Fleet News

Mergers: threat or opportunity?

SEISMIC consolidation in the pan-European vehicle leasing industry has raised questions over the future ability of alliance networks to satisfy international fleet demands.

Why, after all, would Arval and PHH create a €1 billion joint venture, or Lease Plan pay €451 million to acquire Dial and bolster its European representation, if corporate ownership of an international network delivers insignificant benefits?

Yet these mega-mergers may present more opportunities than threats to independent alliances, according to Hans Damen, international sales manager at the Interleasing Co-ordination Centre (ICC).

The ICC is the hub of the Interleasing alliance, the global network of independent leasing companies that together own the ICC and operate under the strapline of 'local partners meeting global needs'.

Damen believes consolidation among the world's leasing companies gives fleet decision-makers a clear choice between suppliers that are part of a corporately-owned network and suppliers affiliated via an alliance arrangement.

Consequently, fleets committed to a dual or multi-supplier strategy enjoy a much greater choice by selecting one corporately-owned network and one alliance rather than appointing two suppliers from the same camp.

It may be far easier to sell the concept of a corporately-owned network, but Damen argues that the huge differences between national fleet markets and local customer expectations undermine the cohesion of any supplying group, even if it has the same brand name above its offices.

'The corporately-owned networks promise that their invoicing and systems will be the same, but it's not the case because the companies have grown through takeovers so their systems are different, while different VAT treatments mean invoices cannot be the same,' he said.

In future, however, there is little doubt that the corporately-owned groups do intend to have a common IT strategy, and the powerful combination of the internet and vehicle telematics has encouraged major suppliers to give their customers real time information on any vehicle in their fleet, wherever it is in the world.

Damen, however, queried how much detail international fleet decision-makers genuinely required on a day to day basis.

Why, he asked, would an international finance or procurement director need to know that earlier in the day a driver in Portugal had not complied with the company's tyre strategy?

'There is a basic need for local fleet data, but people can ask for details that they should not be concerned about - that is why they outsource their fleet management,' he said.

Damen added that the majority of international fleet decision-makers review their fleet data at monthly or even quarterly intervals, and the ICC can comfortably cope with this type of deadline.

The ICC's IT committee requires each Interleasing partner to make a commitment to the alliance's systems strategy, ensuring partners provide files in the correct format for its internal inventory reporting system.

This enables the ICC to present consolidated fleet management reports for Interleasing's international customers, such as Schering-Plough and Hercules Betz Dearborn, regardless of the different stages of IT developments in global markets.

Inter-country harmonisation is further aided by Interleasing's larger partners, such as Deutsche Bank's leasing subsidiaries (led by ALD Autoleasing) and the Athlon Group, who between them extend Interleasing's coverage through 10 countries in Europe.

In addition, Interleasing's strategy of allying with top 10 leasing companies in each market delivers a degree of security to customers that they will receive IT support commensurate with the best in their local market.

'We are the market leader in five European countries - the Czech Republic, Switzerland, Germany, Finland and Denmark - and we have a major ranking in others, including Wheels in the United States,' said Damen.

He emphasised, however, that the success of any international arrangement depends on the collective strength of the whole rather than the strength of its individual parts, and he identified a fundamental change in the way Interleasing partners now approach the alliance.

'If each partner does not make a huge effort to win international business, they might lose that business locally,' he said.

'What you do for your partner on day one could be the other way around on day two. So our French partner could put a lot of resource into a 20-car fleet to defend a 600-car fleet in Germany, but then our German partner may have to devote a lot of resource to a 30-car fleet to defend a 300-car fleet in France.'

If this is essentially a defensive approach, Damen believes the cohesion achieved by the ICC allows the Interleasing alliance to be more proactive in prospecting international business.

Interleasing partners have to commit themselves both to group wide and contract-specific service level agreements (SLA), and the ICC reviews their performance twice a year.

Potential areas for an SLA include speed of response to a request for a quotation, support commitments to fleet decision-makers and drivers, and the manpower resource dedicated to international issues.

'We are not forcing partners to employ three people to look after international accounts, but simply to have the resource available to meet the demand,' said Damen. As evidence that the ICC has real teeth to enforce SLAs, he cited the expulsion of a company from the alliance for failing to deliver agreed service levels.

But he also acknowledged that SLAs have to recognise local market differences to avoid burdening customers with unnecessary costs.

'Expectations are very different. The speed of providing a replacement car, for example, differs greatly, and while Germany, France, Benelux and the UK may expect a replacement within two hours, that speed is not required in other markets, so why pay for it?' said Damen.

Cost is never far from the minds of international fleet decision-makers, and to improve the Interleasing alliance's pricing the ICC is involved in international procurement negotiations for tyres, tyre fitment, and even new vehicle supply. Yet perhaps the biggest area of cost saving available to Interleasing partners is their ability to expand into new markets through alliance rather than acquisition, freeing them from the enormous investment costs paid by companies like Lease Plan, Arval and GECFS.

'All our partners contribute to the budget of the ICC, but that is far less than the cost of takeovers because there are no payments for goodwill or multiples of future earnings,' said Damen.

'Our partners get the best of both worlds by expanding around the world without paying the huge investment costs that the customer must pay for anyway.'

Having increased its international network from 18 to 30 countries in the past three years and doubled its global fleet size to 550,000 vehicles, it seems clear that the Interleasing alliance will continue to offer an alternative fleet solution to that proposed by the corporately-owned networks. (June 2000)

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