Special Edition dedicated to US fleet decision makers
MMM Business Media – Fleet Europe – Special edition distributed in the US – Edition 2011 - 2012 - Price: € 35
2 011 - 2012
Everything you need to know about fleet management in Europe
TAXATION Overview of European taxation
• Analysis beyond the facts • The trends of tomorrow, starting today • Best practices in fleet management • Tips for fleet management
Your subscription
The essential one on your desk 5 magazines
This can be found only in Fleet Europe
Your directory 2012
Your Green issue
Annual reference guide with all International fleet suppliers
Annual issue that offers solutions and best practices for mobility
Available on www.fleeteurope.com/shop
Organised by
International Fleet Managers Institute
The International Fleet Managers Institute is providing professional quality training to decision makers closely involved in the international fleet management process. IFMI PROGRAM 2012: Spring 2012
2-day Expert session - Brussels
Automn 2012
1-day Expert session - Place to be confirmed
MORE INFO To get more information on the IFMI training program 2012, please contact Kathleen Hubert Tel: +32 4 387 87 52 I e-mail: khubert@mmm.be I www.fleeteurope.com/ifmi
Dear Reader,
I
Caroline Thonnon
The most striking differences between Europe and the US...........................P.8 Car taxation: a complex environment.......P.9 Trend: green fleet management................P.14 Trend: focus on TCO..........................................P.15 Trend: driver management...........................P.15 A glance at Europe
6
Financial methods in Europe
Trend: mobility management. .....................P.16
10
A case study with Nokia..................................P.16 A case study with Pfizer. ................................P.16 A case study with Accenture........................P.17
CONTENT
Let Fleet Europe guide you into the world of fleet management in Europe.
t is a pleasure for us to present to you this new initiative from Fleet Europe, the leading European magazine for fleet managers. In this special edition dedicated to US fleet decision makers, we want to share with you the basics of running a fleet in Europe. As you will discover throughout the magazine, Europe ‘as a whole’ does not exist yet. Therefore, managing an international fleet in Europe and taking into consideration local differences and opportunities, is quite a challenging job! The recent economic and financial situation of the EU (or its members states) adds one more challenge to this job… and trends such as implementing electric and hybrid vehicles, mobility management, driver management, telematics,… regularly call for new elements in fleet strategy and fleet policy. We truly hope this Fleet Europe will guide you through the main aspects of fleet management in Europe. And don’t hesitate to join our Fleet Europe Community. We believe that sharing best practices and experiences is one of the finest ways to gain expertise.
EDITORIAL
Special Edition dedicated to US fleet decision makers
Building a European car policy...................P.18 Company profiles: ALD Automotive & Wheels............................P.19
EDITOR Interview: ALD Automotive & Wheels join forces
12
A case study with Microsoft
17
Fleet Europe (www.fleeteurope.com) Editorial team: Caroline Thonnon, Steven Schoefs, Filip Van Mullem, Bart Vanham, Tim Harrup. Editor: Thierry Degives (Managing Director) Jean-Marie Becker (Publication Director) A product of MMM Business Media, Complexe Arrobas 11-13, 4671 Barchon, Belgium.
P.3
I FOCUS I FLEET MARKET
The rich diversity of Europe Although often referred to ‘as a whole’, Europe still represents a multitude of cultural, political, economic and financial differences. These differences also impact fleet management in Europe. Managing a European fleet should therefore be a matter of combining pan-European matters with local ones.
E
urope is the world’s second-smallest continent by surface area, covering less than 4,000,000 sq miles or 2 % of the Earth’s surface. Of Europe’s approximately 50 states, Russia is the largest, while the Vatican City is the smallest. Europe is the thirdmost populous continent with around 733 million people. As a continent, the economy of Europe is currently the largest and it is the wealthiest region. As with other continents, Europe has a large variation of wealth among its countries.The richer states tend to be in the West. European integration is the process of the political, legal, economic integration of states wholly or partially in Europe. In the present day, this translates primarily through the Council of Europe and the European Union. The EU, an intergovernmental body composed of 27 Europe states, comprises the largest single economic area in the world. Currently, 16 EU countries share the Euro as a common currency. The Eurozone entered its first official recession at the end of 2008, it spread across Europe rapidly and has affected much of the region. In early 2010 fears of a sovereign debt crisis developed involving certain countries in Europe, especially Greece, Ireland, Spain and Portugal.
