fleet financials may/june 2011

T H E M A G A Z I N E F O R E X E C U T I V E V E H I C L E M A N A G E M E N T A B O B I T P U B L I C A T I O N

MAY/JUNE 2011 • VOL. 25 NO. 3WWW.FLEETFINANCIALS.COM

NESTLÉ’NESTLÉ’ss YEREM WINS YEREM WINS 2011 FLEET 2011 FLEET EXECUTIVE EXECUTIVE OF THE YEAR OF THE YEAR

‘BREAKING’ THE RULES‘BREAKING’ THE RULES TO OPTIMIZE PERFORMANCETO OPTIMIZE PERFORMANCE

TAKE FLEET TAKE FLEET PRODUCTIVITYPRODUCTIVITYTO THE NEXT LEVELTO THE NEXT LEVEL

FUEL EXPENSE FUEL EXPENSE REDUCTIONREDUCTION PROGRAMS THAT WORKPROGRAMS THAT WORK

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www.fleet.ford.comfl eet.ford.com* Optional, available on select models. **EPA-estimated 17 city/25 hwy/20 combined mpg (Taurus SHO/MKS); 16 city/22 hwy/18 combined mpg (Flex/MKT), EcoBoost AWD.

GREENER.At Ford Fleet, we believe in getting the most out of green technology. We’re continually working to improve vehicle performance while decreasing negative environmental impact. Our proprietary EcoBoost™ engine* can do just that for your fl eet. It combines turbocharging and direct-injection technologies to provide the performance of a V8 with the fuel economy of a V6.** Our ultimate goal is to go beyond producing a more powerful and greener fl eet — to ensuring every mile your fl eet drives barely leaves an impression at all. Ford Fleet. Get More.

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MAY/JUNE 2011 VOL. 25, NO. 3 Features Departments

Contents18 Yerem Named 2011 Fleet Executive of the Year

Communication, collaboration, and not to mention a number of highly successful initiatives led the three-year Nestlé veteran to the Fleet Financials honor.

24 Taking Fleet Productivity to the Next Level“Productivity” is a word bandied about in business all the time,

but what is it? How is it measured and achieved? In 2011, fl eet managers have little choice but to answer these questions.

30 ‘Breaking’ the Rules to Optimize Fleet Performance

Some call it thinking out of the box, pushing the envelope, or just plain breaking the rules. “Common wisdom” isn’t always the best way to

keep a fl eet running cost effi ciently.

38 Alternative Strategies for Reducing Fuel Consumption Fleets are exploring new strategies to lower their fuel expenses, such as

rightsizing vehicles, increasing driver training, improving fuel card compliance, and partnering with fuel management companies.

4 On the Web

6 EditorialUncontrollable Fleet OTD Component

10 LettersSourcing vs. Management Strategies

12 Fleet Briefs OEMs Reveal 2012 & 2013 Models

40 Automotive Financials Commercial Fleet Manager Salary Breakdown

On the CoverDean Yerem was named the 2011 Fleet Executive of the Year.

SEE PAGE 18

Fleet Financials (ISSN 1558-5719) (USPS 022-987) (CDN IPM#40013413) is published bi-monthly, by Bobit Business Media, 3520 Challenger Street, Torrance, California 90503-1640. Periodicals postage paid at Torrance, California 90503-9998 and additional mailing offi ces. POSTMASTER: Send address changes to Fleet Financials, P.O. Box 1068, Skokie, IL 60076-8068. Please allow 6 to 12 weeks for address changes and new subscriptions to take effect. Subscription Prices: United States $28 per year; Canada $34 per year; Foreign $75 per year. Single copy price $10. Bobit Business Media reserves the right to refuse non-qualifi ed subscriptions. Please address Editorial and Advertising correspondence to the Executive Of-fi ces at 3520 Challenger Street, Torrance, California 90503-1640. The contents of this publication may not be reporduced either in whole or in part without consent of Bobit Business Media. All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission.

18 24

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38

2 ■ FLEET FINANCIALS ■ MAY/JUNE 2011

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WHAT YOU’RE READING

NOW F L E E T F I N A N C I A L S . C O M

MERCEDES SHOWS THE 2012 E63 AMGUnveiled at the New York International Auto Show, the company stated that the model’s new high-performance engine provides a 22-percent increase in fuel economy, based on the European driving cycle. Go to fl eetfi nancial.com’s Vehicle Research channel for more information!

YEREM NAMED 2011 FLEET EXECUTIVE OF THE YEARPresented by Fleet Financials magazine and sponsored by CEI, Dean Yerem was recognized for delivering competitive advantage, value, and results to all Nestlé operating companies in North America.

AUDI REPORTS BEST FIRST QUARTER SALES EVERMarch 2011 marked the third-straight monthly record for 2011, with a 25 percent increase over February 2011, and a 14.3 percent improvement from March 2010.

CADILLAC LAUNCHES CTS-V BLACK DIAMOND EDITIONThis edition comes with a host of popular performance options and an exclusive tri-coat paint, also called “Black Diamond.”

2012 INFINITY M HYBRID OFFICIALLY RATED AT 32 MPG HIGHWAYThe vehicle is the fi rst V6 true luxury performance “driver’s” hybrid – and the only such vehicle to offer more than 350 horsepower and 32 mpg fuel economy.

Use the navigator on the fl eetfi nancials.com home page to browse the latest articles from the channels. Enter a channel to view in-depth news, articles, tools, calculators and more relat-ed to that specifi c topic.

May/June’s Web Channel Highlight: MOBILITYView strategies for how to increase real-time control and communica-tion within your fl eet. The resources provided in this channel will ed-ucate you on how to enhance the capabilities of your drivers and fi eld workers to meet customer expectations.

❍ How to Get Yourself Promoted ❍ Managing Your Off-Road Fleet from a Desktop ❍ Bright Ideas Energize Fleet Management ❍ 9 Mistakes to Avoid When Playing ‘Musical Cars’ ❍ How Can Telematics Help Your Fleet?

Industry Trendss Telematics Safety Remarketing Fuel

THE 5

THE FLEET CHANNELS

FLEETFINANCIALS.COM TOP 5 MOST POPULAR STORIES AS OF APR. 29,2011

1

2

3

4

5


What We’re Blogging About

➤ MARKET TRENDSBy Mike Antichwww.fl eet-fi nancials.com/blog/

market-trends.aspx

April 26

The Uncontrollable Component of Fleet OTD

April 18

The Ongoing Used-Vehicle Shortage Favors a Short-Cycling Replacement Strategy

April 1

Time to Add a New Component in Calculating Total Cost of Ownership

March 11

Beware of Expunged MVR Records

➤ FLEET BLOGSThe Voice of the Fleet Community (www.fl eetblogs.com)

April 29

Coming Together to Fuel Sustainable Changeby Elisa Durand

April 28

Something of Signifi canceby Joseph Thompson

April 28

Best Practices in Fleet Safety Policiesby Wayne Smolda

April 26

Stressed Budgets & Relationshipsby Anonymous Public Fleet Manager

April 22

How safe are hand held devices?by Jennifer Sutherland

Interested in starting your own blog? Go to www.fl eetblogs.com for more information.

ANTICH

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http://www.fl

http://www.fleetblogs.com

http://www.fl

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Letter from the Editor

The Uncontrollable Component of Fleet OTD

There are four components to the

fl eet order-to-delivery (OTD) cy-

cle: ordering, scheduling, produc-

tion, and delivery. Fleet vehicles

are particularly vulnerable to OTD delays

because most fl eet orders are concentrated

among a handful of models. Delivery de-

lays can occur because of quality holds or

component constraints for a high-volume

fl eet model. For instance, a single option

can delay OTD. This became abundantly

clear following the selective part shortages

resulting from the plant closures and energy

rationing that occurred in Japan following

what is now offi cially known as the Great

East Japan Earthquake of 2011.

However, the fourth component of the

OTD cycle is always out of the control of

the automotive industry. For the past 10

years, the nationwide rail car shortage

has been a factor for fl eet delivery delays.

Railroads are the primary long-distance

transporter of automobiles. Vehicles are

transported in specially designed, fully

enclosed rail cars that have either two or

three levels within them. Called bi‐level

and tri‐level autoracks, these enclosed

rail cars protect autos from damage by

falling or thrown rocks, bullets (trains

are frequent targets for amateur marks-

men), and other vandalism. The enclosed

autorack rail cars also curtail auto parts

theft and prevents “hobos” from living

inside the automobiles while in transit.

During the economic downturn, many

of these specialized rail cars were re-

moved from service as railroads right-

sized rail car capacity to vehicle order

volumes of the time.

In addition, the increased ratio of trucks

sold has compounded the rail car shortage

because fewer numbers of trucks, due to

their larger size, can be loaded on a rail

car than cars. In the early 1990s, approxi-

mately two-thirds of the rail fl eet was tri-

levels. The industry shifted to two-thirds

bi-level and one-third tri-level because of

the swing to larger SUVs, minivans, and

pickup trucks.

Allocating Rail Car ResourcesThe operation of the industry-wide

autorack rail car fl eet is managed by the

Reload Division of the TTX Compa-

ny, which is wholly owned by the largest

North American railways. TTX provides

rail cars to railroads on a usage basis to

allow them to conserve capital for infra-

structure needs. Authorized by the Inter-

state Commerce Commission (ICC) in

1981, the Reload Pool permits railroads

to pool their autorack fl eets for the trans-

portation of fi nished vehicles. TTX man-

ages Reload, which functions as a cooper-

ative venture between the railroads, TTX,

and auto manufacturers. Railways con-

tribute rail cars to a pool proportionate

to their volume of automotive shipments.

