Twelve months ago Jon Lawes told Fleet News about his “outrageous ambition”: to take the UK’s 10th biggest leasing company into the FN50 top five by 2018.
The Hitachi Capital Vehicle Solutions managing director was just three months into the role following his promotion from managing director of the Commercial Vehicle Solutions division. He had the bullish aspirations, but not the plan; at the time he was embarking on a strategic overview of the business.
Now a plan is in place and changes are already afoot after a structural overhaul of the business earlier this year which saw some people leave (not an easy part of the job, Lawes admits) and others join. His team is now in place.
The strategic review included employing an independent consultant to carry out face-to-face interviews with Hitachi’s 15 biggest customers. Their views helped to shape the new vision: to be a trusted partner.
“Generally there is a lot of mistrust in financial services,” says Lawes. “Our vision is about long-term relationships.”
The biggest change has seen the creation of one business with one leadership team. Previously it was divided across cars, commercial vehicles and the driver instructor operation. Specialisms remain, but they have been reorganised around the needs of customers, explains Lawes.
This has resulted in the creation of three market sales channels. The first, personal and SME, is, says Lawes, the fastest growing sector. It consists of personal drivers and businesses that typically have fewer than 50 vehicles which value speed, online self-service options, competitive deals and easy of working.
The next – corporate fleet – is the largest, consisting of companies with more than 50 vehicles but whose vans are not complex build. Previously these customers would have dealt with both Hitachi’s car and CV divisions.
The final channel is specialist assets – HGVs, plant and specialist, and mission critical vans, where downtime and annual savings are crucial.
“We have reorganised our senior management team to be one business but we go to market through our three customer bases,” says Lawes. “The FN10 can do the first two, but not the third.”
The new structure is already paying dividends with the announcement that Hitachi has been awarded the sole leasing and fleet management contract for Amey’s fleet of 8,500 vehicles in a six-year deal (see news page 10).
It has also re-signed eight of nine contracts that were up for renewal this year out of its 15 biggest customers (the one it didn’t, Environment Agency, has gone elsewhere for its cars but continues to work with Hitachi on its plant and specialist vehicles). Clearly it pays to talk.
Growth has been identified at all levels of the business, not least in cars. Hitachi has been a long-time advocate of blending funding solutions but few fleets were willing to look at the concept. That’s now changing, according to Lawes.
“Out of our top 10 customers, we are talking about blending funding to four of them, whereas three years ago it was too complicated for them,” he says. “We already have some customers on blended, which is typically contract hire and ECO.”
Lawes believes ECO – employee car ownership schemes – is “back on the agenda, particularly for fleets of 1,000-plus as part of the blended solution”, as it gives a certain type of driver the most tax-efficient funding option.
“High residual values and low taxation policy drives the ECO conversation,” he adds.
ECO is often viewed as an ‘either or’ option with salary sacrifice, but Lawes says Hitachi is seeing demand rise for both. In the past six months alone, the company has signed 12 new customers to its salary sacrifice scheme.
Across all its 23 salary sacrifice customers, it is averaging a penetration rate of almost 10% over the first two years. It is now funding more than 8,000 cars in this way.
“We have a fully insured policy now so we manage all the risk from early terminations,” says Lawes. “And we have a salary sacrifice ‘light’ product for companies with 1,000 to 5,000 employees which is a more off-the-shelf product than bespoke. We don’t see salary sacrifice working with fewer than 1,000 employees because of the penetration levels.”
Hitachi’s new business outlook enables it to put the greatest resource where it is most needed but the decision to bring the teams together also enables it to share disciplines across the business.
Lawes says his philosophy is long-term – about working with customers for life, not just for short-term profits. A key business measurement is about the longevity of customer relationships and this comes down to complete transparency and the ability to prove what the company has delivered over and above the terms of the agreed contract.
“Delivering KPIs does not deliver the next contract; they are just the basics that give you the right to have another conversation,” Lawes says.
“We have a proven methodology that looks at 12-monthly plans with customers where we identify their problems and look at solutions. We look at their costs and the opportunities and set targets up front. We won’t win contracts simply by delivering KPIs.”
Four key moves driving fleet efficiency
Mission critical and asset management team
This team is charged with improving utilisation and asset performance, with telematics data management and
proactive maintenance of assets. It includes supply chain engineers who ensure parts are available and repairers are aware of fleet needs, and downtime specialists, while Hitachi has recently moved to 24/7 assistance. “We have extended our working hours to match our customers’ working hours,” says Lawes.
Unlike some competitors, Hitachi is not developing its own systems, nor is it preventing customers from switching on manufacturers’ connected services.
“Our view is that many cars have it embedded already and we are working with manufacturers to turn on all the data services because that’s putting our customer first,” says Lawes. “While that might be a threat regarding cars going to dealerships that we don’t want them to, if we turn it on its head, it means there is an opportunity to provide more services to our fleet customers.”
This includes the management of multiple pieces of data by pulling the information together via the cloud. “Our role is to take the data in different formats to provide consistent reporting for our customers. That way we can drive processes in a practical way to deliver a better service to customers.”
Intelligent asset management solution
A major issue for fleets is the theft or loss of tools and equipment, such as helmets, gloves and harnesses, from the back of trailers. One customer alone spends £200,000 a year on replacing this type of kit.
Hitachi has been working on a solution to manage the whole asset, not just the vehicle, for the past 18 months and is ready to start trials. The concept is to fit supermarket-style RFID tags to all the equipment, which will reduce downtime and improve utilisation. The tags, which cost around 15p each, will also help to prevent vehicle overloading.
“Everything is logged by a scanner as the van leaves the yard and is logged back in when the van returns, so all missing items can be identified and retrieved. Staff who lose the most equipment can be identified,” says Lawes. “This is about linking the plant proposition with vehicle downtime to manage everything together.”
Recycling/refurbishment of LCV bodies
Hitachi says around 80% of van bodies can be refurbished for a double-life rather than written off over one lease, which reduces rentals. Key markets include home delivery with refrigerated bodies.
“Savings can reach 25-30% of the capital cost and that translates to 25-30% reduction in the lease rate,” says Lawes.
Hitachi has designed the refurbishment process itself which means it can move bodies from one type of van chassis to another, and even change the size of the body. “It drives a different conversation with customers when we are going to tender – it’s an example of our savings initiatives,” Lawes explains.