Global consolidation is a growing trend among Fortune 500 companies. For fleet managers, making the jump from local or national fleets to managing a multi-national fleet can be a daunting task.

For Johnson Controls Inc., fleet globalization paid high dividends. By consolidating and coordinating various fleet activities on a global basis, savings of $5 million within the first half of the current fiscal year were achieved.

Johnson Controls Inc.'s (JCI) approach to global fleet management was initiated in Germany in April 1996. At the time, the first goals was to leverage between the two JCI divisions in Germany, mainly focusing on the purchasing aspects such as frame agreements with car manufacturers and fleet management companies. JCI's divisions, Automotive Systems Group (ASG) and Controls Group (CG), until then had operated independently from each other in Europe, as far as fleet was concerned.

Claudia Tinelli was running the German ASG fleet, with around 100 units. The impact on the leverage provided by the 300 CG vehicles was considerable, and led to the first, still local, cross-divisional fleet-related agreement in November 1996 between JCI''s ASG and CG and VW. Motivated by the results of this first deal, Tinelli and Daniel Froehlich, the European controller of JCI's Controls Group, met to discuss a benchmark study to be performed cross-divisionally and cross-Europe.

"The first step taken was to internally perform a fleet audit assessment, by using a questionnaire we developed to better understand what our total European fleet size was and how the various fleets in the various European countries were run," said Tinelli.

The result of this internal fleet audit assessment showed that JCI had a fleet of 2,500 units, across all major European countries. It also showed that the way the local fleets were run could even vary within one country and one division of JCI. It could vary from simply purchasing a fleet and not providing any fleet management program to programs as sophisticated as the full-service fleet management programs available in Europe.

This variation was due to the fast growth of JCI, the various different stages of internal organization, and the fact that, for a company whose core business is not fleet, fleet is a necessary item (either as perk or tool, i.e. service vehicles), but not a priority.

Benchmarking Costs to Develop a Global Development Strategy

"Based on the result of the internal fleet audit assessment, we approached the major fleet management providers, operating on a pan-European basis to request bench-marking quotes for typical, local reference vehicles for a quote comparison," said Tinelli.

"We spent a considerable amount of time on comparing the various quotes coming in, in order to come up with an 'apple to apple' comparison.

The typical full-service fleet management quote consists of a financial part, outlining the investment, interest rate and markup, residual value, etc.; determining the financial and service parts of the quote, outlining the maintenance budget, tire budge, local taxes, insurance budget, tire budget, local taxes, insurance/accident management (if included), daily rental etc. And we analyzed each of the components in detail, before coming up with a decision on who we were going to recommend as cross-divisional and cross-European partner," said Tinelli.

There were also other important criteria taken into consideration. One criteria was the level of flexibility of the fleet management providers (i.e., would they apply deals with car manufacturers, which JCI negotiated on its own).

Another criteria was how they would handle requests pertaining to the company's needs to move the vehicle within Europe if an employee would be transferred to another location in another country; in this type of business, this is a common situation.

Outsourcing opportunities were also a key consideration, taking into account what type of outsourcing programs would they order, in order to take fleet as non-core activity out of JCI's organization as much as possible. Service level and pricing were also an important consideration.

Putting the Global Development Plan Into Action

Between May and September 1997, Tinelli and Froehlich set up meetings in all major European countries, inviting the fleet responsible of each division and Lease Plan International, supported by its local specialists to present Lease Plan's fleet management program per country and collect input pertaining to the market-specific fleet requirements of JCI's internal fleet responsibilities.

Another goal was to ultimately get their buy-in and future support. In September 1997, Lease Plan International was awarded with JCI's European fleet business.

In January 1998, based on the success of the European fleet consolidation project, JCI's headquarters in the U.S. requested a benchmark to be performed on JCI's U.S. fleet cross-divisionally. The U.S. benchmark study was performed in a similar way as was done in Europe; the approach was to assess the internal fleet situation and then find the most appropriate fleet management provider in order to support the decision JCI was going to take.

The result of the benchmark study had an impact on the internal and external fleet management strategy for the future.

JCI's senior management decided to focus on an outsourcing program, and to outsource fleet administration.

"After a detailed benchmark pertaining to fleet management providers, for which we have been focusing on similar criteria as we did before in Europe, we decided to award Lease Plan International as our global fleet management provider, and the European deal was then extended to a global deal, with the signing of the letter of intent in April 1998," said Tinelli.

By signing a global deal with Lease Plan International, JCI was able to leverage a volume of 6,000 units in Europe and the U.S.

With JCI's operations also in South America, South Africa, and the Pacific Rim, and Lease Plan's presence in those markets, the long-term goal is to extend the current U.S. and European global deal into a worldwide agreement within the next several years.

"There are other fleet management components that can be bundled on a European or global basis, such as a car manufacturer deals," said Tinelli.

JCI signed a global deal with Ford Motor Co. pertaining to its portion of JCI's global fleet, and is currently working with other car manufacturers to further leverage their volumes in JCI's fleet.

Other important components were fuel card deals and agreements with independent fleet consultants to develop controllable measures to keep fleet performance at a high service level and competitive within each market.

Other fleet management activities such as outfitting of service vans, taxes, etc. need to be analyzed and set up on a local basis to come up with the best solutions.

"Knowing that there still are considerable saving opportunities is the best motivator to keep thinking globally, wherever there is a chance in fleet," concluded Tinelli.