Under the Reload system, the automotive

OEMs provide their loading demand re-

quirements directly to TTX, which sched-

ules rail car disposition.

In addition to a rail car shortage, an-

other factor lengthening OTD is rail con-

gestion, primarily occurring at rail choke

points, which are comparable to freeway

choke points that exacerbate rush-hour

congestion. Two examples are Houston

and Richmond, Va. When train traffi c

backs up, it causes a ripple effect of delays.

These choke points occur in areas where

multiple railroad right-of-ways converge

or where trains are frequently handed off

from one railroad to another. One-third

of all rail freight passes through Chicago

since all of the six biggest North American

railroad company networks intersect there.

It can take 24 hours to move 20 miles in

Chicago due to congested rail traffi c and

time-consuming coordination of numer-

ous inter-railroad train moves.

There is a seasonal peak in freight vol-

ume, which extends from mid-July to au-

tumn. The peak season is triggered by the

fall grain harvest, the high-volume shipment

of retail merchandise for Christmas, and

transporting new cars and trucks to dealers

at the start of the new model-year. The de-

gree of congestion within the rail network

is infl uenced by the strength of the econo-

my, the volume of new-vehicle sales, and

the bountifulness of the harvest.

Another factor contributing to rail con-

gestion has been staffi ng constraints due

to workforce reductions at railroads. Cur-

rently, 36 cents out of every dollar spent to

run the railroads goes to labor costs. As

part of cost reduction initiatives, many

railroads reduced their workforce, with

most of the cuts in operating staff. The rail-

road industry says it takes fi ve years to be-

come fully qualifi ed in most jobs. Even if

railroads started hiring today, it will take

years before they have a fully qualifi ed in-

crease in their workforce. In addition, fed-

eral work rules contribute to freight delays.

Freight trains sometimes must stop mid-

track to relieve crews who have reached

the federal maximum they are permitted

to work — a 12-hour shift. Trains sit un-

til new crews take over.

The Baton Pass to UncontrollabilityThe U.S. Department of Transportation

forecast freight transportation demand will

nearly double by 2035 from 2002 levels as

the economy and population grow, neces-

sitating even greater investment to expand

rail infrastructure. During the last three de-

cades, railroads invested more than $480

billion (more than 40 cents out of every rail

revenue dollar) to build, maintain, and im-

prove the national rail network. However,

it is not enough.

The “baton pass” to the railroads to de-

liver fl eet (and retail) orders causes OTD

to fall out of the control of OEMs, mak-

ing them vulnerable to the infrastructure

constraints of the rail system.

Let me know what you think.

[email protected]


BY MIKE ANTI CH

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mailto:[email protected]

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http://www.volvocars.us/fleet

about the next genera-

tion of fl eet managers.

Will the fl eet function

survive when today’s

fl eet managers ultimate-

ly retire?

My fi rst reaction is

that fl eet managers at

small companies wear

many hats and the fl eet

function is combined with a host of

other things.

Large companies with large fl eets

understand the need for a subject matter

expert and while sourcing is very strong,

they realize the need for someone to

pull it all together with the FMC.

In terms of mid-sized companies,

this is where I would think consolida-

tion with sourcing would happen.

Because I am reaching a certain lev-

el of longevity in my company, it was

actually raised in a few discussions

that while they can’t ask me how long

I plan to work, they realize in the near

future I may not be there and they must

begin thinking about my replacement.

Truly, this was the fi rst such discussion

of this type in all the years I have been

here. They were looking at an assistant

type, but to me this means an admin, as

they are not going to pay the salary for

two of us. This is somewhat the way I

started, so only time will tell.

It is defi nitely true that technolo-

gy has changed our roles, but again,

depending on the size of the fl eet, re-

ports will only get you so far. When

outsourcing to FMCs, you must rely

on the FMC processes, which most

times do not conform to your in-house

systems.

I do not see the fl eet manager role

being elevated. It is too detailed and

time-consuming. It has too many mov-

ing parts, too many vendors involved,

etc. It is a middle management role. Any

manager higher up would not keep it

long! Could it move down the chain?

Sure. But you need some level of re-

sponsibility and accountability to ne-

gotiate with vendors, FMCs, and in-

ternal management.

Author wished to be anonymous


Letters to the Editor

Sourcing Strategy vs. a Fleet Management Strategy

The editorial in the March/April

issue, entitled “Higher Raw Material

Costs Put Upward Pressure on Re-

placement Tire Costs,” highlights

an issue that is habitually ignored

by companies that insist on a com-

modity savings strategy in lieu of

fl eet management.

There are countless fl eet managers

who have been supplanted by com-

modity buyers adept at machine gun-

ning RFPs at the supply base, such as

OEMs, insurers, fuel companies, tire

manufacturers, etc. Many of us have

witnessed “savings” claims of these

one-off activities, which when briefed

as a distinct event to the uninformed,

bring accolades to the messenger. We

can recount meetings where limited in-

formation disclosure describes heroic

status to what historically has been one

iota of fl eet management.

In the pre-commodity era, this was

business as usual for fl eet managers,

who routinely reported the full scope

of lifecycle costing, measuring and re-

porting the total fl eet expense portfo-

lio — cost escalation and reductions

— to achieve a metric for fl eet man-

agement, cost per vehicle per mile or

cost per vehicle per year.

For commodity buyers who have

larded their coffers reporting one-time

savings, the gig is up. With rising raw

material costs across fl eet — tires,

fuel, tolls, taxes — it must be back to

basic fl eet management, namely cost

controls and lifecycle costs. The best

companies have shed the commodity

facade and adopted a lean six sigma

approach to fl eet management. Un-

doubtedly those that insist on a com-

modity approach will creatively claim

savings. Thanks for ringing the fl eet

management bell.

Charles SchottFleet Consultant

New York City

Will the Fleet Manager Role Survive in the Future?

There has been much discussion

Vol. 25, No. 3

PublisherSherb Brown

Editor/Associate PublisherMike Antich

[email protected]

Managing Editor Lauren Fletcher

lauren.fl [email protected]

Senior EditorGrace L. Suizo

[email protected]

Associate EditorThi Dao

[email protected]

Web EditorGreg Basich

[email protected]

Field EditorBob Cavalli

Art DirectorArmie Bautista

Production DirectorKelly Bracken

Production ManagerBrian Peach

(310) 533-2548

Great Lakes Sales ManagerRobert Brown Jr.

1000 W. University Dr., Ste. 209Rochester, MI 48307

(248) 601-2005; FAX: (248) 601-2004

Regional Sales ManagerEric Bearly

(310) 533-2579

Sales & Marketing CoordinatorTracey Tremblay

Business and Editorial Offi cesBobit Business Media

3520 Challenger St.Torrance, CA 90503FAX (310) 533-2503

ChairmanEdward J. Bobit

CEOTy Bobit

Chief Financial Offi cerRichard E. Johnson

Editorial ConsultantHoward Rauch

Autom

otive Fleet

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DALLAS – AT&T’s compressed natural gas (CNG) vehicles helped reduce

the company’s petroleum consumption by 1 million gallons in 2010. The

company made this announcement on the heels of President Obama’s Na-

tional Clean Fleets Partnership. This initiative, supported by the U.S. De-

partment of Energy, is designed to help large fl eets across the nation reduce

petroleum use by 2.5 billion gallons by 2020.

AT&T has deployed more than 3,500 alternative-fuel vehicles, includ-

ing more than 2,400 CNG vehicles in 543 cities in 35 states and the District

of Columbia. The latest alt-fuel additions announced by the telecom com-

pany were 101 new CNG-powered Chevrolet Express Cargo 2500 vans for

its customer service fl eet.

NEW YORK – More than 10 new 2012 and 2013 model-year vehicles were introduced at the New York International Auto

Show in late April. The following are just a few of the vehicles revealed.

Additional information on these new vehicles and others highlighted at the show is available at www.automotive-

fl eet.com/news. Keywords: 2012-MY or 2013-MY.

AT&T Saved More Than 1M Gallons of Petroleum in 2010

2012 & 2013 Models Debut at N.Y. Auto Show


President Barack Obama inspects an AT&T all-electric vehicle on display during a tour of a UPS facility in Landover, Md., April 1. (Offi ce White House Photo by Pete Souza)

The 2012 Mercedes E63 AMG now features the new 5.5L V-8 biturbo engine, called the M157 internally by Mercedes, which can produce either 518 hp or 550 hp. Fuel economy is improved up to 22 percent, according to the automaker.

The fuel economy-focused version of the new 2013 Malibu, the ECO Version, comes equipped with the company’s eAssist “light electrifi cation” technology. GM’s estimated fuel economy for the ECO version of the Malibu is 38 mpg highway, 26 city. The ECO version of the Malibu joins the three other trim levels (LS, LT, and LZ) announced during the introduction of the new Malibu.

The 2012 Volvo S60 R-Design sport sedan (shown above) and XC60 R-Design crossover will be powered by Volvo’s T6 en-gine, a turbocharged, inline six-cylinder that will now produce 325 hp and 354 lb.-ft. of torque. The standard T6 engine in both models produces 300 hp and 325 lb.-ft. of torque.

