Ron Pink, fleet manager for Xerox Corporation, thinks long and hard before making any decisions concerning his fleet. A. mistake on his part could cost the company millions of dollars; the correct decision saves everyone involved time and trouble. Pink's choices for 1983 acquisitions, methods of disposition, the addition of small, domestic trucks to the company's fleet and a new way of reconditioning units before disposition were all covered in a wide-ranging interview. Don Gorman of Leaseway Transportation's Fleet Management Division, one of three Xerox lessors, sat in on the conversation and offered a few comments of his own.

PINK: In our 1982 program, we are going to put in 3000 more K-cars. Because of the energy conservation program we want to stay with the fuel- efficient front wheel drive station wagons. We are putting in approximately 500 Chevy S-1O pickup trucks. That is because of product availability and the contribution they can make as far as fuel efficiency is concerned. We are doing something different than Continental (Telephone of Atlanta, which recently purchased 1500 S-10 trucks, see AF, Dec. '81), in that we are putting a fiberglass enclosure on the bed, made by Astoria Fiberglass of Hannibal, Missouri. The rest of the truck basically follows the Continental program where the truck and fiberglass enclosure will be shipped to Pontiac, Michigan, to Adrian Upfitting and that is when they will install the racking, the top, put carpeting on the back, and mount the tailgate on the rear of the wall behind the driver's cab.

When we trade them in after 24 months, we can use the enclosure all over again. It is a one-shot deal.

I found it was really different to spec out a truck for a fleet, as opposed to a car. It took many, many meetings with the Chevrolet people, with the Adrian people, with the Astoria people. Now that we have the thing under control, it is going over smoothly. We expect to be able to have all our S-10 and G-20 vehicles over a 90-day period, but not at once, like the passenger cars. This is because Adrian just can't handle the Xerox volume. We are going to start taking delivery of some units through March, then continue through May. There will be additional costs to us because the vehicles will be tied up for about 45 days while they are being assembled. The interest exposure is a substantial amount of money, and it was another obstacle we were confronted with ordering trucks and not cars.

AF: What engine are you going with in the S-10?

PINK: We are going to put the 6-cylinder in, because of the weight and the volume we will be carrying. We tried the 4-cylinder in the S-10, but as far as we were concerned, because of our load requirements, we need the 6.

AF: What other trucks did you look at?

PINK: We did look at the Ford Ranger, but there was a problem with getting the quantities we wanted at the time we wanted them. We do not want to get involved with any foreign trucks. The Dodge Rampage was not really available at the time. What we plan to do in '83 is to take a look at all three, the Rampage, S-10 and the Ranger.

AF: Would you seriously consider the Rampage?

PINK: Yes, if it lit our needs. I don't seriously think it will, but I really don't know until I understand it. But just looking at it, there could be an expense problem with trying to fit a shell over the bed, due to the way the bed is designed.

One of the points I want to make is that we did tests for the last two years on about 50 combinations of the LUV, the Courier and the D-50, which are all imports, but have American nameplates. We tested them extensively for two years and said, yes, they are better than a van. There was a difference of maybe five to seven miles per gallon between an S-10 and a van. A difference of one mile per gallon in our fleet on just 5000 vehicles is a difference of $673,000 a year. So we are extremely interested in mpg, no question about it. We are also interested like any other fleet in going-in costs, in serviceability of the product and potential resale value.

AF: What does your inventory represent in total dollars?

PINK: We have 12,000 units with an asset base value of about $72 million. It takes about $43 million a year in operating costs to support it, including the lease rental expense and the running expense.

AF: Did you look at Toyota or Datsun at all?

PINK: No, we stayed with the American nameplates.

AF: Are you buying any vans?

PINK: Right now we have on order 3000 Chrysler K-car station wagons, 500 Chevy S-l0s and approximately 1500 Chevrolet G-20 vans. We looked at the full-size trucks, but they don't offer the fuel efficiency, which is what we really are after.

GORMAN: How about a full-sized truck to replace the vans?

PINK: That's a good point. When I made the presentation to senior management last July on the options that were available to Xerox, 1 said 'Do you want to go 100 percent S-10, 100 percent van, or give the drivers a choice?' Now, the technician who has a large family might tell us he understands where we are coming from at Xerox with the S-10 concept, the fuel efficiency, the operating costs and so forth, but if he has a large family 1 can't give him an S-10. So now I can say no problem; we can offer him a van. I don't think the majority of the people who order vans do so for business reasons, but rather for a combination of personal and business uses.

AF: Will you be looking at the Chevy diesel being offered in their 1983 vans?

