Slowly, and with the inevitability of the inexorable, it has happened: in the first quarter of 2007 Toyota became the world’s biggest car manufacturer.

Official.

At a stroke General Motors, for so long the global number one, was pushed off its pedestal by the Japanese giant.

But Toyota’s slow ascent to primacy hasn’t been without its issues.

There has been the concern over quality – almost a byword for Toyota – with stories of mass vehicle recalls in Japan and America.

Such defects haven’t affected the UK – Toyota was number two in the latest FN50 reliability league of manufacturers, and the Avensis the second most reliable model.

Nevertheless, it is a warning that cracks can appear in even the best-run companies as the excitement of expansion beckons.

Perhaps, for this reason, Jon Walden, the managing director of Lex – the UK’s largest leasing company – shrugs off talk of being the biggest. He says size is important, but what’s more crucial to him – and to his fleet manager customers – is quality of service rather than quantity of vehicles.

“Our strategy is to become a world class company,” says Mr Walden. “Our focus is on the quality of business, rather than size.

“That may mean in the short to medium term our fleet size will fall so we can ensure the service quality and quality of returns are correct.

"Going forward we want growth in profitable business.”

Last year Lex retained its title of largest leasing company in the FN50 league table – but it did so with an increased majority.

From 168,000 vehicles in 2005, it put greater daylight between itself and second-placed Lloyds TSB autolease as it grew to 250,000 vehicles.

The company now towers, colossus-like, at the top the current chart which was revealed last month, with nearly 252,000 vehicles on the funded fleet.

The reason for this goes back to May 2006 when Lex’s joint venture owner HBOS acquired full control of the company.

Both the HBOS fleet – Bank of Scotland Vehicle Finance (BoSVF) – and the Lex Vehicle Leasing (LVL) fleet were combined into one operation.

Subsequently, LVL simplified its name to just Lex as it undertook management of the 250,000-vehicle fleet.

However, both BoSVF and Lex continued to operate as separate brands in the market.

But that will change.

By Christmas there will be a new brand – still under consideration says Mr Walden – but one that combines the automotive heritage of Lex and the banking heritage of HBOS.

And within a year there will be just one company in the market – spelling the end for BoSVF.

Should that should concern BoSVF customers?

And will there be change for Lex customers?

 

Mr Walden is quick to point out that customers of both brands needn’t be concerned about the change.

He says Lex is already experienced at such large integration tasks – and points to the HSBC Vehicle Finance fleet inclusion under Lex management.

“We don’t underestimate the challenge, though,” continues Mr Walden.

“While the integration continues, service levels must be protected.”

But is a super-sized Lex necessarily a good thing for fleet managers and their customers?

Tradition says service personalisation tailors off as the size of a company expands.

Mr Walden says this is not the case with Lex – being larger provides better buying power, and that means buying better service.

He says Lex has a tendering process with dealers that focuses on service, speed and price.

“We’re looking for a good deal and good service. But we’re looking for service first. The savings are then passed on to the customer.”

Lex recently announced a financial incentive to its supplying dealers.

It has put aside £1million to reward those dealers providing excellent customer satisfaction.

Currently Lex has 64 dealers on its books for supplying cars and 1,700 for repair and maintenance.

Internally, Lex has its own improvement scheme based on six sigma principles to ensure robust service delivery.

“At any one time we have 40 improvement processes in place, led by a board director,” says Mr Walden.

Nevertheless, he remains “paranoid” about becoming a monolithic structure, adding: “A challenge of scale is to continue making decisions quickly.”

Not only taking decisions, it seems, but taking pre-emptive decisions that anticipate customer demand.

Because being big, being super-size, provides additional benefits over and above service and price, says Mr Walden. It provides management information on a grand scale.

“Being big allows us to take decisions based on the data we hold that smaller companies would dare not take because we can smooth those decisions over a wider area,” reckons Mr Walden.

“That means anticipating demand – we want to take the business into a pro-active phase over the next two to three years – because traditionally the industry has been very reactive.”

Customers are used to having their needs satisfied quickly – and the internet has been fundamental to this.

“I’m a great reader,” he says.

“Because books are so easy to order on Amazon and arrive so quickly, I now read more. So why should a driver wait six months for car delivery? Or have to wait two weeks for a service slot?”

He says there are some easy wins in this process.

These include instant real-time fleet management information for all major account holders.

Turning round queries more quickly is another.

And organising internal structures, along with the supply chain, so that actions are swifter is another.

Anticipating driver vehicle choice, to reduce the gap between decision and delivery, is further off.

Then there is always the question of the next FN50.

Will Lex still be number one? And will it be even bigger?

Once again Mr Walden rehearses the “not size but quality of service” mantra.

Nevertheless, he concedes that another white label deal – similar to the HSBC programme – is a possibility.

“We have the right attributes to do that,” he concludes.

“We have the systems, people and heritage in joint ventures that allows us to expand in this manner.”

Like Toyota’s slow rise to the top, Lex’s growth appears unstoppable.

Walden - view from the top

 The industry: long-term trend for unit demand is strong, but margins are under pressure.

“Some contract hire companies have unrealistic expectations of growth. And they are cutting margins to compensate.”

 Residual values: holding up well, but there are lots of cars due back in the marketplace.

“Some people think used car inflation is back. It’s not. The fundamentals aren’t there.”

 FN50: consolidation will continue...but it will be at a slow pace.

“We’ll see a gradual growth of the larger companies.”

Customer counterpoint

Phil Biddle, corporate mobility services manager – strategic procurement and logistics, Siemens

Back in November 2003, Siemens handed Lex a contract for up to 5,000 cars across the global electronics and engineering company’s 24 UK businesses.

“Siemens required a partner to match our values,” recalls Phil Biddle.

“Specifically, we were looking for a partner with cutting-edge solutions and a passion for customer service.”

The structured car scheme – which currently covers 3,642 vehicles – was designed to minimise early termination and excess mileage costs.

Over three years later, has the Lex service promise and IT infrastructure, all crucial to the deal, offered what was promised?

“The partnership has delivered an innovative IT platform which covers vehicle ordering and servicing arrangements,” says Mr Biddle, “while also realising service and wholelife cost improvements. We will continue to identify opportunities for ongoing service excellence.”