The 2013 Ford Taurus is the fi rst North American model to come equipped with the company’s advanced 2.0L EcoBoost engine, providing an estimated highway fuel economy of 31 mpg and delivering a company-estimated 237 hp and 250 lb.-ft. of torque.

FF0511briefs.indd 12FF0511briefs.indd 12 5/3/11 2:47:12 PM5/3/11 2:47:12 PM

http://www.automotive-fleet.com/news



Visit fl eet-central.com to fi nd out more, or contact a Subaru fl eet professional at 1-800-879-8233.

*Based on ALG’s 2011 Residual Value Award for Midsize Utility Vehicles. †EPA-estimated hwy fuel economy for Outback 2.5i CVT models. Actual mileage may vary.

Driver made the meeting.CFO made the budget.And both made it here for a BBQ on a Saturday.

Happy drivers. Happy CFO. Happy fl eet manager. The

Subaru Outback, with Symmetrical All-Wheel Drive standard,

has been awarded ALG’s highest forecasted resale value for a

mid-sized utility,* is an IIHS Top Safety Pick and gets 29 MPG.†

Love. It’s what makes a Subaru, a Subaru.

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Fleet Briefs


IRS Announces New 2011 Auto Depreciation LimitsWASHINGTON – The IRS has published new

guidelines for infl ation-adjusted depreciation

limits and lease inclusion amounts for passen-

ger vehicles. Revenue Procedure 2011-21 ap-

plies to passenger cars, vans, and trucks placed

in service in 2011 and to fi rst leases occurring

in that year. The guidelines also provide updat-

ed limits for vehicles placed into service in 2010

to which the 50- or 100-percent additional fi rst-

year depreciation deductions apply. Visit www.

irs.gov/pub/irs-drop/rp-11-21.pdf to download

the document.

Meurer Joins Mercedes-Benz Fleet TeamMONTVALE, NJ – Tedd Meurer has

joined Mercedes-Benz USA as the

national account manager for the

company’s South and Mid-Atlantic

regions for its fl eet sales division.

Meurer brings

more than 20 years of

management experi-

ence in new business

development, sales,

marketing, third party/

client servicing, oper-

ations, and fl eet. Dur-

ing his tenure in the industry, he

served in a variety of management

roles with The Hertz Corporation,

JM Family Enterprises, Automo-

tive Remarketing, Inc., National Car

Rental, and Alamo Rent-A-Car.

Audi Announces Diesel Lineup Expansion in U.S. HERNDON, VA – Audi of America

announced during its March 8 web-

cast that it plans to sell diesel ver-

sions of its A6 and A8 luxury sedans

and a diesel version of its Q5, in ad-

dition to its A3 and Q7 clean diesel

models. The company said its TDI

lineup will expand during the next

24-36 months.

Audi also announced the expect-

ed arrival of its electric e-tron sports

car in the U.S. in 2013.

MEURER


http://www.irs.gov/pub/irs-drop/rp-11-21.pdf

http://www.irs.gov/pub/irs-drop/rp-11-21.pdf

MAY/JUNE 2011 ■ FLEET FINANCIALS ■ 15

Chrysler Adds Executive Series to 300 Lineup

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AUBURN HILLS, MI – Chrysler has

expanded its 300 lineup with the

introduction of the all-new 2012

Chrysler 300C Executive Series.

The Chrysler 300C Executive Se-

ries combines ultra-premium leather,

improved handling, a range of safe-

ty and connectivity features, and the

363 hp 5.7L HEMI V-8 engine with

Company-Issued Vehicle Use on the RiseMIAMI – More individuals are get-

ting rid of personal vehicles with

leases because of company-is-

sued vehicles, according to data

from LeaseTrader.com. The online

lease transfer marketplace showed a

5.3-percent increase in transactions

due to company cars within a house-

hold, which comes on the heels of a

4.8-percent increase in February.

Many of the personal vehicle

lease transfers are taking place in

states such as California, Texas, Flor-

ida, and Michigan, which all showed

growth in jobs during March, ac-

cording to LeaseTrader.com. During

the recession and much of the eco-

nomic recovery, drivers would es-

cape vehicle leases out of need. Since

January, a growing percentage of

drivers have been escaping to shop

for a new vehicle lease deal at retail,

or choosing to drive their company

cars instead now that they have more

confi dence in keeping their jobs.

Fuel Saver Technology. Available

in rear-wheel or all-wheel-drive, the

2012 Chrysler 300C Executive Se-

ries models will arrive in Chrysler

dealerships this fall.

Features include a platinum

chrome exterior fi nish, 12-way

power-adjustable driver and front-

passenger seats (including four-

way power lumbar) with two-mode

ventilation, and two-mode heated

seats for front and rear passengers.

Olivier Francois, president and chief ex-ecutive offi cer − Chrysler Brand and Lead Executive for Marketing − Chrysler Group LLC, introduced the all-new 2012 300C Executive Series at the New York In-ternational Auto Show.



http://www.chevinfleet.com

DODGE GRAND CARAVAN. VALUE-ADDED SAFETY AND VERSATILITY.

The minivan that can. Do. Everything. The new 2011 Grand Caravan is our

smartest utility vehicle yet. An impressive array of safety and security

standards, including the Electronic Stability Control (ESC)3 system and

Sentry Key® anti-theft system, make the Grand Caravan a ⇓ eet favorite.

Improvements rev up with the new Pentastar V6, featuring Flex-Fuel

capability and a new fuel economizer mode. Open any door and you’ll be

welcomed by an all-new interior with well-appointed design details and

friendly, intuitive features.

The ultimate “jack-of-all-trades” work vehicle is the GRAND CARAVAN C/V

(not shown). It offers a cavernous 144 cu ft of usable cargo area, compared

to just 135 cu ft for the 2011 Ford Transit Connect XL1,4 and it doesn’t

⇓ inch when it comes to performance, fuel ef⇒ ciency or comfort.

DODGE DURANGO. ULTIMATE UTILITY.

All-new inside and out, the 2011 Dodge Durango bursts onto the sport

utility scene with a kickin’ combo of capability, performance and comfort.

Three rows of seating convert for outstanding ⇓ exibility and comfort.

The new 3.6L Pentastar® with best-in-class V6 towing (6,200 lb)1 comes

standard, or you can choose the available 5.7L HEMI® V8 (capable of

towing up to 7,400 lb). Fuel ef⇒ ciency stretches 500 miles on a single

tank of gas.2

TAKING YOUR FLEET FARTHER.

FFIN_16-17.indd 16FFIN_16-17.indd 16 4/29/11 6:36:54 AM4/29/11 6:36:54 AM

DODGE JOURNEY. EMPOWER YOUR PORTFOLIO.

Awarded 2011 Top Safety Pick by the Insurance Institute for Highway

Safety (IIHS). 5 A remarkable combination of performance, styling and safety.

The 2011 Dodge Journey brings a refreshed car to your ⇓ eet: a totally

refurbished interior with 5- or 7-passenger seating and available Uconnect®;

the new 3.6L Pentastar Flex-Fuel VVT engine, offering a 20 percent boost in

power; and all-wheel drive availability. Safety and security includes six air

bags6 and driver knee blocker, plus ESC.3

DODGE AVENGER. MULTI-TALENTED SEDAN.


Safety (IIHS). 5 More than smartly styled, the Dodge Avenger is brilliant

everywhere — from the all-new interior to the redesigned exterior to what’s

under the hood. The new 3.6L Pentastar V6 with VVT applies some of the

most advanced automotive engine technology and fuel ef⇒ ciency.7 The

suspension is redesigned, re-tuned and re-engineered. Both driver and

passengers are treated to spacious seating and soft-touch resting points,

plus new or upgraded sound-deadening materials for a supremely quiet ride.

DODGE CHARGER. FISCALLY RESPONSIBLE, RICHLY DESERVED.


Safety (IIHS). 5 The all-new Dodge Charger re-de⇒ nes craftsmanship and

executive privilege. Notable fuel economy comes from the best V6 engine

in Dodge history — the all-new 3.6L Pentastar with Flex-Fuel and VVT

(up to 27 mpg hwy),8 standard, plus the available legendary HEMI V8 with

Fuel Saver Technology. The Charger combines performance with connectivity,

high style with roomy comfort and tops it off with must-have safety and

security features.

1When properly equipped. 2Based on 3.6L V6 engine with 16 city/23 hwy EPA estimated mpg and 24.6-gallon fuel tank. 3Always drive carefully, consistent with conditions. Always wear your seat belt and obey traf⇒ c laws. 4The comparator data is provided under license from Autodata Solutions, Inc. (Autodata). 5IIHS groups Top Safety Pick winners according to vehicle type, size and evaluations of crash test performance. 6Always sit properly in the seat with the seat belt fastened. Always drive carefully, consistent with conditions. Always wear your seat belt and obey traf⇒ c laws. 7Of⇒ cial EPA estimates not yet available. Results depend on driving habits and conditions.

82011 EPA estimated miles per gallon, actual mileage may vary with driving conditions. 9See your dealer for complete details and a copy of the 5-Year/100,000-Mile Powertrain Limited Warranty. Dodge, HEMI, Uconnect and the Pentastar logo are registered trademarks of Chrysler Group LLC. ©2011 Chrysler Group LLC.

g y

(up to 27 7 mpm g hwhwy),8 statandard, plus the availal ble legendary HEMI V8 with

Fuel Saver Technology. The Charger combines performance with connectivity,

high style with roomy comfort and tops it off with must-havev safafety yyy anananandddd

security features.

