Fleet News

LeasePlan profits are key as ABN retains control

As soon as ABN Amro revealed it was putting LeasePlan on the market earlier this year, it was presumed that there would be no shortage of interested buyers.

Although many names were suggested as likely bidders over the past few months, it was GE Capital, and then Volkswagen that became favourites to acquire the huge LeasePlan operation.

But on November 19, ABN announced that LeasePlan was no longer for sale. And who could blame it for taking the company off the market? During the first half of 2001, ABN Amro Lease Holding's profits grew to just over €77 million -a 48% increase on the previous year.

Hugo Levecke, managing director of ABN Amro Lease Holding, spoke exclusively to Fleet News Europe correspondent Philippe Quatennens about the decision, and unveiled the company's future plans in Europe.

Why has ABN Amro decided to keep control of its leasing arm, ABN Amro Lease Holding?
First, I would like to explain how LeasePlan was integrated into ABN Amro. It happened in 1992. At the time, our mother company, MeesPierson, itself a subsidiary of ABN Amro, couldn't guarantee our growth ambitions.
That led to a good co-operation with ABN Amro during the following nine years. However, last year, ABN Amro started a restructuring programme, with the aim of concentrating on its core business, which is banking activities.
In 2001, ABN Amro decided to evaluate the situation of the company, with the possibility that AALH would be divested. However, ABN Amro noticed the real value of our company which substantially contributes to the profitability of the whole group. With that in mind, there was only one possible solution: maintain control of AALH.

  • Why has it taken so long before deciding what to do with ABN Amro Lease Holding?
    It was because ABN Amro wanted to seriously analyse AALH's position in the market and find out what our activities were worth. The approach was to examine every aspect of our company. In my view, it was a valuable process. We do not consider this as a failure. So many positive factors played a role in ABN Amro's decision not to divest.

  • Did the terrorist attacks on the US play a role in delaying the decision?
    No. Because that would mean that ABN Amro had already started a selling process which has never been the case. Every option has been analysed. We can assure you that the events of September 11 had no major influence. It didn't accelerate the decision-making.

  • How many people from your side were involved in the analysis process that led to the decision of ABN Amro to retain AALH?
    We analysed every single solution for the markets we cover with ABN Amro Leasing Holding. It took a lot of preparation. We needed as accurately as possible a good view of the company — because that is what the people involved in the analysis deserved.
    Most of that analysis process took place in our corporate centre in Almere, the Netherlands, where about 60 people are employed. Part of this group and mainly a special committee comprising six people worked hard to collect all data available and present it to our potential partners.

  • Did anyone fear a takeover?
    Not at all. I noticed that some of our staff were concerned after hearing possible names and figures to do with the takeover. We therefore kept people up-to-date in-house.
    Takeover or not, we are the leading company in the market with, year-on-year, double-digit margins and, above all, a company with a solid image.
    Everyone was aware that if the outcome of the analysis process was the sale of the company, then the sale would be based on those excellent elements!

  • Concerning some of your competitors, for example GE Capital or Arval PHH: do you not think that you disclosed too many details of your internal audit?
    Information is always temporary - it is part of a continuing evolution process. As we never reached a final takeover process, we never had to disclose sensitive information. Also, everyone involved in the process agreed that they would not disclose any of the details gathered.
    I have to confess that we have had a very difficult year. Let's not forget that we finalised the integration of two acquisitions: Dial and CSC. Just before those two acquisitions QEK Global Solutions was formed. This leaves a promising future ahead of us.
    LeasePlan remains focused on the fleet sector, while QEK will oversee automotive activities. Finally, Carvantis (the final name of the project CarPlan) will develop a specific approach for private consumers in France. This is a European first.

