GE Capital Fleet Services quizzed 250 fleet bosses on the importance of the company car as part of its quarterly Company Car Trends poll with the average eventually weighing out at 8.7 for essential car users.

This is the highest since before the recession when it sat at a lofty 9.7 (Q3 2007) and signifies a continued rise on previous third quarters (8.0 in 2010 and 7.2 in 2009).

The vast majority of respondents (85%) rated the importance of the company car at 8.0 or more while 45% had no qualms in handing out the maximum score.

Remuneration

The aim of the poll was to evaluate how employers view the company car as a valid business tool, explained Gary Killeen, Commercial Director for GE Capital Fleet Services.

“What the research indicates is that since the technical end of the recession towards the end of 2009, the company car has become quite markedly more important to UK employers and their employees,” he said.

Mr Killeen stated that fleets consider the company car as the most viable business transport option when achieving real world results is essential and costs are being watched closely.

“In an uncertain economic environment, employees have come to value the company car ever more as a part of their remuneration package,” he added.

“It is a timely reminder of the key contribution that the company car makes to business life in the UK.”

Initiated less than 12 months ago, the accreditation assesses standards of van operations across the board and celebrates those that maintain demanding but realistic standards.

The Van Excellence code is open to van operators of all sizes including non-FTA members and takes into account driver behaviour, risk assessment, vehicle safety, and environmental impact.

Eddie Parker (pictured), LCV Consultant at GE Capital Fleet Services, was beaming with pride over the company’s achievement.

“We are delighted to be the first leasing company to achieve the Van Excellence standard,” he said.

“This has proved a very useful exercise as we constantly re-examine our light commercial vehicle operations from top to bottom to ensure continuous improvement. To have done this with the FTA’s expert guidance and input has been invaluable.

“Van Excellence also gives assurance to existing and potential customers that we meet the highest industry standards when it comes to our van fleet.”

Richard White, the FTA’s Van Project Leader, added: “It is very pleasing to be able to welcome GE Capital, Fleet Services to our list of accredited Van Excellence fleets, especially as they are one of the leading players in the vehicle leasing sector.”

GE Capital Fleet Services operate nearly 46,000 company car in the UK and around 245,000 across Europe. 

FleetDirectory recently spoke to GE Capital’s Gary Killeen. Click here to read the full interview.

Gary Killeen is Fleet Services Commercial Director at GE Capital UK. He joined the company in 1988 and has since developed deep domain expertise in the European fleet industry and asset based lending in general. He built his early career in finance with roles of both Financial Accountant and FP&A manager.
Gary founded GE’s now-global best practice strategic consulting group, often referenced to as ‘Key Solutions’.

We kicked off by quizzing Gary on what he thought were the greatest problems facing today’s fleet managers.

Gary Killeen: “The key challenge for fleet managers is to balance needs within their organisation – running costs, employee benefits, legislative compliance, environmental concerns and more – that are often at odds.

“Arriving at a solution that satisfies all these requirements is very difficult and, we believe, the best approach is to involve all parties in the decision-making process in order to arrive at the best outcome.”

It has been a few months since GE Fleet Services revealed results from a survey which suggested a significant level of optimism amongst fleet managers with a slowly recovering economy. What kind of measures do you think the Government can incorporate to aid or speed up recovery?

Gary: “Our Company Car Trends survey suggested that we are beginning to see confidence growing among fleet decision makers.

“Confidence is a key factor in moving beyond the effects of recession but is often one of the scarcest resources, so the findings are encouraging.

“The tipping point for a recovery often comes when businesses regain the sense of belief that enables them to start making major investments once again. Anything a Government can do to aid this process is helpful.”

With the majority of fleet managers maintaining a very stand-offish attitude towards electric vehicles, do EVs have a valid future in the fleet landscape?

Gary: “The new crop of EVs that are coming onto the market could form a small but viable part of the fleet mix. As long as range is not an issue and running costs can be contained, there is no real reason not to be using EVs.

