The acquisition of the fleet management segment of Fleetlevel+ Services GmbH by ARI furthers its ongoing initiative to expand its strategic global footprint. The new company will be known as ARI Fleet Germany.
Fleetlevel+ Services is a subsidiary of Alphabet International, with its fleet management division providing services in the German market for more than 30 years. The Stuttgart-based company offers a comprehensive range of fleet management services and currently serves over 100 customers with over 13,000 vehicles.
The German vehicle market has been growing consistently by around 1 percent per year. There are approximately 50 million vehicles registered in Germany, of which 10 percent are registered as company cars.
The German fleet market is dominated by national automakers, including VW, Audi, BMW, and Mercedes-Benz. The lease market is very mature with almost 60 percent of all company cars being leased. On Dec. 16, 2011, ARI acquired UK-based Fleet Support Group (FSG), which was later renamed ARI Fleet UK.
AF Editor Mike Antich recently spoke with ARI President Carl Ortell to learn more about the acquisition of the fleet management segment of Fleetlevel+ Services. The following are excerpts from the interview:
AF: Why did ARI acquire the fleet management segment of Fleetlevel+ Services?
ORTELL: The acquisition of Fleetlevel+Services’ fleet management business supports ARI’s ongoing focus to develop a strong global platform to better serve the needs of our customers who are growing globally as well.
The opportunity to expand into the German market and operate on the continent will further enhance ARI’s ability to deliver innovative, top-level fleet management services in the markets and regions that best complement our customers’ needs.
AF: How long has ARI been negotiating to acquire the fleet management business of Fleetlevel+ Services?
ORTELL: This particular acquisition has been in the works for quite some time. We have a strategy to expand and support the hundreds of multinational customers that we serve. When we did the initial study as to where we wanted to enter the European market, it was between the UK and Germany. For us, it is just another step in expanding throughout Europe.
We are working on additional acquisitions and “green field” opportunities, not only in Germany, but also elsewhere in Europe.
We now operate in two very strong economies — the UK and Germany — and that gives us a strong platform from which we can consider further expansion.
AF: How does ARI Fleet Germany compare to ARI Fleet UK in terms of size?
ORTELL: It is smaller in terms of the number of customers and the number of employees, but it actually provides more services than ARI Fleet UK did at the time we acquired them. Of course, we are bringing many of our services over to the UK now. But, all in all, ARI Fleet Germany is a smaller business than ARI Fleet UK. That said, we see tremendous growth potential in Germany.
AF: How will this unit be integrated within the ARI organization? Will it be a wholly owned subsidiary or part of ARI Fleet UK?
ORTELL: It is going to be a very complicated legal structure that will change as we continue to expand, but ARI Fleet Germany is a subsidiary of ARI, just like all of our other companies. The parent company is ARI. ARI Fleet Germany is a sister company to our UK business in terms of operations, just like it is to ARI Canada and ARIZA in Mexico.
Wherever we go, we want to have similar cultures. For example, our Partners In Excellence program, or PIE as we call it, will be a big part of what we bring to Germany. We have already brought PIE to the UK. PIE establishes and tracks fleet-specific performance goals that substantiate our promise of service excellence.
Everything we offer in North America will be brought to Europe and tailored to fit the market. We will bring new ideas and programs that have never been seen before.
We are going to bring all of our technology and all of our services that are relevant to the marketplace to Germany, just as they are being brought to the UK. Technology will also be the same throughout all of our companies, offering seamless services, as much as possible. We will do certain operations differently in each country, based on the needs of the country, customs, and traditions. However, the over-arching umbrella is ARI — whether it is ARI Fleet Germany, ARI Fleet UK, or ARI Canada — it will all be the same.
AF: Who will manage ARI Fleet Germany?
ORTELL: Craig Neuber, who had been our director of strategic consulting, will move with his family to Stuttgart and assume the title of VP of European Operations. He will report to Chris Conroy, our managing director for global operations. We are searching for the new managing director for ARI Fleet Germany.
The existing managing director is set to retire, so we have a little bit of time, but the idea is that we will hire someone to run ARI Fleet Germany. Until that time, Craig will oversee the business.
Our intent is not to have Americans run these businesses. We want people who are native to wherever we are present running those businesses. That is what we have done in Canada and Mexico and recently with the hiring of Keith Allen as the managing director for ARI Fleet UK.
We want to think globally, but act locally. Everyone says that, but that is what we are doing.
If we are going to be successful, we need to have local talent helping us to manage and lead our operations, wherever they may be. The most important factor for us is to have the right people. That is the most important part of any business foundation.
AF: What is the current state of the German commercial fleet market?