  • What are QEK's and CSC's objectives?
    Keddy Services is a company that we started in 1990 in the UK, as an outsourcing company for automotive companies. Most of its services occur after the production of cars and before shipment to the dealers.
    We decided to acquire Qual-Effic in the United States. Combining the two companies formed QEK Global Solutions, with a presence not only in the UK and the US, but also in Brazil, Australia and the Netherlands. There is a large growth potential for QEK.
    As far as CSC (Consolidated Service Corporation) is concerned, LeasePlan has been represented in the US since 1983. At the time, it was the only non-American leasing company operating over there.
    We had a difficult start - it took quite some time to make our operations profitable. In order to improve our market share we acquired CSC at the end of 2000. We decided that CSC would be fully integrated into LeasePlan USA. Now we are the number two company in the American fleet management market.
    This illustrates the global approach of AALH, a company that intends to be present in the world. In fact, to maintain our European leadership, we need to play an important role in the USA.

  • What are your future growth plans?
    Even though LeasePlan has achieved a strong performance in several markets (the UK, Belgium, the Netherlands and the US), the company has enormous growth potential in other areas including Italy, Germany and Eastern Europe, where we are already present (in Poland, the Czech Republic, Slovakia and Hungary).
    Currently in Asia - where we have an establishment in India — the leasing and fleet management market is still in a pioneering phase.
    QEK is the key player in the automotive market. The same applies for Carvantis. We will start in France early 2002. We'll try to follow the example of the United States, where 22% of the cars are offered through private leasing. We'd like to reach the same level in Europe in the future.

  • AALH is quite diversified. You offer insurance services, car repair activities. Are you partners or competitors with car manufacturers?
    They are, and will remain, our colleagues. They are our main suppliers, they are our main customers, for example via QEK. We want to reach a more global relationship with them. Our future will be stronger if we better co-operate together.

  • There is still a great debate whether the driver of a car is a customer of the leasing company or of the car maker?
    This is an important debate. No one can 'hold' the customer. However, we buy the vehicles and with them, all the risks attached to them, especially financial ones.
    We cover them with insurance, taking all the risks ourselves. And we sell them at the end of the contract. In my opinion, there's a huge difference in what leasing companies and car makers can do. Automotive companies operate in a relatively mature market. Their margins are small.
    Leasing and fleet management are both a younger line of business operating in growing markets.
    Our growth potential is therefore much bigger: that's the reason why our margins are higher. If car makers follow our working process by providing customers with a large variety of services, this will improve the competitiveness of the market. In these circumstances, the customer would benefit most.

  • You're not afraid that manufacturers could offer more than leasing companies?
    As long as the car makers remain fair, I don't fear their competition. That's why the block exemption regulations play a central role.
    Our position against the advantages granted to the car makers today are clear. All we want is fair rules for all the players and to be recognised as the client of the car makers. I've had several opportunities to explain this to the European Commission.
    We do not want to establish our own sales network. However, there are different levels of taxation between European countries. Cross-border sales are now legal, but car makers don't accept these practices.
    As the biggest leasing company, we've always bought our vehicles in the markets where we distribute them. We hope that once the new legislation comes into action, we'll continue our good co-operation with the car makers.

  • What are you plans for Carvantis?
    We'll start in France early 2002 and our aim is to enter other countries afterwards. Our concept is based on three principles.
    First, the communication will be organised via e-commerce. Secondly, LeasePlan will offer its experience to help customers make their choice between different brands. Third is distribution.
    We are negotiating agreements with major partners to use their databases. At the beginning, we wanted to start working with big retail networks (superstores, hypermarkets). Car makers were the first opponents of this and I understand their reactions.

  • If you look back at the last 12 months and the events related to the possible sale of AALH, what was, according to you, the role played by the media?
    One can never control the media. I was surprised to read some news in the press, because that information had to remain confidential. However, I fully respect the role of the media.
    What counts is what the people involved in a process really think of the situation once they sit together at the table. With the analysis process engaged to determine the future position of our company, we certainly had less time for our core activities and customers.
    However, the focus of our LeasePlan and QEK subsidiaries remained at servicing our customers, since our operating companies were less involved in all the discussions during the process.
    Overall I'm really satisfied that the whole process did not keep us from achieving excellent results. Moreover we have learned a lot this past year.

    Carrying on as normal over the last six months

    It is never easy to carry on working when everyone's talking about your future — but LeasePlan has continued to push ahead as normal throughout the past six months.

