By Mike Antich
Twenty-five years ago, there was a utopian vision of what fleet management would be like in the 21st century. However, this new century has been far from utopian. Its reality is more like a maelstrom. In eight short years, fleet managers have been buffeted by one major crisis after another, most of them unprecedented and severe.
These are tough times to operate a fleet. Incredible events are occurring. The entire U.S. domestic auto industry has teetered on the verge of collapse and even though a bridge loan has been authorized by the U.S. Congress, the situation is still precarious. Automakers and dealers continue to find it extremely difficult to fund new- and used-vehicle retail customers as lenders raise minimum required credit scores.
Fuel costs have been wildly unpredictable. First, fuel prices climbed to a record $4.11 per gallon on July 17, and then began a spectacular freefall that is still continuing. The continuing decline in prices is so dramatic and so sudden that it is raising the prospect that average nationwide gasoline prices could conceivably fall below $1 per gallon, especially if macroeconomic conditions continue to deteriorate. For gas prices to get close to a $1 per gallon, oil prices would need to fall another $10 a barrel — something that would have been impossible to fathom during the first part of this year as crude oil prices soared near $150 per barrel. But, with a barrel of oil currently selling at $44, it's no longer an inconceivable scenario; however, most likely unsustainable in the long-run.
One Crisis Following Another
In 2001, the terror attacks of Sept. 11 caused an overnight meltdown in fleet resale values. In the space of a month, resale values plummeted 30 percent. It took us almost three years to dig out of this hole. In 2005, Hurricane Katrina triggered fuel prices to skyrocket to a then-record $3 a gallon, literally overnight. Afterwards fuel prices continued their northward march until peaking in July 2008. In 2007, the subprime crisis emerged that morphed into a full-blown financial crisis in July 2008, triggered by the collapse of Bear Sterns, Lehman Brothers, Merrill Lynch, and AIG. This, in turn, fueled an ever-deepening global recession.
Fleet operations are feeling the pressure of the dramatic downturn in the economy. This downturn is impacting fleets in ways never before experienced. Who could have conceived some fleets would find it difficult to order new-vehicles through their fleet management company? Resale values have softened, acquisition costs are up, and incentive dollars are diminishing. Fleet budgets remain flat, while costs go up. Throughout corporate America, fleet managers are under intense pressure from senior management to reduce expenses, make fleet operations more efficient, and maximize driver productivity at the lowest possible cost.
The first decade of the 21st century is shaping up to be one of the most tumultuous in the history of fleet management. When the history of fleet management is written, this will be recorded not only as a very challenging decade, but one that validated the value of professional in-house fleet managers. Exemplary fleet managers are being proactive and anticipating the changes in their corporate environment. In this tumultuous economic environment, fleet managers are saving companies millions of dollars by implementing the right policies and selecting the right vehicles and suppliers. A fleet manager who reduces annual fleet expenses by $100,000 generates the equivalent of $1 million in sales, if a company operates at a 10-percent net profit margin.
When uncontrollable market forces drive up the cost of fleet operations, it takes the expertise of a professional fleet manager to mitigate their financial impact. Trust me. Without an in-house professional fleet manager, things could be a lot worse and the cost of running a fleet much more expensive. It is during times of crisis that the value of a professional fleet manager is most apparent.
Let me know what you think.