All Dodge vehicles are backed by the unsurpassed

5-Year/100,000-Mile Powertrain Limited Warranty.9

fleet.chrysler.com 800-999-FLEET

FFIN_16-17.indd 17FFIN_16-17.indd 17 4/29/11 6:36:57 AM4/29/11 6:36:57 AM

YEREMYEREM NAMED 2011 NAMED 2011 FLEET FLEET EXECUTIVE EXECUTIVE OF THE YEAROF THE YEAR

Communication, collaboration, and not to mention a number of highly successful initiatives led the three-year Nestlé veteran to the Fleet Financials honor.

By Shelley Mika


Dean Yerem attributes the following to being named Fleet Executive of the Year:

■ Reducing fl eet size based on driver use.

■ Setting levels for personal use fees.

■ Collaborating with fl eet managers and fl eet management companies.

■ Communicating openly.

■ Listening carefully and making sure all sides are heard before making decisions.

AT A GLANCE As purchasing manager for

Nestlé Business Services

(Nestlé’s Shared Servic-

es Organization), Dean

Yerem is responsible for

fl eet, fl eet management, small pack-

age, offi ce supplies, furniture, and of-

fi ce services for the U.S. and Canada,

and supports global and regional initia-

tives as well. Nestlé operates more than

5,000 vehicles in the U.S. and Canada

and close to 29,000 units worldwide.

Yerem supports several fl eet manag-

ers throughout the company, with the

goal of bringing value to the fl eet and

those managers.

In his three years with the com-

pany, he’s seen big results. Working

with fl eet managers on a daily basis,

they have streamlined Nestlé’s opera-

tions and improved the fl eet. In doing

so, they’ve not only helped the orga-

nization become a greener operation

but have also yielded savings for the

company.

Now, they have validation for all their

hard work: Yerem is this year’s Fleet

Executive of the Year, an award co-

sponsored by The CEI Group, Inc.

“It is a great honor to receive this

award,” he said. “I am in a unique posi-

tion being able to support the fl eet man-

agers on decisions behind the scenes,

and it is really great to be recognized

for the work we have accomplished

over the past couple years.”

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FF0511feoy.indd 18FF0511feoy.indd 18 5/3/11 6:30:23 AM5/3/11 6:30:23 AM

SPONSORED BY


“Managing fuel costs is one of the

most critical and diffi cult challenges

facing fl eets. Dean Yerem has dem-

onstrated leadership and innovation

in tackling this problem on a glob-

al basis for Nestlé and has shown us

that it can be done. All the candidates

were worthy, but his selection sends a

particularly timely message to fl eets

around the world,” said Wayne Smolda,

CEO and founder of The CEI Group,

Inc. “CEI has been proud to be a co-

sponsor of this award with Bobit for

the last 10 years. It is a very fi tting way

to acknowledge that fl eet best practic-

es are achieved through the coopera-

tion among managers and executives

with different but complementary tasks

and skills.”

Yerem has implemented several

highly successful fl eet initiatives over

the last three years, and those initia-

tives are yielding major savings.

“My role at Nestlé Business Ser-

vices - Procurement allows me to be

in a great position to support the op-

erating companies in North America.

Many employees in Nestlé don’t have as

many opportunities to gain that unique

exposure in working with all the busi-

nesses,” he said. These operating com-

panies include Nestlé Nutrition, Nestlé

Purina PetCare, Nestlé USA, and Nestlé

Waters North America.

Prior to joining Nestlé, Yerem held a

similar role with The Walt Disney com-

pany for four years. “It was a wonder-

ful experience and really helped ready

me for working for a global company,

like Nestlé, with its many complexi-

ties,” he said.

Name-Making InitiativesYerem’s recognition as Fleet Execu-

tive of the Year is due in large part

to his leadership role in initiatives

that streamline overall fl eet process-

es and help promote greener opera-

tions, while also driving key savings

for the company.

“In my role, I need to continually

fi nd the best value and benefi t for the

company while being aware of the dif-

ferent needs of my stakeholders. Try-

ing to align opportunities and initia-

tives is one of the main things I do on

a day-to-day basis. Nestlé does an out-

standing job of always providing op-

portunities, training, and goals that al-

low the individual to succeed — and

contribute to the company’s overall

success, too.”

Yerem’s fi rst goal in his role was

to identify the differences between

the operating companies he supports

and look for ways to infl uence the cost

points for the fl eet. One initiative he

implemented was to convert a U.S.

fl eet from six- to four-cylinder units

over a three-year period. This transi-

tion has improved the performance of

the fl eet and saved on capital and fuel

expenditures.

This effort also resulted in a green-

er fl eet, an achievement Yerem took

advantage of promoting further. “We

made sure to communicate ‘green’

driving practices and followed up with

quarterly newsletters for reinforcement

of the success we were gaining. It not

only became a green initiative, but

these environmentally friendly driv-

ing habits have reduced our accident

rate as well.”

Overall, Yerem and his teams have

suggested adjustments in the selector

list and a focus on more fuel-effi cient

vehicles, which will lower CO2 by more

than 3,000 tons each year.

Another effort spearheaded by

Yerem in the last three years was an

evaluation of personal-use fees be-

tween the various operating compa-

nies. This led to a phased implementa-

tion of set levels for personal-use fees

for all drivers.

A third initiative Yerem led was to

reduce the number of vans in the fl eet

over time. By surveying drivers, Yer-

em’s team identifi ed those vans unnec-

essary to the fl eet and has now made

major reductions in the van fl eet and

cost over the past two years.

In 2009 alone, Yerem’s initiatives

in the U.S. and Canada have seen a re-

duction of more than 300,000 gallons

of fuel and a 15-percent reduction in

emissions, resulting in savings for the

company.

Yerem’s most recent success was to

tie in Nestlé’s global partnerships in a

bid process with a car manufacturer

that covered all of the U.S., Canada,

and Mexico. “We leveraged our posi-

tion with some of our partners and cre-

ated new partnerships along the way,”

Yerem said.

Collaboration Bolsters the WinYerem said his collaboration both

within and outside Nestlé helped him

CEI Founder and CEO Wayne Smolda (left) and Ed Bobit (right), founder and chairman of Bobit Business Media, congratulate Dean Yerem on his Fleet Executive of the Year win after the awards presentation at the NAFA I&E in April.

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AF0909leaseplan.indd 1 8/19/09 2:45:42 PM

accomplish his successful initiatives,

as well as his Fleet Executive of the

Year win.

His fi rst nod is to the backing he

receives from the fl eet managers he

works with on a daily basis. “They keep

me apprised of their needs and goals

and make sure we align ourselves as

a group to make the process success-

ful,” he said.

Secret to Success No. 1: CommunicationWhile the support Yerem has received

from his internal and external partners

has bolstered his success, his achieve-

ments are arguably due to his own man-

agement techniques as well. Yerem’s

personal work philosophy relies heav-

ily on good communication — both to

overcome issues and to work together

toward a common goal.

“We have established great lines

of communication at each operating

company and have given fl eet some

excellent visibility with more sustain-

able solutions (i.e., more “green”), ac-

cident reduction, and cost savings over

the past couple of years. I have month-

ly calls with all of the fl eet managers

where we identify any roadblocks or

future opportunities,” Yerem said.

What is his most critical success

factor? “I cannot stress how important

it is to ensure everyone is on the same

page and on board with what you are

trying to accomplish,” he said.

Yerem noted that communication

has helped him and his team members

overcome the natural challenges of dif-

ferent cultures and geography that exist

in a company of Nestlé’s size. “We are

a very large global company and it can

be complex taking into consideration

the different business needs and cul-

tures with every opportunity,” he said.

“I feel the key is communication. I send

out as much information as possible on

each project. We review the return on

investment (ROI) on everything, keep-

ing an account of each individual fl eet

need and the goals we agreed to at the

beginning of the project.”

Secret to Success No. 2: A Careful EarFor Yerem, listening is just as im-

portant as communicating. His ad-

vice to other fl eet executives? Listen

to everyone.

“Listen to your fl eet managers; fl eet

management company; other fl eet man-

agement companies; car manufactur-

ers; internal Human Resources; health,

safety, and risk; environmental; as well

as keeping in line with what is go-

ing on in the market,” Yerem empha-

sized. “Each initiative has its own set

of stakeholders, and my role is to en-

sure everyone is heard and part of the

decision-making process. I may have

a strong opinion going into a process,

but I can be quickly infl uenced by a

stakeholder with a specifi c need that

will ultimately alter the outcome of

the overall project.”

Yerem said listening carefully to

partners and stakeholders can reveal

opportunities that might otherwise go

undiscovered. “Fleet is a great cate-

gory and has many complexities to

deal with on a daily basis. I can tru-

ly say that my success is based on lis-

tening to the fl eet managers, my peers,

lease management, and everyone who

has an opinion on fl eet — which we

all know is everyone,” he said. “You

never know when and from where you

will get some great information that

will ultimately lead to your next op-

portunity.”

More Work Ahead — and a Little Bit of CelebrationYerem’s next initiative is to imple-

ment a comprehensive safety pro-

gram that establishes a baseline that

can only get better. “We realize the

driver is the most important asset in

fl eet, and we are taking steps to en-

sure we provide the necessary pro-

gram, training, and policy that refl ect

that goal,” he said.

While Yerem continues to be hard

at work, he has paused for just a mo-

ment to celebrate the success of his

Fleet Executive of the Year honor. “It

feels great,” he said. “It is a great hon-

or to receive this award.”