Fleet & automotive The European market can be divided into several zones. The first of these brings together the mature countries, followed by those which are semi-mature, particularly the nations of Southern Europe, and finally the emerging countries made up of those states located in the East of the continent. Today, five markets can be considered as ‘mature’ in Europe: The United Kingdom, the Netherlands, Belgium, France and Germany.
P.6
Cars & companies The automotive market has always boasted smaller cars than in the US. With the high fuel prices and the focus on CO2 emissions, going for smaller cars is not only smart, but also trendy. Additionally, cultural differences and the love for home market brands makes it difficult to integrate or to ban certain brands from an international car policy. Germans will prefer German cars such as Audi, BMW and Mercedes, French employees will love Renault, Peugeot and Citroën, etc. In Europe, it is common to receive a company car from an employer. Whether it is a management car (linked to your position in the company), a benefit car (especially for sales representatives) or technical cars. In most European countries, the company car presents substantial advantages both for the employee and for employers. In the most mature markets, it is not uncommon to see between 40 and 50% of all new car sales registered by companies as fleet vehicles.
Fleet suppliers Across the whole of Europe, the long term rental (leasing) market is dominated by three types of players: subsidiaries of automobile manufacturers, subsidiaries of banking groups and companies known as ‘independents’, specializing in rental. Many elements oblige multinational rental companies to adapt their service to each country: uneven growth rates, wide differences in characteristics from one country to another, the relationship of Europeans with their automobiles, legal, fiscal and administrative issues and finally company profiles.
Special Edition dedicated to US fleet decision makers
There is no such thing as one Europe yet.
Top 10 Brands in Europe
Volkswagen remains Europe’s best selling brand in 2010. The Golf is the most popular car with sales of over 492,000 units.
Recent figures from the Corporate Vehicle Observatory show that almost 50% of the large companies in Europe use operational leasing as their main financing method, making it the most appropriate funding mode. But also in this area, tax differences, market players and cultural issues cause huge differences from one country to another. In Belgium, Spain, France and Italy, operational leasing accounts for much more than 50% in large corporations, whereas the Eastern European countries score less. Switzerland, with its stable and modern economy, has the highest European nominal per capita GDP and is the home of several large multinational corporations. Self purchase is the main financing mode. Though the crisis challenged the operational leasing model, it is also seen as the preferred solution for large corporations with a tendency for bundling services, managed in an all inclusive proposition.
Tough years for the European car industry 2009 and 2010 were tough years for the European car industry as overall sales figures fell. Total car sales for 2010 were down for three of Europe’s ‘Big five’ markets compared to 2009: France down 0.7%, Italy down 9.2% and Germany down 23.4%. “It’s not surprising that sales for 2010 went down compared to 2009,”explains Gareth Hession, Vice-President Research at JATO Dynamics. “The 2009 figures, although impacted by the financial and economic crisis, were stimulated by government incentives and scrappage schemes.” As predicted, 2011 is another challenging year for the industry, given ongoing government cuts across Europe and a continued lack of consumer confidence. Eight months into 2011, a total of 8,888,793 new cars have been registered in the EU (27 states). The main markets have
VOLKSWAGEN
1,536,473
RENAULT
1,138,180
FORD
1,118,089
PEUGEOT
1,002,956
OPEL/VAUXHALL
998,692
CITROEN
835,114
FIAT
823,097
AUDI
623,51
BMW
608,502
MERCEDES
590,412
Source : JATO Dynamics, January 2011. Figures show total car sales figures in 2010.
shown a mixed picture: Germany posted double-digit growth (+11%), France remained stable, the UK was down 6%, Italy contracted by 12% and Spain fell by 22%.
International Fleet Management Cost saving and optimization being amongst the priorities of all companies, the international fleet manager has to be in line with the board’s strategy. Fleet management does not escape from the trend for centralization and harmonization. Harmonizing the car policy, running a green fleet, choosing the best financial formulae, negotiating with suppliers and implementing these elements locally are highly ranked in a fleet manager’s top priority list. ■
Caroline Thonnon
The global footprint of ALD Automotive & Wheels
ALD Automotive has the broadest footprint of any global management company with operations on the ground in 37 different countries. Started in 1939, Wheels in North America, has the most experience serving large, international companies. In April of 2009 the two companies came together in a global partnership to serve the needs of their mutual clients. «We had always been aware of ALD and their reputation for quality and customer service,» says Scott Pattullo, Sr Vice President of Sales & Marketing at Wheels, «but when we began talking to them about the partnership, it became clear that our company cultures are remarkably similar.» In the two and a half years the companies have worked together, they have developed a full-featured global reporting product, comprehensive global account management and a global framework agreement to guide the complex interactions with global fleets.