PINK: We intend to look at the diesel- powered vehicles. The only experience Xerox has to date, and I know it is different now than it was back in 1978, was when we put six units into Houston, Texas. We put them down there for two reasons: one, they do not have a catalytic converter, so our guys could use them in the oil fields without being a fire hazard, and, also, we wanted to gain some diesel experience. We drove them into the ground. We ran them for three years and they cost us an awful lot of money to maintain. They were not true diesels like the 6.7 liter engine Chevy will be offering. They were gasoline conversions. I think today the diesel engines are a different story. I think the only fleet using diesels on a real large scale is McDonald's.

AF: Would you be interested in the mall vans being talked about by GM for 1985? They would be similar to the Asian vans already in production.

PINK: You bet. No question about it. As a matter of fact, they would be the answer to our prayers. A mini-van, front-wheel drive, fuel efficient, would serve both our business needs and our personal usage.

AF: Mitsubishi will be offering such a van in about a year. Any interest there?

PINK: I doubt it. I really doubt it.

GORMAN: The majority of fleets you talk to have a pretty strong commitment to domestic products. In our client seminars we have been trying to keep this question up from the standpoint of, 'Hey, if you are going to switch, you have to be ready, as a lessor and supplier.' It comes through pretty loud and clear (that they don't want to go foreign). I personally don't think it is all wrong. I don't want to run the flag up too high, but I have some strong feelings about it. If we can meet our business needs, we have an obligation to stay with them (domestics).

PINK: I think we have to remember that we are all Americans and we arc working for companies which manufacture American products.

AF: What is the difference in mileage between the ear, S-10 and the van?

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PINK: After 12 months of experience with the K-cars, it is 22.2 on the 4-cylinder 2.2 and 22.0 on the 4-cylinder 2.6. That is because of our carrying requirements, carrying about 288 pounds around in back. We are pleased with the performance of the vehicles as far as fuel efficiency and expenses. On the S-10, we have 20 miles per gallon on the 6-cylinder. We gave all the employees a choice between automatic and stick shift. Some 58.6 percent of the employees went with the stick shift. For the van, we are projecting mileage at 12 mpg. It could be better than that, as much as 14 because we will be using the 6-cylinder engine. We allow the employees the option between automatic and standard, but on the vans it was something like 8 percent out of 1500 drivers took the stick shift on the van. On the mini- truck it was just the opposite.

AF: How did disposal of your full- size cars turn out for this year?

PINK: it went very well, and it is over. We were fortunate; we had a Phase One and Phase Two because of product availability on the K-cars we were acquiring. Phase One I can say was a disaster. First, the market was soft and most of the cars were on the west coast where the market was very, very weak. Then we had a Phase Two in the spring and the market started coming back when gasoline prices started to stabilize. People's confidence level came up. We did so well on Phase two overall that it made up for the tremendous losses we had on Phase One. We had set aside a provision of $1000 per car. When it was all said and done we used about $400 per car. So, we anticipated a $5 million loss, and wound up with a $2 million loss. It doesn't take too many months of driving a K-car around, with their fuel efficiency and savings, to pay for the loss and then with the rest of the vehicle's life you're home free throughout the vehicle's service life.

AF: How many cars did you dispose of?

PINK: There were 5000. There were approximately 2500 each Chevrolet Impalas in a combination of station wagons and four-doors and 2500 Ford LTDs station wagons and four-doors.

AF: So would you agree with the general feeling that the used car market is improving for large cars?

PINK: It looks like it is going back that way. We are not, though. We have a very strict energy conservation program at Xerox. When you start throwing numbers around when a difference of one mile a gallon could mean three- quarters of a million dollars a year potential savings, you can't turn your back on that.

AF: What about A-cars from GM?

PINK: We are taking a look at the A-car, particularly the Celebrity from Chevrolet, however, they don't have a station wagon. We are very interested in a station wagon model because of our business needs. We are also interested in the front-wheel drive characteristic because of the superior handling and road traction that you get. We see another opportunity to drive costs down by eliminating some snow tire expense. On the '81 K-cars, on the tire expense, I am not sure of the exact number, but we have reduced costs substantially. You just do not need them 100 percent. In some places you do, like Wyoming or Montana, up in the Rockies, Denver . . . places where there is big, heavy snow. That is another cost reduction we have to look at.

AF: Where do you use the 2.2 and where is the 2.6 liter engine used?

PINK: We use the 2.6 in California because of the emissions rules, and also in mountainous areas, and high altitude areas. Also in cities like San Francisco and Pittsburgh because of the hilly terrain. I cannot see any significant difference in costs of the two engines at all. I think it is a little early to throw too many numbers around, because they have only been in service a year. I would like to have two years of records to compare against two years of rear wheel drive cars. In Spring of 1983, by using VATS (Vehicle Asset Tracking System), we'll be in a position to provide those numbers.