“As more fleets gain operational experience with them and costs start to fall, their popularity should grow. However, if there is a sea change in motive power for company cars during the next decade, it is more likely to be towards advanced hybrid technology.”

Do you feel manufacturers are doing enough to produce vehicles that limit overheads for fleet operators?

Gary: “Manufacturers have to fulfil a hugely complex brief when they produce a vehicle – they need to arrive at a solution that has high levels of showroom appeal, that works well in real life conditions, that meets all kinds of safety and environmental legislation and can be sold across the world.

“Sometimes, I think it is fair to say, running costs could be higher on their list of priorities but the fact is that today’s company cars are generally safer, better equipped, nicer to drive, more environmentally friendly, better built and cheaper to service than their predecessors – yet overall costs have not risen to any marked degree in a number of years.

“They represent excellent value for money as a business transport tool and employee benefit.”

How successful do you think the Continuous Insurance Enforcement Law (CIEL) will be in limiting the number of uninsured drivers on UK roads?

Gary: “Uninsured drivers have been a growing problem on our roads for a number of years as premiums for individuals have risen. The CIEL is one way in which this problem can be tackled but it will probably work best alongside other measures, including looking at ways of reducing insurance costs for those who attract the highest premiums.”

What lies ahead for GE Fleet Services? What can we expect to see from your company in the future?

Gary: “We have an excellent UK, European and worldwide team with perhaps an unrivalled degree of fleet expertise which is helping us win new deals, retain existing customers and produce innovative new products that will enhance our already comprehensive offering. We are therefore looking to the future with a high degree of confidence.”

GE Capital Fleet Services quizzed 300 fleet managers on factors shaping fleet management decisions with 31% of respondents rating fuel costs 10 out of 10.

However that quantity rose to nearly half (47%) when asked how they would answer the same questions 12 months from now.

This would push fuel costs ahead of ‘fleet safety and risk management’ on the fleet agenda, second only to ‘fleet running costs’.

No surprise

Gary Killeen, UK Fleet Commercial Director for GE Capital, said he wasn’t shocked that fuel was an increasing concern for fleet managers at the moment.

“The £6 per gallon cost is now commonplace and it is possible that by this time next year, continuing the rate of recent rises, we will be looking at the £7 per gallon mark,” he commented.

“While there is little that most fleet managers can do to reduce the actual pump price of fuel, there are a whole range of strategies that can be adopted to control fuel spend and fuel consumption.

“We expect to see a lot more interest in formalising these actions into comprehensive fuel management policies during 2011.”

‘Driver and corporate taxation’ and ‘environmental concerns’ came fourth and fifth respectively in the list.

Carried out by GE Capital Fleet Services at last month’s NAFA Institute & Expo in Charlotte, North Carolina, 105 fleet managers were quizzed on what they were most anxious. Over a quarter of them (29%) listed sharp fuel (or ‘gas’) price rises as their top worry, 12% more than in 2010.

Also on the up was concern for driver safety which jumped to 28% from 21% last year.

Nearly two-thirds (64%) indicated that executive management’s main focus for fleets is cost savings, up from 48% in 2010.

“Volatile fuel prices are an overriding concern today for corporate fleet managers, given the current environment,” said Clarence Nunn, CEO of GE Capital Fleet Services.

“We are seeing a corresponding increase in interest from our fleet customers for solutions in fuel, telematics and maintenance programs that will help them combat rising fuel costs and improve operational efficiency.”

GE’s survey flagged a lapse in lease accounting with 40% of fleet managers admitting poor knowledge of how pending changes to lease accounting rules (FASB) will affect fleet leasing.

EVs could also become more common in US fleets with 28% of respondents saying they intend to introduce electric vehicles to their fleets some time in the forthcoming year.

Simon Cook has been appointed LCV Leader while Eddie Parker was named LCV Consultant as part of the company’s strategy to develop van leasing customer focus.

With more than 25 years of commercial vehicle experience to his name, Mr Cook joins GE Capital after managing sales and operations at TLS Vehicle Rental.

Mr Parker comes over from Masterlease and also boasts an impressive history with manufacturers and leasing companies throughout Europe.