P.7
I FOCUS I MARKET IDENTITY
10 key differences between Europe and US The fleet markets in Europe are often very mature, but they are now evolving quickly once more, as new elements such as pollution, mobility requirements etc. begin to bring in a new mindset. So what are the key characteristics of the European fleet market? There are some important differences between the way companies and employees see their company cars in Europe, compared to the USA.
1. Part of the salary The company car in Europe is (in some countries at least) often seen as a reward for reaching a particular level in the company, and is given to an employee as part of the overall compensation package.
2. Taxation driven It is also the case that in most countries, the difference between the tax an employee pays on a company car, and the tax he or she would pay if the equivalent monetary value was simply added to the basic salary, is such that it is financially beneficial to the employee to receive a car.
3. CO2 driven Most countries are moving towards a CO2 based taxation model for company cars. This means that manufacturers are continuously developing in order to lower CO2 emissions, and thus the fuel consumption of cars. CO2 limits are integrated in car policies.
4. User-chooser As the company car is part of the salary package, the user-chooser model is popular. Either car policies offer a short list of brands and models or employees are given a total budget to choose a car of any type (although many policies ban certain categories such as open top cars, SUV’s…)
5. Model and engine size Since the crisis, there has been a marked trend for downsizing of engines. This is helped by the fact that a modern smaller displacement engine produces as much power as an older, larger version. For this reason, some companies refer to downsizing as ‘rightsizing’ – the right power for the right car. It is also often the case that employees are compensated for choosing a smaller engine or model by being allowed extra options, or a higher specification.
6. Full service leasing A financing method with all services included, also called operational leasing, which is particularly popular within large organizations. The full service leasing contract includes, for a fixed monthly cost, a vehicle for a defined period and mileage and all associated services for the vehicles such as maintenance, assistance,… It is the lessor that finances the vehicle and its associated services. On top of this, the vehicle is managed by the lessor from delivery to resale which gives the customer the opportunity to save time and liquidity to concentrate on their core business.
7. Risk on residual value
In a full service leasing contract, the residual value risk lies with the lessor. A residual value is projected for the resale value of the vehicle at the end of the contract. The lessor then takes the gain (or loss) of the actual value of the vehicle when it is sold.
8. Procurement Since the crisis, the focus is on cost optimization and cost reduction. As a result, we have seen more and more fleet managers and fleet decision makers being part of the procurement process of their company.
9. Outsourcing Corporations want to focus on their core business. Outsourcing of the fleet management is well-known model in Europe. Fleet management is carried out by the leasing company, or in some case by a consultant.
10. Mobility management In Europe, the dense population and the traffic on the roads, make both suppliers and fleet managers think about alternative mobility solutions. Working at home (teleworking), combining car + public transport public transport, video conferencing… ■
Lexicon Terminology used throughout Europe in relation to the different methods of acquisitions. Finance lease Definition: residual value based funding without services. Characteristics: • mostly on balance sheet, but definition and amortization rules vary across Europe • residual value risk with the lessee Full service lease Definition: residual value based funding with services Characteristics: • off balance sheet • residual value risk with the lessor Also called: operational leasing (BE), long term rental (FR, ES), contract hire (UK) FLEET MANAGEMENT Definition: While in the US Fleet Management englobes everything (funding + services) that a lease company does for a corporate client, in Europe Fleet Management means everything but the funding.
Tim Harrup
P.8
Special Edition dedicated to US fleet decision makers
Car Taxation
“Understanding the dynamics of car taxation is crucial to prepare strategic fleet decisions on an international level.
Part of the complexity of European car fleet management In the EU there are as many different car taxation systems as Member States. It’s clear that this situation doesn’t make it easy to harmonize fleet management policies and processes on an international level. But nevertheless you can use taxation as an efficient enabler to fleet cost optimization, as taxes shape the market more than ever. • Already 19 (Western European) Member States have introduced a CO2-linked car taxation regulation. This implies that a CO2 emission reduction program in the EU saves not only fuel but also car taxes (see our International Fleet Guide 2011 for an overview). • In Eastern-Europe, car taxes are usually lower and based on engine power, cc, etc.... Latvia, Greece and Hungary do have some car taxes linked with CO2 emissions or the environmental impact. • To stimulate the introduction of electric vehicles 15 of the EU27 have introduced tax incentives in form of tax reliefs, subsidies, etc…, ranging from € 9,000 in Belgium to waiving the registration tax in Denmark (significant as in Denmark is either 105% or 180% of the purchase prices). • Other important differences relate to benefit in kind taxation (BIK). The level and calculation method of this BIK influences the popularity of leasing in different countries. For example, in Belgium junior employees often get a company car, while in Germany company cars are reserved for management level and higher.