AF: How have the drivers reacted to the K-cars?

PINK: There was some driver resistance initially for about the first six months. The reason for this was due to driver perception; we overcame that through an education process in the company. Now that they have changed their driving habits, there is no problem.

AF: What were those perceptions?

PINK: They perceived a great problem in thinking the car was underpowered. That is because they came out of an 8 cylinder car and went into a 4. I don't think we'll have that problem this year, because they are coming out of a Ford Fairmont with a 6 cylinder and going to a 4. From a 6 to a 4 is a whole lot different than an 8 to 4.

Let us say drivers pressured us to get out of 4's and get into 6's. We would be right back where we were and forego all the cost-savings that has worked so far.

AF: What about sales of full-size cars to employees?

PINK: About 38 percent went to employees, which was way below our average. The feeling is the 1980 Fairmount will be about a 70 or 80 percent buy-back. They are a good, solid car. The prices are right, and with the sticker shock of the new cars, people just aren't going to buy new cars. The buy-back of the K-cars is going to be probably the highest we have had in 18 years.

AF: What is your current fleet break­ down?

PINK: We have 1500 vans, 500 mini- trucks, and the other 8500 are station wagons. The S-l0s are replacing 500 vans. For every 250 S-l0s, getting 250 drivers out of vans, Xerox saves in a two-year period something like $362,000 in lower operating costs compared to a van.

AF: What about the safety shields you've installed?

PINK: For the first time, we've put a safety shield in our Ford Fairmont wagons. There are going to be four holes in the headliner and four holes in the rear seat. We contacted a company called Cadillac Products in Detroit and asked them to design a color-coordinated plug about the size of a quarter. You pull the shield out and you stick the plug in. This way you avoid the cost of reconditioning or what it may cost to put a new head- liner or rear seat in the car. Through our computer, we have identified, by unit, what color the interior is, and when our lessors pass back the used car sales documentation to the buyer they will mail the buyer the plugs and instructions on how to plug them in. That is kind of neat.

GORMAN: A hell of a lot better than $300 for reconditioning!

PINK: That is going to be an ongoing situation with us, with the '81 and '82 K-cars. We'll also be able to pull the tops off the S-10. We are trying to minimize our costs by buying something of real quality up front we can use over and over again.

AF: Why go with the fiberglass S-10 cover?

PINK: Overall quality. As far as I am concerned, it is almost indestructible; it is going to last forever. It will never rust, it will never rot, it can never warp. It is a damn good quality product. I saw them take a sledgehammer to this thing and they couldn't dent it!

AF: We understand you're using a re­ conditioning system for your cars to increase employee sales.

PINK: Right. This is to enhance the appearance of our vehicles prior to trade-in and to turn back better merchandise to our lessors that are not sold to Xerox. I contacted the Ziebart Rustproofing   Company and asked them if they had some sort of program where they could clean our cars two months prior to trade-in. They have a program called Ziebart Appearance and Protection Services. We have negotiated a test program with them for some 1980 Ford Fairmonts. I have identified about 1500 station wagons scheduled to be traded in between March and April of 1982. We'll take those 1500 units through the program with Ziebart at hand-selected locations throughout the United States, basically in severe weather areas of this country, very little on the west coast. The bottom line is this: In June, we'll see if we sold more of that group back to Xerox employees, and to see if we do better in that group on the used car market than we did a year ago.

I am very impressed with the quality of their work. Basically, they degrease the engine and do a complete interior clean-up. This is very important with Xerox because the dry toner we use in our machines that gets on the interior of an automobile is almost impossible to get off. Ziebart has done a remarkable job with what­ ever solvent they are using to get the stuff off. On the outside they wash it and do the chrome. The car is really sparkling when it comes out. Under- coating is available as a driver-paid item.

We'll know in June or July if this program has paid off. If it does, we'll make it a mandatory program for 1983. Then we'll develop a means to have our cars taken back after 12 months for a quick clean-up to keep the interest of the driver up. Around the 16th or 17th month, the driver is advised the car will be traded in four or five months. Around the 22nd month we'll take it in for the major cleaning. It looks very, very positive right now.

Ziebart is training their dealers on how to perform the various jobs on the Xerox cars. There are 20 or 30 different items on the list for them to take care of. The complete job is about a four-hour turn-around.

We ran a test where six Xerox cars were brought in by the drivers. After" the work was completed, the drivers returned to pick up their cars, and five out of six said they would buy their cars. The other wasn't sure. Now, that is a very small sampling, but I think it is a damn good indication of the potential.

 

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