Simon Cook revealed how the company will progress: “We will be concentrating on a number of key areas in the UK van market – from 50 vehicle fleets that require a high quality, price competitive contract hire package, to major blue chip companies that are looking for a complete, consultative, outsourced service.

“The latter is especially important. In a van market where customers want value more than anything else, we can deliver a very high degree of customer focus.

“We will be promoting an expert proposition that emphasises products and services such as the capabilities of our widely respected Key Solutions strategic consulting team and market leading iManage online software.”

While many find it far too easy to be gloomy after the challenging economic period we’ve seen in the past couple of years, things are on the up; that’s if the latest survey from GE Capital Fleet Services is to be believed.

When questioned on the economy on the whole, over a third (38%) of the 300 fleet managers asked believe the economy will “improve slightly” during the rest of 2011.

Over the last three months, 37% of respondents say their fleet has grown while 35% of them said they would expect to see it expand even further before the end of the year.

More than half (55%) expect their fleet would stay the same while a pessimistic 11% predicted their fleet to shrink.

“We are on a path towards a stronger economy,” said Gary Killeen [pictured], Fleet Commercial Director with GE Capital UK.

“Though the journey will probably be bumpy for a while, our research clearly indicates that there is a growing sense of optimism among car fleet operators.

“This sits very well with our own experience at GE Capital. Our fleet customers have spent the last two years ensuring that their businesses are operating with low cost, but highly efficient bases. They are becoming increasingly confident about their prospects, but remain mindful that the economy is still in a relatively fragile state.”

Pump prices may still skin you more than you’d wish but the Budget announcement could have been worse, much worse.

As with every Budget, talking heads are turned up to 11, but FleetDirectory.co.uk has gone to the trouble of picking out the views of those who matter.

John Lewis, Chief Exec with the British Vehicle Rental and Leasing Association was relieved that the government had delivered a Budget that “at last, offers something for motorists”.

“His fair fuel stabiliser is ingenious, shifting the burden of taxation upstream when crude oil prices increase,” he said.

“Whether you are a haulier, a fleet manager, a commuter or a just someone trying to keep your family car on the road, this imaginative tax measure will have an instant impact on your weekly cash flow. For many it will be more important than all the other tax announcements put together.”

However, the decision to maintain the 3% diesel surcharge within the company car tax regime left Mr Lewis disappointed.

“This discriminatory tax against diesel fuel is totally out-of-date and needs to be abolished,” he added.

“We would go even further and call for the government to investigate the continuing differential between diesel and petrol prices at the pumps which is nothing more than exploitation of business motorists and haulage companies.”

Business friendly

The reduction in corporation tax by 2% from April 1 then by 1% in each of the following three years would benefit the transportation sector and encourage growth in the UK economy, said Jakes de Kock, Sales and Marketing Director with The Fuelcard Company.

“We’ve been stagnant too long and need stimulation such as this to begin growing again and make the UK a true ‘business friendly’ location,” he reckoned.

“Various tax incentives including a cut in corporation tax can only have a steady long-term positive impact,” added Roddy Graham, Commercial Director with the Leasedrive Velo Group and Chairman of the ICFM.

“However, more investment is required in properly engineering and maintaining our road network infrastructure. We risk rapidly turning the main arteries of UK PLC into a rocky road.”

Reducing fuel duty was a “welcome break” for motorists and businesses said Peter Rodger, the IAM’s Chief Examiner.

“However, eco-driving is the only guaranteed way to reduce motoring costs,” he added. “It’s no longer an ethical choice, it’s a money-saving essential – especially in rural areas where driving is a necessity. The best fuel-saver is a light right foot and anticipating the road ahead.”

ACFO Chairman Julie Jenner also welcomed the penny cut but questioned the longevity of its effect: “It remains absolutely essential that all fleet decision-makers continue to focus on cost management.

“It is difficult to believe that with the unrest in the oil producing countries of North Africa and the Middle East that fuel prices will fall significantly in the short term.”