    Interviewed by Fleet News Europe in September at LeasePlan International's Brussels site, managing director Nick Salkeld said the company's strategy to develop its European business would move ahead whatever the outcome of the ABN sale.

    'You have to be committed to survive in the pan-European fleet market,' he said. 'We began by finding out what customers wanted from an international programme. At the end of last year a new regional structure for the group was created.'

    This divided the company into four regions - Northern, Central and Southern Europe, and the United States. These offices work with LeasePlan's 26 local operations.

    'This structure meant we could deliver centralised accounting management and standardisation across Europe while making sure we could deal with customers locally,' said Salkeld.

    'Each region has its own structure, with business development managers and sales and marketing staff. We can deliver harmonised prices and products across the EU, and we can negotiate on a European level on behalf of clients.'

    But the challenges of developing a pan-European capability were outlined by LeasePlan Group's senior vice-president, business development, Guido Schouteet: 'The biggest challenge is getting countries to work alongside each other, and to deliver locally.

    'It looks easy to convince people of globalisation, but it isn't. However, once local offices are convinced globalisation is an important objective, then it becomes easier — and we are already past that stage.'

    LeasePlan International employs about 40 staff, liaising with 26 local offices around the world. Its worldwide fleet is more than 1.2 million vehicles.

    'It helps that we have wholly-owned subsidiaries,' said Schouteet, 'rather than alliances. The business structure would be very difficult with alliances.'

    LeasePlan joins the rush to woo Europe's private buyers

    ABN Amro's decision to keep hold of LeasePlan will have important consequences for the European fleet industry. Henri Stolwijk explains how it will affect the Netherlands market

    The Netherlands has a well-developed leasing market. More cars are leased than sold to private buyers.

    That means Dutch automotive leasing plays an international, trendsetting role.

    It is a crucial - and very lucrative - market for many of the major leasing companies. This is the main reason why ABN Amro bank has decided not to sell its leasing activities.
    ABN Amro Lease Holding's portfolio includes companies such as Autolease Holland, Lease Concept and LeasePlan.

    The holding company has about 1.1 million contracts, which makes it the second biggest in the world after GE Capital.

    ABN Amro's board was planning to sell its leasing activities as part of a move to concentrate on its core activity of banking. Volkswagen Group was one of the interested parties, but negotiations ended suddenly.

    The contribution to the bank's profit was €43 million in the third quarter of 2001, an increase of 4.9% compared to the second quarter.

    The net profit over the first three quarters rose by 60% to ?120 million, compared with the same period in 2000.

    Netherlands-based leasing companies mostly concentrate on the business market. Their sights have firmly been set on small and medium-sized companies over the last few years because they offered the best potential for growth.

    Now though, companies are also directing their attention towards the private buyer.

    Recently, ING Car Lease, the second biggest player in the Dutch market and a company that is expanding internationally, was the first large business to target the private buyer. It is doing this in conjunction with Postbank, one of the names under which ING serves the Dutch market.

    Postbank - which has contact with three million Dutch households - uses brochures and the internet to communicate with customers. ING Car Lease has provisionally concluded an exclusive contract with Pon's Automobielhandel, which is the importer of all Volkswagen Group's products.

    So, how does it work? The Volkswagen dealer provides the customer with a quotation, after which the Postbank checks the solvency of the applicant.

    ING Car Lease handles the administration and the client then comes back to the Volkswagen dealer, who might make an offer for the car to be traded-in, although ING Car Lease retains the right to do this itself.

    Most cars in the Netherlands are traded-in when buying a new car ie from the official dealer. Only rarely do private customers buy directly from private owners.

    Meanwhile, a network of sales points for the disposal of second-hand leased cars has been developed. Other importers will be able to use the system from next March.

    Other leasing companies are also preparing to attract the private buyer. LeasePlan will shortly direct its efforts at the French market - an initial step that will sell the concept of private leasing to car buyers throughout the market. The network of bank branches can easily and rapidly be converted into a sales channel for leasing products.

    The rapid growth in leasing for private buyers is one of the most important industry trends of the moment. ING and LeasePlan are just two of the companies who see it as a major growth prospect in the future. (December 2001)

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