Yerem celebrated by sharing the

news of his — and the company’s —

success with those who helped him

get here. “I sent out an e-mail to all

my stakeholders in Nestlé (even my

non-fleet ones) with a link to the

online story about this recognition

and thanking them for their support

along the way.” ■

Dean Yerem (center) poses with (from left) Ed Bobit, founder and chairman of BBM, and LeasePlan USA executives Jon Toups, SVP, chief sales & marketing offi cer; Tom Casey, national vice president, client relations; and Mike Pitcher, president and CEO.

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AF0909leaseplan.indd 1 8/19/09 2:45:42 PMFF0511feoy.indd 23FF0511feoy.indd 23 5/3/11 6:30:50 AM5/3/11 6:30:50 AM

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“Productivity” is a word bandied about in business all the time, but what is it? How is it measured and achieved? In 2011, fl eet

managers have little choice but to answer these questions.

Webster’s defi nes pro-

ductivity rather ob-

viously: “The qual-

ity or state of being

productive.” Drilling

down, productive is defi ned as “hav-

ing the quality or power of producing,

especially in abundance.”

So how does a fl eet manager make

his or her fl eet more capable of pro-

ducing abundantly? Better put, how

can you get more work out of the re-

sources given? Productivity is a key

element in any economic discussion;

it determines costs, prices, effi ciency,

and a host of qualities found in any

Productivity


Increasing fl eet productivity involves:

■ Defi ning it in terms of vehicle and departmental aspects.

■ Determining how to measure it.

■ Identifying ways to improve it using all the resources available.

AT A GLANCE

business endeavor. The fi rst two steps

in increasing productivity are fi rst to

defi ne it, and then determine how it is

to be measured. The third step, achiev-

ing it, is the real challenge.

Improving Fleet ProductivityFleet managers have two areas where

productivity can be enhanced:

■ The fl eet itself. The vehicles,

their costs, and the amount of

work the vehicles can do in

relation to the costs associated

with them.

■ The fl eet function. The fl eet

manager, his/her staff (if any),

and how much work they can do

relative to the time and resources

they have to do it.

Like employees, fl eet vehicles are

“hired” to do a job — provide trans-

portation, deliver products and ser-

vices, and perform tasks on a jobsite.

They have costs associated with ac-

quiring and holding them and costs

associated with operating them. Ve-

hicle productivity can thus be defi ned

as the relationship between the work

a vehicle does and the resources re-

quired to do it.

Departmentally, a fl eet manager

incurs costs associated with the ad-

ministration and management of fl eet

vehicles. Vehicles must be ordered; de-

livered; records and fi les kept; costs

tracked and analyzed; titles, registra-

tions, and inspections administered;

and vehicles sold. Some fl eet manag-

ers have staff to manage as well, while

others do not. Fleet departmental pro-

ductivity is defi ned in much the same

way that any business function is de-

fi ned: how much work can be done in

relation to the resources (people, mon-

ey, time) necessary to do it.

Thus, fl eet managers are challenged

to step up the productivity of the vehi-

cles they manage, as well as how they’re

administered and managed.

Maximizing Vehicle ProductivityManaging a fl eet of vehicles is an ex-

TAKING

FF0511productivity.indd 24FF0511productivity.indd 24 5/3/11 11:59:05 AM5/3/11 11:59:05 AM

MAY/JUNE 2011 ■ FLEET FINANCIALS ■ 25

ercise in productivity; in essence, the

job is that of squeezing as much pro-

duction out of company vehicles as

possible.

How is the productivity of a fl eet

vehicle measured? Fortunately, the in-

dustry has provided fl eet managers with

some very specifi c measures. All of

them, in one way or another, are time

or mileage/cost ratios, which makes

measuring vehicle productivity rela-

tively simple.

Fixed or holding costs, those costs

incurred in the acquisition and own-

ership/use of the vehicle, consist pri-

marily of depreciation and leasing or

fi nance (money) expenses. It is im-

portant to note that depreciation ex-

pense can only truly be measured af-

ter a vehicle has been taken out of

service and sold; during a vehicle’s

term in service, it is only an accrual

or reserve established to “cover” true

depreciation.

Reducing DepreciationBecause depreciation makes up 70

percent or more of holding costs, it

is a natural fi rst stop in stepping up

productivity. For purposes here, fl eet

depreciation is simply the difference

between the original cost of a vehicle

(either purchase cost or the cost cap-

italized into a lease) and the net pro-

ceeds when it is sold. Depreciation is

expressed (measured) in either dollars

per month or cents per mile (cpm) —

both are cost/use ratios. Merely re-

ducing the net depreciation number,

therefore, is an increase in productiv-

ity only if the use, expressed either in

cost (cents) or time (months), remain

the same or increase.

For example, if the original vehi-

cle cost $20,000, was kept in service

for 30 months accumulating 75,000

miles, and is then sold for $7,000,

the actual depreciation is expressed

as follows:

■ Net depreciation is $13,000 ($20,000 – $7,000 = $13,000)■ Cost per mile is $0.173 ($13,000 x 100 / 75,000 = 17.3 cpm)■ Dollars per month are $433.33 ($13,000 / 30 = $433.33)

Thus, if the depreciation dollars

decrease while achieving the same

mileage and time in service, or con-

versely mileage or time increase at

the same level of depreciation cost,

an increase in productivity has been

achieved. Most commonly, decreas-

es in depreciation are sought either

by decreasing the original cost or in-

creasing resale proceeds. There are

practical limits to the former (only so

many dollars are available in the orig-

inal cost), so most efforts to increase

productivity by addressing deprecia-

tion costs center on increasing resale

proceeds. This is not a bad idea at all;

there are a number of ways this can

be accomplished:

■ Employee sales.

■ Varying markets used (wholesale,

auction, broker, even retail).

■ Increasing condition report

follow ups.

■ Enforcement of preventive

maintenance policy.

How can a fl eet manager go from

the traditional to the next level? It may

sound like blasphemy, but keeping ve-

hicles in service beyond the usual re-

placement time and mileage criteria

can be done, and can result in addi-

tional savings/increased productivity.

Most auto and light truck fl eets keep

TO THE NEXT LEVEL


Productivity


vehicles in service for 24-48 months

or 65,000-100,000 miles, whichever

comes fi rst. The common wisdom is

that beyond that, the fl eet risks major

component failure (as mileage accu-

mulates), decreased resale values, and

even reduced fuel effi ciency.

While these can indeed happen,

they don’t necessarily have to hap-

pen. Vehicles today are (despite com-

mon perceptions that “they don’t build

them like they used to”) far better en-

gineered, have more extensive war-

ranties, and retain value at a better

rate than did vehicles 25 or 30 years

ago. The key, of course, is a rigorous

preventive maintenance program,

coupled with detailed condition re-

ports for which follow-up and action

are critical.

The next level of productivity? It

could be extending the service life of

your fl eet vehicles beyond what the in-

dustry has historically recommended.

The depreciation curve tends to fl at-

ten out as time and mileage accumu-

late; the greatest period of depreciation

occurs in the initial weeks in service.

Once a new car has been titled, regis-

tered, and hits the road, it becomes a

used car and suffers its greatest drop

in value. Beyond the second, third, and

fourth years of service, all things be-

ing equal, the drop in resale value be-

comes less and less precipitous.

Extending replacement cannot, nor

should it, be done without testing the

waters for some period. Select vehicles

over a replacement period to keep in

service. If, say, the replacement mile-

age is normally 75,000 miles, keep a

handful beyond that. Extend one to

90,000 miles, another to 100,000,

and still another to 125,000. When

they are sold, run the full lifecycle

depreciation analysis and compare it

to that of vehicles replaced normally.

You may well fi nd that, on a cost-per-

mile or dollars-per-month basis, your

depreciation costs will actually de-

cline. The next step is to run the same

cost analysis for variable, or operating

costs (fuel, maintenance/repair, tires,

oil). If those at least remain steady,

you have a winning strategy for tak-

ing a major portion of your fl eet pro-

ductivity to the next level. Naturally,

if the test vehicles don’t pan out cost-

wise, it is a simple matter to shut the

test down.

Incurring Variable CostsVariable or operating costs are those

incurred in the operation of a fl eet ve-

hicle. They include fuel, tires, main-

tenance and repair, and oil. Variable

costs will tend to “ratchet” upwards as

mileage accumulates. Initially these

costs consist primarily of simple pre-

ventive maintenance, such as oil and

fi lter changes, wheel alignments, tire

rotation, winterizing, and the like.

At somewhere between 30,000 and

50,000 miles, the two major variable

costs that are predictable — tires and

brakes — will need replacement. This

will cause variable expense to spike,

then decline as accumulated mileage

dilutes them. This process tends to re-

peat itself, with overall cost per mile

slowly increasing.

Today’s fl eet manager enjoys some-

thing fl eet managers 30 years ago did

not have: more extensive, and extended,

warranties. While the typical vehicle

back in 1980 might have a warranty

of 12 months or 12,000 miles, today’s

vehicles are often covered bumper-to-

bumper for three years/36,000 miles

or more, with powertrains covered as

long as 100,000 miles. Repairs that

would have added variable costs back

then are now covered under warran-

ty, and thus the overall lifecycle vari-

able costs are lower today (in addition,

tire and brake life have both also been

lengthened). With that in mind, what

action could possibly take productiv-

ity to the next level, given that vari-

able costs have declined?