Julie added that she would have liked to have seen a restructuring of AMAP rates (Authorised Mileage Allowance Payment): “A more subtle approach instead of the current two-band, single mileage threshold system in place is worth analysing.”

Gary Killen, Commercial Director with GE Fleet Services UK, agreed saying the 1p decrease would be “quickly swallowed up” in future fuel price rises.

On the previously publicised decision to invest £100m into addressing potholes, Neil Greig, Director of Policy and Research with the IAM said: “The extra investment in roads is welcome but it is not enough to cure Britain’s pothole pandemic. We need to ensure that roads are properly looked after so we don’t store up bigger maintenance bills for future.”

Middle of the road

Ken Trinder, head of business development at epyx – IT solutions specialists for the automotive sector, felt the Budget was too “neutral” and could have gone further.

He explained: “The fleets and dealers that we work with have become extremely lean and focused during the last two years and, having survived the recession and maintained or regained worthwhile profitability, are facing the future with a limited but definite sense of optimism.

“There is little in this fiscally neutral Budget that looks as though it will substantially change that outlook in the short to medium term, despite the ‘feel good’ news on fuel duty. The Chancellor’s plans to encourage growth and investment such as the corporation tax cut are welcome but, if they do have an effect, it will not be for some time.”

Geoff Dunning, the Road Haulage Association’s Chief Executive, said all the campaigning for fairer fuel had “paid off”.

“It makes a welcome change for a Chancellor to not only listen, but to take positive action,” he said.

Simon Chapman, Freight Transport Association’s Chief Economist, also agreed that the 1p cut was “a key win” and the decision had effectively saved industry £125m this year.

“Clearly, Mr Osborne has listened to our concerns and recognises that for economic growth to be sustained, then freight transport is needed to keep shop shelves filled and businesses supplied,” he explained.

“Times are incredibly tough in the logistics sector right now, with carriers unable to recoup rising costs and facing a cash flow squeeze.  The Chancellor is right to recognise that going ahead with an above inflation fuel duty policy would have been suicidal for the UK’s economy. His decision to keep VED levels unchanged shows how intently Government has listened to us, for which they should be congratulated.”

Magic trick

Neville Briggs, MD of Pinewood Computer Solutions, said that George Osborne has “pulled a rabbit out of the hat” by lowering fuel duty.

“But there is really nothing in the Budget that prompt dealers or manufacturers to consider the remainder of 2011 in rosier terms than before, especially considering general factors such as the reduced growth forecast, rising inflation and high unemployment,” he added.

“However, dealers have become impressive since the recession in their ability to exploit almost every opportunity in new cars, used cars and aftersales. For that reason, many are mildly optimistic about their prospects in the medium term.”

Plans to support more apprentices and enhance capital allowances were good news to the ears of SMMT Chief Executive Paul Everitt.

“Budget 2011 recognised the strength of the UK manufacturing sector and its ability to steer our economy out of recession,” he said.

“We are pleased to see that the Chancellor’s plans have a strong focus on manufacturing and making the UK an attractive place to invest.

“The outlook is certainly still challenging, but we are encouraged by the impact these measures will have on our sector and the wider economy.”

Tony Hulatt, MD at independent fleet management specialist CLM, was also pleased by the increase for business mileage reimbursement from 40p to 45p.

“This was an interesting move and while it remains uncompetitive because of the fuel increases we have witnessed, it gives more weight to the return to company cars.  However, I do think that this is at odds with previous statements about reducing business mileage in private cars,” he said.

Carl D’Ammassa, chief executive officer, explained: “During the recession, we have seen a fall off in traditional daily rental in line with overall reduced activity throughout the economy. However, the slack has largely been taken up with flexible rental, which we believe is proving to be the recessionary acquisition method of choice for many businesses.”

He further explained how Advantage allowed fleets a much higher degree of flexibility than other acquisition methods such as buying or leasing. It also allowed businesses to keep their cash reserve a real need in the current financial climate.