ORTELL: Europe is a huge market. The market for cars in Europe is six times the size of what it is in the U.S. The market in which we specialize, complex light- and medium-trucks, is very fragmented and untapped. And, the German market has enormous potential. It is the largest market in continental Europe and there are many companies based in Germany looking for something different.
Most multinational organizations operate in Germany and are looking for new technologies and methodologies to reduce their cost of ownership, and we are going to provide it.
AF: Will ARI Fleet Germany provide fleet funding services in the future?
ORTELL: Our initial approach, in both the UK and Germany, is to focus on fleet management and administrative services, because the market is 90 percent closed-end, so most organizations have multiple funding providers.
ARI Fleet Germany, like the UK, will continue to work with local providers to place lease orders while managing the overall administration of the fleet with its various services focused on reduced cost of ownership. ARI does not intend to compete with the existing contract-hire lease providers; rather, we’ll seek to partner with them to serve our mutual customers.
For those customers who wish to finance their vehicles under an open-end lease structure, ARI plans to have a product to meet this alternative demand in both the UK and Germany. This will be available in the UK in 2014 and Germany shortly thereafter.
AF: When we spoke last about ARI Fleet UK, you mentioned that there were several products and services that they offered, which were unique to the market and in some ways superior to what was in ARI’s menu of products and services. Is there something similar to that in the German market?
ORTELL: Our new German organization has a unique expertise in partnering with local lease providers to facilitate lease placement for those customers who wish to have relationships with multiple leasing companies.
This service, often referred to as “multi-bidding,” is a proprietary product that ARI will develop further in both Germany and the UK with planned enhancements to meet demands across continental Europe.
Drivers have only so much money they can spend on a vehicle, and it will offer them all the different choices from which they can select. The leasing companies operate in a similar way to how the retail market does in the U.S. The captive finance companies put out different rates to their dealers every month or every quarter.
There is constant communication with all the different leasing companies throughout the European marketplace, and their rates change all the time. We are able to be both a facilitator to help leasing companies get the word out about their rates, and a conduit for the customers to be able to see what is best for them at any particular time.
It is totally different from how the U.S. fleet market operates with regard to leasing, where there are eight or nine fleet management companies that do most of the lease funding.
In the UK, it was their Risk Master product that was unique to the marketplace, and we are building a very exciting new global product based on Risk Master that will be announced soon.
AF: Is ARI’s strategic focus on Europe or are you looking beyond Europe for expansion?
ORTELL: Right now, our strategic focus is on Europe. As you know, we have a very strong global alliance called Global Fleet Services that has been around for a long time. Our partners are doing extremely well — ORIX in Asia, Total Fleet and Renting Columbia in South America, and Eqstra in Africa. They have those regions covered and those markets are different from one another, but each region is very homogenous.
Europe has always been something different, somewhat more complex. It is 30-plus countries, 150 different languages, and being aligned with one partner was never the right fit for us and our clients.
We have had our eye on the European space. We believe it strengthens not only ARI’s brand with the ability to service our customers; it also strengthens our Global Fleet Services alliance because it helps their customers as we expand and provide all the services and customer service for which we are known.
We are focused on Europe, and we have our existing consulting business, which we are going to continue to expand to other parts of the globe.
For example, we opened a consulting office in Hong Kong last year. Alvin Lau, manager, ARI Global Fleet Consulting in Hong Kong, is part of that global consulting team. They do consulting projects anywhere in the world to help fleets navigate in places where fleet management companies do not have brick and mortar.
We also have our global reporting and global fleet administration products. Our consulting business is also breaking new ground in trying to understand the supply chain in difficult areas to help ARI and our Global Fleet Services partners. Our consulting business is a big part of the service we provide to multinational organizations.
But, as far as providing the core fleet management services that we provide in North America and the UK today, at this time we are looking to expand those in continental Europe.
AF: Earlier in the interview, you mentioned the possibility of entering new markets using “green field” sites. Which markets do you foresee as more attractive for green field opportunities?
ORTELL: That is something we are looking at now very carefully. If you look at where we want to go next beyond the UK and Germany, the natural next steps are France, the Benelux countries (Belgium, Netherlands, and Luxembourg), Spain, Italy, and Portugal. There are also significant demands for fleet management in Central Europe — particularly in Switzerland and Austria — and in Eastern Europe as well. ARI wants to be a pan-European player.
In terms of “green field” sites, it depends whether there is the right acquisition opportunity like we found in both the UK and Germany, or if we feel it is better to build from hubs that we have now.
Our acquisition of the fleet management business of Fleetlevel+ Services is simply another step in our strategy to expand ARI into the European marketplace. ARI has 3,000 customers in our existing operations and more than 10 percent of those are large multinational organizations. They want us to bring our unique approach to customer service, our technology and our products and services to the marketplaces in which they are operating, and that is what we are going to do. Our objective is to become a global brand around the world.