It could be that vehicles are be-

ing over-maintained from a preven-

tive maintenance perspective. It is

easy to be locked into the common

practice of, for example, changing

oil and fi lters every three months or

5,000 miles. For years, vehicle own-

er’s manuals would provide a “severe

use” exception to an oil change inter-

val, usually around 7,500 miles, due

to the increased mileage accumulat-

ed in fl eet usage (the typical person-

al car runs about 12,000 miles per

year or less; fl eets regularly accumu-

late 20,000 or more miles each year

in service).

Let’s take a look at what this might

mean in increasing productivity. In a

1,000-vehicle fl eet with vehicles driv-

en 25,000 miles per year each, total

annual mileage is 25 million. Chang-

ing the oil every 5,000 miles adds up

to fi ve oil changes per vehicle per year

or 5,000 oil changes. Extending the

interval to 7,500 miles reduces this to

3.3 oil changes per vehicle per year,

or 3,300 oil changes. At $25 per oil

change, productivity is as follows:

■ At 5,000 miles: 5,000 oil changes @ $25 each = $125,000 or 25 cents per mile.■ At 7,500 miles: 3,300 oil changes @ $25 each = $82,500, or 11 cents per mile.

A decrease of 14 cents per mile in

oil change expense results in total sav-

ings of $42,500 per year. Can this be

done? In the same way that the depre-

ciation test is done, so too should this

go forward. Take a handful of vehi-

cles and extend the oil change inter-

val to 7,500. Keep close track of any

other maintenance or repair issues that

may arise during the test. If no major

component failures occur and fuel ef-

fi ciency remains static, slowly roll out

the change to the rest of the fl eet. Run

your standard lifecycle cost analyses

as the change matures and you may

well see the productivity of your fl eet

increase, squeezing the same or more

miles out of your PM dollar.

Minimizing Fuel ExpenseAs depreciation is to holding costs, so

fuel is to variable costs. It is the 800-

lb. gorilla, eating up as much as 70

percent or more of variable cost. And

when fuel pump prices spike as they

did in 2008 and are today, this can


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1Whichever comes fi rst. See dealer for details. 2Whichever comes fi rst, provided the service is performed within 2,000 miles of the recommended service interval.


Productivity


move higher still. Even small moves

to increase fuel productivity can reap

large rewards.

Sometimes, it seems as though we’re

at the mercy of prices, as they move up

and down “fueled” by events that cannot

be controlled. Yes, fl eets use fuel cards,

track data, and place strict controls on

what can be bought (when, where, by

whom, and how much). All of these are

good actions and are critical to the pro-

ductivity of fl eet fuel dollars. Is there more

that can be done? Yes, and it can take fuel

productivity to the next level.

Fleets press suppliers for rebates,

elimination of fees, and even discounts.

But there are actions that can be taken

at the regional and local level that can

have an even greater effect. Most fl eet

fuel cards are “universal;” that is, they

are accepted by nearly all merchants,

so when drivers need to fuel up, they

can conveniently pull into the next sta-

tion they see and do so. Branded oil

company locations, convenience store

outlets, and other retailers accept fl eet

cards. However, asking your suppli-

er to seek and manage discounts only

takes the effort so far.

There are literally hundreds of local

and regional fuel retailers that can be

approached for discounts. Your branch

and regional offi ces can fi nd them; it is

likely they already use many of them.

Many, if not most, of these retailers

are open to providing discounts at the

pump in exchange for brand loyalty.

A branch manager who contacts the

corporate offi ces of a regional conve-

nience store chain, for example, with

an offer to send his or her drivers to

the brand in exchange for discounts, is

likely to encounter a great deal of in-

terest; the same goes for fl eet manag-

ers. The fuel card supplier can then be

notifi ed of the agreement and should

be able to pass the discount through to

the fl eet in full on each month’s bill-

ing. Let’s look at the effect.

Take the 1,000-vehicle fl eet, driv-

ing 25 million miles each year and get-

ting an average of 20 miles per gal-

lon. Productivity, at $3 per gallon, is

as follows:

■ 25,000,000 miles / 20 mpg = 1,250,000 gallons per year■ 1,250,000 gallons X $3 per gallon = $3,750,000 in annual fuel spend■ $3,750,000 X 100 / 25,000,000 = 6.6 cents per mile

Every penny per gallon discount ne-

gotiated will save $12,500. The percent-

age isn’t great — 3 cents per gallon, at

$3 per gallon at the pump, is a mere 1

percent. However, because the dollar

spend is so great, the dollars saved can

be substantial. Remember that produc-

tivity gains don’t need to be huge to

result in substantial savings.

Departmental ProductivityThere are also things that fl eet man-

agers 30 years ago had that fl eet man-

agers today don’t — staff tops the list.

The old rule of thumb that a fl eet de-

partment needs three people for every

1,000 vehicles in the fl eet has long be-

come obsolete, as fl eet managers have

been forced to do more with less, and

outsourced programs have expanded. In

spite of this, some fl eet managers haven’t

taken full advantage of technology and

are often timid in outsourcing.

Taking departmental productivity to

the next level begins with technology.

Is the fl eet manager taking full advan-

tage of all the tools available for com-

munications, administration, record-

keeping, and data mining? Time spent

on the telephone, for example, can better

be used in more strategic management

and decision making. Do drivers call to

ask how they can renew a registration?

What do they do when their vehicle is

up for replacement and they need to or-

der a new one? How do they report an

accident? They don’t need to call if a

fl eet manager uses the technology avail-

able. Make certain that the company in-

tranet site contains the company fl eet

policy, along with an FAQ (frequently

asked questions) feature and remind

drivers it’s there at every opportunity.

Many drivers now have Internet access

via smartphones and other devices, and

they should be able to answer any ques-

tion they have without calling the fl eet

manager on the phone.

Use social media (Twitter, Facebook,

LinkedIn, etc.) to get the message out

that drivers can fi nd answers to ques-

tions themselves, and where they can

do it. Set up a company LinkedIn or

Facebook group, where you can check

to see what drivers are saying, and an-

swer questions without spending time

on the phone at work.

Don’t be afraid to outsource what

should be outsourced. The fl eet manag-

er (or staff, if there is any) should not be

handling license renewals, paying park-

ing tickets, or directing drivers to repair

shops. Remember that clerical and ad-

ministrative tasks can and should be out-

sourced, but management decision-mak-

ing should not. If a fl eet manager does

have staff and fi nds that he/she can do

without, it’s better to take action than to

have someone else do it for you.

The Next LevelTaking fl eet management to the next lev-

el is not always the most glamorous pro-

cess. It can be the result of simple common

sense, of using the resources available to

their fullest advantage, and yes, sometimes,

bucking the common wisdom.

■ Take advantage of local leverage. Ask your regional and

branch locations to assist in the

search for better productivity.

■ Take a second look at what is considered the “right” way of doing things. Question the

common wisdom, and don’t

hesitate to test new processes and

policies.

■ There is a whole world otechnology out there, and it ischanging every day. Look for ways

to use it all. Stay current on what is

going on. Apply it wherever and

whenever it makes sense. Use it to

do more.

■ Be creative. Don’t dismiss any

idea out of hand.

The key point in taking productivity

to the next level is this: If you don’t do

it yourself, if you don’t make it a part of

every working day, someone else will

do it for you. ■

AF0411greenfleet_mag.indd 1 3/18/11 10:08:18 AMFF0511productivity.indd 28FF0511productivity.indd 28 5/3/11 11:59:09 AM5/3/11 11:59:09 AM

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FF0511toyota_sienna.indd 1 4/29/11 8:33:07 AM

Some call it thinking out of the box, pushing the envelope, or just plain breaking the rules. “Common wisdom” isn’t always the best way to keep a

fl eet running cost effi ciently.

There has never been a bet-

ter time to break the rules

than today. Resources are

being slashed, staff elim-

inated, and fl eet manag-

ers are scrambling like never before

to meet the never-ending demands to

reduce costs.

If you’ve tried everything — if

you’ve data mined and scolded and

cajoled until your keyboard catches

Management


Common adages fl eet managers should reconsider include:

■ Vehicles must be replaced in three years/65,000 miles (or thereabouts) — otherwise, there is risk of major component failure.

■ Leased vehicles should be amortized at 2 percent per month to most closely proximate actual depreciation.

■ Fleet needs certifi ed technicians to authorize vehicle repairs beyond preventive maintenance.

■ Large fl eets need more than one supplier to keep them honest and compete for business.

AT A GLANCE

fi re — maybe it’s time to forget tra-

ditional fl eet management and take

a step out of the box. The payoff can

be substantial.

‘The Way It’s Always Been Done’Let’s fi rst take a look at some of the

more common adages that have guid-

ed fl eet managers for decades.

■ You must replace your vehi-

cles in three years/65,000 miles

(or thereabouts) — otherwise,

you run the risk of major compo-

nent failure.

■ Amortize your lease vehicles

at 2 percent per month; this will

most closely proximate the actu-

al depreciation.

■ You’re not a mechanic; you need

certifi ed technicians to authorize

vehicle repairs beyond preventive

maintenance.

■ Your fl eet is a big one; you need

more than one supplier to keep

them honest, and they can com-

pete for your business.

There are more, but you get the pic-

ture. Try to buck that common wis-

dom and you’ll be laughed out of the

room — and possibly out of your job.

Then again, perhaps not. Let’s take a

look at each of these adages, and how

stepping out of that comfort zone can

help fl eet realize savings previously

thought impossible.