D’Ammassa said: “More than anything, businesses are still worried about cash flow. They know that it is poor cash flow that kills most companies during tough economic times. What flexible rental allows them to do is take on the van or truck that they need without any of the long term commitment of buying or leasing. The vehicle essentially becomes part of their fleet but the moment the need for it ends, they can hand it back without penalty. For many businesses, that is a proposition that makes a lot of sense at the moment.”

An additional benefit of flexible rental was that some of the day-to-day administration was often handled by the rental company themselves.

D’Ammassa said: “For example, Advantage provides roadside assistance as part of the package together with a relief vehicle whenever one is needed. Having these issues taken care of by the rental company means that the customer can concentrate on core business.”

More details about TLS Advantage can be found at www.tls.co.uk/askivan.

The quarterly research shows that fleet managers have regained the lead role in how company cars and vans are run in 41.4 per cent of organisations – up from 30.4 per cent a year earlier.

The change appears to be part of a swing towards fleet decision making being based more on cost – those in purchasing roles have also seen a rise in influence from 1.7 per cent to 9.6 per cent in the same period; conversely, human resources has fallen away from 8.1 per cent to 5.2 per cent.

Gary Killeen, Commercial Leader for the fleet division of GE Capital, said: “The story of fleet in 2009 is that the human resources-based company car policies of recent years, based heavily on attracting and retaining the right employees, have rapidly given way to cost concerns.

“As a key part of this, the fleet manager is making a comeback. Companies are redrawing their fleet policies with a strong bias on containing costs and increasing operational efficiency, and they need someone to implement those policies on a daily basis – a fleet manager.”

Killeen added that this did not mean that human resources issues had disappeared from fleet, rather that a more balanced approach was being taken.

Killeen said: “The motivational aspect of being provided with a company car remains, but it is no longer the keystone of a fleet policy – instead, cost is at the centre of all decisions as a consequence of the impact of the recession.

“In many ways, the company car is going back to basics. It is returning to its roots as a highly efficient and cost effective business transport tool that is also an important element of an employee benefits package.”

GE Capital is increasingly working alongside fleet managers through its well-established Key Solutions consultancy service, which has a successful track record of providing advice to companies that help them to construct fleet policies to meet their particular needs.

Killeen explained: “The Key Solutions team is extremely busy, having been proactively working with fleets through the recession to bring about changes that help businesses looking for creative and effective financial and tax structuring designed to optimise their company car provision.

“Increasingly, our contact point with customers for this activity is the fleet manager who will be in charge of implementing policy. Fleet managers are very much playing their part in working alongside us and helping to identify effective answers to the difficult questions they are being posed.”

The GE-owned commercial vehicle rental specialist says that recessionary pressures mean that many commercial vehicle operators may be tempted to cut corners in areas such as maintenance and vehicle compliance.

Carl D’Ammassa, chief executive officer at TLS, said: “Operators of commercial vehicles and daily rental companies are currently under a huge amount of pressure from rising costs, falling residual values and depressed markets. Many daily rental companies are fighting for for survival and rates are highly competitive right now.

“Against this backdrop, we are aware of a number of daily rental companies offering very low rates that raise questions over their ability to survive long term in the market.”

D’Ammassa added that the situation was leaving customers wary and confused, with many aware that supplier stability could be under question.

He explained: “Customers are not stupid. If they are offered a daily rental rate that is simply too good to be true, they immediately start to ask questions about that supplier and whether they have a long term future.

“Customers are also intelligent enough to recognise when a rental rate is so low that maintenance and compliance issues are likely to be falling down the list of priorities, and to steer clear of those suppliers.

“More than ever it is important to choice the right partner for your commercial vehicle provision.”

D’Ammassa added that the reassurance of being supported by the financial stability of parent company GE, with its recently reconfirmed AAA credit rating, was helping TLS to retain and win new business as the recession starts to bite.

He said: “Our rates are competitive whilst being backed up with very high levels of compliance, maintenance and customer service. Our Customers applaud our service standards and those who are looking for a partner to work with them during the recession recognise the advantages of flexible rental and our approach.

“They know that, in the final analysis, our stability and high compliance standards drive down the total cost of operating commercial vehicles in the long term.”