Under the banner of ALD Automotive, Société Générale is creating a formidable pan-European fleet operation that will not only serve the continent's largest corporate fleets, but will also promote 'fleet' products and services to professional and private customers.
The acquisition in May saw Société Générale gain full service leasing operations in the Czech Republic, France, Germany, Portugal, Spain and the United Kingdom, to complement its existing network in France, Germany, Italy and Morocco.
'Our policy is to cover Europe in an independent way, and we will probably make an acquisition in the Benelux region,' said Jean-Claude Renaud who heads Société Générale's leasing and fleet management operations from the Paris headquarters of ALD International.
This umbrella division will oversee the national operations that will rebrand by adopting the ALD name, although local tax issues will see some brand names such as Interleasing France gradually disappear.
As a network, the ALD companies will participate in the Global Fleet Services international leasing alliance, having taken a strategic decision to leave the Interleasing alliance.
Internationally, Renaud wants the ALD group to become the third largest pan-European full service leasing network, behind LeasePlan and Arval PHH, and ahead of GE Capital Fleet Services.
This will depend on every ALD business achieving top four or five status in its domestic market, a challenging target for both its established and relatively new companies.
In the UK, for example, BCH Vehicle Management (now ALD Automotive) is ranked about 15th in terms of fleet size and needs a further 60,000 vehicles to achieve top five status, while Société Générale's relatively new operations in Italy and Portugal face the challenge of growing rapidly while maintaining profitability.
But expansion will allow smaller ALD operations to cover their fixed overheads and secure new business at minimum cost, while each company must meet bold financial targets of delivering returns on equity of 20% after tax within four years.
In Germany ALD was already the number one independent (non-manufacturer owned) leasing company, while TEMsys in France has already achieved the target level of profitability and a top three domestic market position. Its sister companies, however, face a daunting future.
In their favour is the opportunity to share investment and development costs, particularly in IT where new technology can be adapted rather than written from scratch, and the bank's strategy of seeking growth in fresh markets. Renaud is particularly keen to exploit sales opportunities for new products that rely on a fleet back office, but which are delivered to professional and private customers.
'Société Générale is a retail bank and for years banks have tried to earn more income from commission services than credit,' he said.
Not only are commission fees less risky, but pure credit and finance lease arrangements in the automotive market are under threat from operating lease products, particularly in the corporate sector where manufacturer captive finance houses are increasingly competitive with the traditional vehicle funders.
Renaud believes there is still considerable growth opportunity for a product that allows companies to fund their vehicles for a fixed monthly rental and to receive detailed management reports on those vehicles through a fleet management product. 'We think the global trend is that within four or five years operating leases will have overtaken finance leases in car finance,' he said.
'Full service leasing is a good product for clients because there is no reason for them to buy cars - a car depreciates with no stable value, and they are not organised to obtain the best discounts from car dealers.'
He forecasts similar developments in the private car market, with Société Générale enjoying huge success over the last three years with a type of full service lease aimed at 'professional' customers, such as lawyers, accountants and doctors.
'They only have to pay one monthly rental for their car and nothing else except fuel and fines,' said Renaud.
Two call centres in Paris deal with enquiries generated by Société Générale branches, and the volume of business is remarkable - 300 calls per day and between 300 and 400 new contracts signed every month.
TEMsys also achieved significant business wins by providing 'white label' full service leasing via its subsidiary TEMpro to other companies that could brand the product as their own.
In France, short term rental firm ADA and insurance giant Groupama both sell TEMpro leasing and fleet management products to their corporate and private customers.
'Full service leasing companies have all the tools which gives them the possibility to develop products for other categories of clients, including private buyers who are the biggest part of the market in terms of registrations,' said Renaud.
If this private market is still emerging, so is demand from multinational companies for genuine international fleet supply arrangements. But by making the substantial investment in acquiring the Deutsche Bank companies Société Générale has given a clear indication that it believes this market will mature.
'We have to anticipate the moment when the pan-European market will become mature, but having created links with car dealers, manufacturers, short term rental companies and tyre providers it will give us an advantage over the competition,' said Renaud. (November 2001)