Replacement Cycling ‘Rules’It is one of the oldest adages in the fl eet

industry. Fleet automobiles should be

replaced on a cycle of time and mile-

age, 36 months or somewhere be-

tween 65,000-75,000 miles, whichev-

er comes fi rst (light trucks and vans,

a bit longer). Why? For a number of

reasons. Exceeding this mileage range

will signifi cantly reduce resale value.

Replacing at that point will avoid the

additional expense of the next round

THE RULES THE RULES TO OPTIMIZE TO OPTIMIZE

PERFORMANCEPERFORMANCE

‘BREAKING’‘BREAKING’

It may be time to forget traditional fl eet management and take a step out of the box. The payoff can be substantial.

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http://www.IntelliChoice.com

Management


of tire and brake replacements. Keep-

ing vehicles longer increases the pos-

sibility of major component failure.

These and other reasons are given

when the question of when to replace

vehicles arises.

Like similar common wisdom, it

has its origins decades ago when ve-

hicles were not nearly as well built

as they are today — warranties were

nowhere near as long or comprehen-

sive, and model years were clear-

ly defi ned. Today, vehicles routinely

last well over 100,000 miles, provide

many years of cost-effi cient, reliable

service, and retain signifi cant value

on the used-vehicle market.

That said, before considering step-

ping out of the replacement cycle box,

a fl eet manager needs to ensure that

it’s done carefully. Ensure that:

■ A vigorously enforced preven-

tive maintenance regimen is in

place.

■ Vehicle condition reports are

completed, endorsed by a super-

visor, and submitted several times

each year. Conditions requiring at-

tention must be addressed.

■ The change is phased in slowly,

stretching out the time and mileage

on selected vehicles, and lifecycle

costs are calculated and tracked.

Provided vehicles are cared for,

there is little reason to believe that

either performance or resale value

will fall off a cliff if replacement is

stretched out to four years, or 100,000

miles or more.

Amortization is Not ‘One Size Fits All’For fl eet vehicles leased under an

open-end TRAC lease (the most com-

mon lease transaction among mid-size

and larger fl eets), a key part of the

lease rate factor is the rate at which

the original cost of the vehicle is am-

ortized. This rate will determine not

only the size of the lease payment,

but the “book” value of the vehicle

at lease term, against which the re-

sale proceeds are applied.

Again, decades ago, it was gener-

ally accepted that for a “typical” fl eet

auto, in service for the aforementioned

36 months or 65,000 miles and re-

placed with that mileage in approxi-

mately 2.5 years, the proper amortiza-

tion rate was 50 months, or 2 percent

per month. After 30 months in ser-

vice, for example, this would result

in an unamortized value equal to 40

percent of the original cost.

AF1010jobfinder.indd 1 9/21/10 9:04:40 AM

Replacement cycling is an important component in managing a fl eet. Provided vehicles are well cared for, replacement cycles can be adjusted without impacting performance or adversely reducing resale value.

Amortization is a key part of a lease rate factor. For a national fl eet, with vehicles in several different roles carried out in many different venues, amortizing at one rate is counterproductive.

Today, vehicles provide many years of cost-effi cient, reliable service and retain

signifi cant value on the used-vehicle market.

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http://www.fl

Management

Few fl eets, however, are so ho-

mogenous that a “one-size-fi ts-all”

amortization rate properly fi lls the

role the process requires. The purpose

of amortization is to reduce the orig-

inal cost to the point when, at antici-

pated replacement, the unamortized

value will approximate the market

value when the vehicle is sold.

For a national fl eet, with vehicles

in several different roles carried out

in many different venues, amortiz-

ing at one rate is counterproductive.

Urban vehicles generally run lower

mileage than do rural vehicles. Job-

site trucks accumulate harder, tough-

er miles than do delivery trucks, etc.

Smart fl eet managers should use

amortization rates appropriate to

the usage: lower-mileage vehicles

amortized over a longer period, and

higher or harder mileage vehicles, a

shorter period. This will more accu-

rately refl ect the actual depreciation,

and smooth out cash fl ow. Remem-

ber, there is not real “gain” or “loss”

from the sale of a vehicle lease under

a TRAC lease. It is merely an adjust-

ment required as a result of amortiza-

tion that doesn’t properly match the

actual depreciation. It’s not unlike a

tax return; you aren’t really getting

money from the government when

you get a refund. You’re getting your

own money back that was taken from

you during the year. The ideal with-

holding, like the ideal amortization

rate, will result in an adjustment as

close to zero as possible.

Maintenance ManagementMore often than ever before, fl eet

managers’ backgrounds include fi -

nancial experience such as fi nance

or treasury, corporate functions such

as purchasing or general administra-

tive, or operational functions such as

corporate services. Fewer have back-

grounds in the automotive business,

particularly vehicle technology and

mechanics. Thus, it is said, you need

the expertise provided via a mainte-

nance management program, where

you have certifi ed vehicle technicians

at your service to discuss, negotiate,

and manage maintenance and repairs.

Makes sense, doesn’t it?

To some extent, it does. But once

again, the maintenance management

programs available today, in essence,

are little different than those of 30

years ago. And their purpose, back

then, was a function of the vehicles of

their time. The company pays a sup-

plier a per-vehicle, per-month charge,

and the supplier provides a number

of resources and services:

■ A national network of mainte-

nance and repair facilities.

■ The means by which drivers

can purchase preventive mainte-

nance, emergency road service,

and repairs when needed.

■ The previously mentioned certi-

fi ed vehicle technicians who pro-

vide expertise and assistance in dis-

cussing repairs with the shop.

■ Reporting tools, which enable

the fl eet manager to mine data,

track operating costs, and take

action when needed.

■ “Extended warranty” servic-

es, where the supplier submits

repairs performed beyond pub-

lished warranty to the manufac-

turer for consideration.

The technology has certainly

changed from 1981, but the essence

of the programs has not. What have

changed, and changed dramati-

cally, are the vehicles themselves

and the warranties covering them.

While in ’81, most warranties ran

for 12 months or 12,000 miles, today

they cover fi ve years, 50,000 miles

(bumper-to-bumper, save wear items

such as tires, brakes, belts, and hos-

es), with some powertrains covered

up to 100,000 miles. With the typ-

ical fl eet vehicle running as much

as 25,000-30,000 miles per year, a

12,000-mile warranty ran out after

as little as six months or less, leav-

ing the fl eet manager to fend for

him or herself if repairs were need-


While technology has certainly changed over the years, the vehicles themselves and the warranties that cover them have also changed dramatically. Today, an engine or transmission failure is a rarity, and more often than not occurs under warranty and is thus covered.

Smart fl eet managers should use amortization rates

appropriate to usage: lower-mileage vehicles amortized

over a longer period, and higher or harder mileage

vehicles, a shorter period.

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Management

ed. However, a 36,000-mile warran-

ty covers the fi rst two or so years of

fl eet use, and thus, the large major-

ity of trips to the shop are for sim-

ple preventive maintenance items. In

1981, a fl eet of 1,000 vehicles could

expect to replace several transmis-

sions as well as some engines each

year. Today, an engine or transmis-

sion failure is a rarity, and more of-

ten than not occurs under warranty

and is thus covered.

That said, is paying $4-$6 per ve-

hicle per month (as much as $48,000-

$72,000 per year for a 1,000-vehicle

fl eet) worth the cost, when the large

majority of maintenance activity is

preventive maintenance, or covered

under warranty?

Think about leaving the mainte-

nance management cocoon and man-

aging the function yourself. You may

even be able to negotiate with your

supplier for a fee-for-service type

program, where you can avail your-

self of the technical expertise only

when needed and requested, for a

per-occurrence fee. It may seem a

bit frightening — what do I do if a

shop calls and says a vehicle needs

brakes? However, items such as tires

and brakes are safety items, and it

isn’t likely that even a supplier will

decline them and risk liability if either

fails. Two tires or four? Give drivers

a tread depth gauge, teach them to

use it, and have the driver check the

tread depth when the shop wants to

replace them. You may be surprised

to fi nd that maintenance and repair

costs don’t skyrocket, vehicles don’t

break down in droves, and you end

up saving money.

Multiple SuppliersYou manage a fl eet of 500, 1,000, or

5,000 vehicles. It’s smart not to put

“all your eggs in one basket,” right?

You need to have two or three fl eet

suppliers to split the business, which

creates the kind of competition that

will provide the highest level of ser-

vice, at the best prices, as these sup-

pliers compete for your business.

Think again, and think outside the

box. Say you manage the 500-vehicle

fl eet. If you think that the prospect

of getting 250 of those vehicles and

having to compete for more orders

every year will get you the best rates

and better service from a fl eet suppli-

er than competing for all 500 vehicles

will, you’re probably wrong.

Just like anything else, the more

you buy, the lower the price, and just

because you’re buying more doesn’t

mean your service will be any better.

Fleet suppliers compete relentlessly for

any business, provide the best level of

service they’re able to, and price ser-

vices according to the volume of busi-

ness they get. The only thing splitting

the business gets you is multiple bill-

ings, two account executives, two dif-

ferent systems to use to manage your

fl eet, and the possibility of confusion

among your drivers.

This does not mean that the pro-

cess known as “best practices” isn’t

of value. You can seek the best pric-

ing on a lease, the best for mainte-

nance assistance, the best for acci-

dent management, etc., since there

are companies that specialize in each

of these areas.

