Fleet News

Masterlease targets pan-European business

UPWARDS of 70% of European leasing contracts originate in Britain, says Masterlease managing director Ed Sabisky.

The Chancellor of the Exchequer Gordon Brown may have set five economic tests before the Government holds a Euro referendum, but British business is seizing pan-European commercial opportunities with immediate effect.

The advent of the single currency on the European mainland has made international business simpler and more attractive, and where business goes, fleet requirements follow simultaneously.

This spells good news for fleet suppliers in more ways than one, firstly fuelling international demand for their services, and secondly, encouraging the propagation of mature fleet concepts into relatively young fleet markets.

Poland, for example, has become one of the fastest growing fleet markets in Europe, and is leapfrogging the development times experienced in more western markets to adopt the full service leasing culture, known as contract hire in the UK.

It is therefore not surprising that Poland is one of the new markets for Masterlease Europe, the international full service leasing arm of GMAC which has operations in Austria, France, Germany, Greece, Italy, Portugal, Spain and the UK. On the continent, GMAC operates under the name Masterlease, and in the UK under the Interleasing brand.

Altogether, Masterlease and Interleasing operate about 150,000 vehicles in Europe, the majority in the UK and Germany, and as part of the General Motors empire Masterlease has an inherent international outlook. On the manufacturing side, Vauxhall and Opel have arguably led the development of pan-European and global fleet supply deals.

The challenge for Masterlease is to learn the lessons from the manufacturer while maintaining a resolutely multi-marque approach to its business.

In the UK, Interleasing and Vauxhall Masterhire already form part of the same division, but with strict 'Chinese walls' between them to maintain the integrity of each brand, and their relationship forms the skeleton of the blueprint for Masterlease and its relationships with domestic Opel finance operations.

The bond with Interleasing is also commercially valuable to Masterlease, given the British origin of so many pan-European fleet deals, according to Ed Sabisky, who took over as managing director of Masterlease Europe 12 months ago.

'There is a tremendous amount of European and global fleet arrangements that come out of the UK – perhaps as much as 70% of the contracts signed – and the UK is taking the lead because it's more experienced in structuring pan-European deals,' he said.

'Customers see that if they can present a bigger opportunity they should get a better deal, and with one dominant leasing company to provide consistent management information it would help them reduce their costs.'

To grow their international business Masterlease and Interleasing mine each other's databases to identify customers in common who do not currently structure their fleets on a multi-country basis, as GMAC seeks to build a global all-makes business-to-business finance division.

However, even on a European basis there are gaps in the Masterlease network, with the Benelux region being the most important omission, albeit one that the company intends to close within the near future via acquisition.

'We want to build our business through organic growth and through acquisition in mature markets,' said Sabisky. GMAC bought Interleasing in the UK, and we are in discussion with a party in the Netherlands to buy a company there. Our mission is to reach a critical mass quickly. In mature markets, to service a decent sized customer, price competitively and be profitable to generate a decent return for shareholders, you need about 12,000 cars on a national basis.'

In less mature markets, this fleet size threshold can fluctuate depending on local overheads, but size is important to convince clients that the leasing company can handle their account with ease. Size also counts because pan-European customers are likely to have significant international fleets and therefore be able to negotiate lower margins on their contracts.

Partnership with local Opel finance operations on the continent offers Masterlease a short cut to critical mass through the opportunity to share back office overheads, and in each country GMAC aims to have one multi-marque company and one own-brand company.

With the advantage of relative youth on its side, and small scale operations, Masterlease also has the flexibility to install a common pan-European IT system to deliver the consolidated management information demanded by pan-European clients.

The prospect of common pan-European products, however, remains elusive, despite full service leasing sharing the bare bones concept of outsourced maintenance management and residual value protection.

'There are major country differences, such as insurance or winter tyres being included in some full service leases as standard, but not in others, and there are also great cultural differences in the way you interact with clients,' said Sabisky.

But this has not deterred major multi-nationals from seeking a consolidated approach to their European fleet arrangements, and Masterlease already provides fleet solutions to about 10 clients with company cars in multiple countries.

Moreover, the prospects for exponential growth are substantial as economic uncertainty preys on the bottom line of large organisations which in turn look to lighten their balance sheets and remove residual value risk from future calculations. 'The trend is definitely for more companies to think about full service leasing.

Recession helps leasing because cash can become scarce, especially in countries that have traditionally bought cars and where leasing penetration is much lower than in markets like the Netherlands and UK,' says Sabisky.

In terms of centralising its own operations, Masterlease has a risk assessment team for Europe that works with national operations to number-crunch data on new car supply, economic factors and used car demand to establish residual value forecasts. The company has also recently employed well-known UK fleet industry figure Bob Rider as European remarketing director to develop its end of contract business and maximise residual value returns.

Recruiting an executive as senior and experienced as Rider serves as a clear indication that Masterlease is serious about growth and developing its pan-European business.

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