Be BoldIt is easy to follow the crowd, to rest

comfortably in the practices the in-

dustry has held are the “proper” ones.

It’s also daunting to leave that crowd,

break some rules, and try some cre-

ative management techniques. As

long as you measure the risk, de-

velop a plan, and implement change

carefully, breaking the rules of fl eet

management can be a rewarding ex-

ercise, in more ways than one. ■

FF0710green.indd 1 6/28/10 3:56:12 PM


Splitting up business across multiple suppliers for one particular product can cause multiple billings, numerous vendor contacts, multiple systems to use, and the possibil-ity of confusion among drivers.

There has never been a better time to break the

rules than today. Resources are being slashed, staff

eliminated, and fl eet managers are scrambling to meet the never-ending demands to reduce costs.

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AF0

5-39

.10

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As individuals and as a company, we are dedicated to maintaining green initiatives and strive to be good

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5AF0

539-39.1010

HHeerree aarree aa ffeeww ooff tthheeee wwwwaayyssss p gwe’re keeping GRREEEN:

RECYCLED PAPER PROGRAM: • 55,0000 llbsper month

RECYCLED CANS & BOTTLES PPROOGRAMM: • 40 lbs per month

WINDOW TINTING: reduces eeneergy losss • by 75%

VARIABLE SPEED CONTROLL ONN HVAC•UNITS: 7500 kWh savedd per month

RETROFITTING OLD T-12 FFLUOORESCENTTS TO •NEW T-8S: 3400 kWh ssavedd per monnth

EFFICIENT BOILER/HEATEER:• 30000 theermssaved per month

PARTNERING WITH OUOUR PRINNTER: develloped•a “green” gameme plan,, saving papper,

ink and energyyene

RECYCLRECYCL ONER CARTRIDCLED TO IDGES AND • BATTE GRAMERIES PROGRAM

AND OOUR• ENVIRONMENTALLY FRIENNDLYY

Digitital Editions

We care about the environment and are setting a positive example.

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Fleets are exploring new strategies to lower their fuel expenses, such as rightsizing vehicles, increasing driver training, improving fuel card compliance, and partnering with fuel management companies.

Implementing a new fuel management

program isn’t always a fast process,

but with the rising cost of fuel, fl eets

are looking at various strategies to

reduce fuel spend, including right-

sizing vehicles, working with drivers,

and implementing fuel caps.

Fleets Reduce Fuel SpendThree years ago, tests at General Parts,

an automotive replacement parts, sup-

plies, tools, and equipment distributor,

showed that 85 percent of its vehicle cargo

loads did not need to be transported in a

pickup truck. The fl eet team decided to

change its truck-buying habits, replacing

many pickups with Nissan Versas.

“That’s been a tremendous amount of

savings for us [in 2010] and well into this

year,” a company representative said.

The change was initially met with hes-

itation from long-time employees. Store

managers had a hard time overcoming

the perception that cars would be able

to do the work pickups did. After show-

ing drivers that 19.9 aggregate mpg was

standard across the delivery fl eet, the 28

mpg on the smaller vehicles was more

than enough to convince them.

For LKQ Corporation, a national

parts and replacement products pro-

vider, close monitoring of fuel costs

helps the company ensure no abuse or

fraud is taking place, according to Mike

Lahr, director of Logistics. Fuel for ve-

hicles is purchased using an assigned

fuel card, and a PIN gives drivers ac-

cess to any truck.

The gallon maximum per day per fi ll,

fi ll-ups per day, and hours of use of each

card can also be limited, Lahr said.

Fuel Management


A list of drivers no longer employed

with the company is provided daily to

ensure their PINs are deactivated and no

unauthorized charges are incurred. In ad-

dition, drivers must enter the odometer

total, which enables mpg to be tracked

for discrepancies. Weekend and after-

hours fuel use is also tracked.

For many years, Safelite AutoGlass,

a national auto glass repair and replace-

ment service provider, has managed an

anti-idling campaign called “Turn it off,

idling gets you nowhere.” It was recently

revamped with new “green” signage and

goals, as well as enhanced mileage and

exception reporting and fi eld training to

support Safelite AutoGlass’ overall 2011

fuel initiative to reduce consumption by

10 percent, according to Erin Gilchrist,

fl eet manager.

In efforts to achieve this goal, Gilchrist

worked with Safelite AutoGlass’ fuel

card provider to develop a Web seminar

focusing on the key components neces-

sary to maximize overall fuel economy.

With the help of its risk management

solutions company, new “green” driv-

er training modules and policies have

been added to ensure all individuals un-

derstand their role in maximizing fuel

effi ciency. All drivers were required to

complete the new modules by April 15.

Gilchrist estimated these initiatives will

help reduce CO2 emissions by 9,000

metric tons.

Explore Fuel Purchase AgreementsFleet managers can also curb fuel ex-

penses by working with a fuel man-

agement company that can provide a

customizable price cap. According to

Liat Rorer, vice president of market-

ing for Pricelock, a fuel price cap is an-

other way for fl eet managers to reduce

fuel expenses.

Managers should look at “improv-

ing the mpgs of the vehicles [and] im-

proving the driving pattern of their driv-

er,” before selecting a protection price,

Rorer said.

A cap covers a set amount of fuel over

a specifi ed time period, both of which are

determined by the fuel manager. Manag-

ers can use caps to cover the duration of

a single project or a whole year.

Rorer warned against using fuel locks,

which can cost fl eet managers extra mon-

ey if fuel prices unexpectedly drop.

Whether making major purchas-

es or minor adjustments to offset high

fuel expenses, fl eet managers must do

their research before making any sud-

den changes. The best fuel management

strategy for any fl eet will ultimately be

the option that best suits a fl eet’s partic-

ular needs. ■

ALTERNATIVE STRATEGIES FORREDUCING FUEL CONSUMPTION

The EIA reported average national retail gasoline prices at $3.88 per gallon and die-sel at $4.10 per gallon at the end of April.

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Automotive Financials


Average National Fuel Price Per-Gallon Trend Gas Diesel

Salary Breakdown for All Commercial Fleet Managers

How Are Personal Use Charges Collected?36%

69%

56%

$35,001-$40,000

2%3%

7%

15%

18%

12%

10%

13%

8%

12%

$40,001-$50,000

$50,001-$60,000

$60,001-$70,000

$70,001-$80,000

$80,001-$90,000

$90,001-$100,000

$100,001-$110,00

$110,001-$120,000

More than$120,000

2%

2010 OPERATING COSTS - COMPACT CARS

TOTAL UNITS:24,797

<24,000 MILES 24,001-48,000 MILES 48,001-80,000 MILES

CENTSPER MILE

DOLLARSPER

MONTH

CENTSPERMILE

DOLLARSPER

MONTH

CENTSPERMILE

DOLLARSPER

MONTHGASOLINE 0.0911 $143.94 0.0869 $157.82 0.0805 $188.76

OIL 0.0065 $7.30 0.0056 $8.82 0.0054 $8.50

TIRES 0.0042 $5.63 0.0170 $14.22 0.0101 $15.75

MAINTENANCE/REPAIR 0.0105 $10.80 0.0173 $29.80 0.0253 $45.75

WARRANTY RECOVERY (0.0001) ($0.15) (0.0015) ($0.29) (0.0005) ($0.87)

TOTAL OPERATING COSTS 0.1122 $167.52 0.1253 $210.37 0.1208 $257.89

Apr. 10 May 10

$2.84

$3.04

$2.84

$3.07

June 10

$2.71

$2.96

July 10

$2.71

$2.93

Aug. 10

$2.71

$2.96

Sept. 10

$2.95 $2.96

Nov. 10

$2.84

$3.14

Oct. 10

$2.78

$3.06

Jan. 11

$3.08

$3.38

Dec. 10

$2.97

$3.24

Mar. 11

$3.53

$3.89

Feb. 11

$3.16

$3.54

Percent of fleet managers receiving performance-based

compensation incentives.(Down from 48 percent in 2008)

Percent of fleets thatperform annual personal-use

reconciliations.

Percent of fleets that perform MVR checks on non-employees driving

company provided vehicles.

88%

1%

8%3%

■ Payroll deduction

■ Expense account deduction

■ Employee check

■ *Other

*Other includes: additional taxable income on W-2 and expense account

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FF0511financials.indd 40FF0511financials.indd 40 4/29/11 6:41:18 AM4/29/11 6:41:18 AM

Celebrating 25 Years of Exceptional

Customer Service

#USTOMIZED�&LEET�0ROGRAMS

s Accident Management

s Maintenance Management

s Rental Services

s Subrogation

s Safety Solutions

800.338.0619 www.fleetresponse.com

FF0511financials.indd 993FF0511financials.indd 993 4/29/11 6:41:22 AM4/29/11 6:41:22 AM

http://www.fleetresponse.com

THE CHALLENGE: MANAGING A FLEET EFFICIENTLY

OUR SOLUTION: PUTTING TECHNOLOGY TO WORK

| 2011 CHEVROLET SILVERADO

| 2011 CHEVROLET EXPRESS

The latest GM technology can help maximize your fleet’s productivity. Whether

it’s getting directions, gaining peace of mind, staying connected, monitoring

costs, or all of the above, GM provides a wide range of innovations designed

to help you work more efficiently. For more solutions, visit gmfleet.com.

©2011 General Motors LLC

FF0511cover.indd 994FF0511cover.indd 994 4/29/11 6:24:36 AM4/29/11 6:24:36 AM

fleet financials may/june 2011

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