• Fuel taxes are an important part of the fuel price and have its impact on the engine type: low taxes on diesel generally have resulted in typical “diesel countries” like France, Belgium, .. whereas the push for CO2 emission reductions (and the technological evolution of diesel engines) has stimulated a shift from petrol to diesel in typical petrol countries like Germany, resulting in a dominant position for diesel cars in the EU. • Car taxes are income for the governments. Changing buying behaviour based on taxes will pay off if you continue changing. ■
Part of decision making process Understanding the taxation differences is crucial to understand the differences in the EU fleet market. Taking into account car taxes in the decision process will help to position cars in a correct car policy segment, will help to decrease (temporarily) cost and will allow you to choose the right vehicles to match your corporate strategy. Bart Vanham Specialist International car taxation bart.vanham@bvhconsulting.eu
P.9
I FOCUS I FINANCING METHODS IN EUROPE
The growing success of operational lease When a company needs new vehicles for its fleet, there are three financing and management methods available: 1) purchase the vehicles with corporate cash, 2) lease the vehicle through a finance lease formula or 3) opt for operational lease (or full service lease). Each method has its advantages and drawbacks. This being said, from the three options, the popularity of operational lease in Europe is definitely increasing each year.
A crucial question is if equity should be used for acquiring vehicles as this decision might have a negative impact on the return on equity required by the shareholders.
P
urchasing a vehicle with equity generally means that the company has significant cash reserves. One of the most important questions very often raised is if equity should be used for acquiring vehicles as this decision might have a negative impact on the return on equity required by the shareholders.
Outright purchase and finance lease Deciding to buy the vehicles also implies exposure to operating and residual risks, having internal expertise and being in a position to predict and budget for costs and finally support the entire administrative burden. It is also admitted that this purchasing option is ineffective for companies whose performance is measured by return on assets. Final elements to consider are the effective negotiation/buying power and the generated economies of scale.
P.10
In finance lease the risks relating to the asset are virtually transferred to the lessee (the user) as if they had bought the vehicle outright - as above. During the term of the finance lease the user will generally have paid for the full value of the vehicle and will bear the risk should the sale value of the vehicle not match the final balloon payment agreed at the commencement of the lease. Furthermore because the user carries the residual value risk the vehicle must be shown on the users balance sheet.
Operational lease: an outsourcing solution to finance and manage a company fleet Operational lease In an operational lease the company buys a service implying it does not own the vehicle which, associated to the lease, is considered as an off balance sheet item. The company makes monthly payments covering the use of the vehicle and related services required to efficiently use the vehicle such as maintenance, assistance, glass repair, fuel, tyre replacement...These payments depend on the model of vehicle chosen, the length of the contract and anticipated kilometers and the associated services chosen. As such, Operational leasing is considered as a riskfree solution offering an efficient way of running a fleet with none of the uncertainties and unpredictable costs of ownership. It improves the business cash flow, reduces the depreciable capital and spreads the expense over the entire leasing period.
Special Edition dedicated to US fleet decision makers
Operational leasing is considered as a risk-free financing solution.
Going for outright purchase Main elements to consider when going for outright purchase: • Exposure to operating and residual risks • Company needs to predict and budget for costs • Not effective for companies whose performance is measured by return on assets • Entire administrative burden levied on company • What is economy of scale compared to leasing company?
Opting for finance lease Main elements to consider when opting for finance lease: • On balance sheet • Responsible for all running costs • No capital allowances for user
• Exposure to residual risks
Risk appetite
• End of contract costs undetermined until end of the lease
• The risks on residual values and maintenance are with the lessor.
• Lessee can pay interest on the residual
• Monthly costs relating to a vehicle are fixed and known in advance (cost control)
• Inflexibility of the contract with regards to early terminations
Operational lease and associated benefits Main benefits being put forward by the operational lease method: Financial and fiscal consequences • No corporate cash required allowing the company to free up financing capacities for investments directly dedicated to the growth of the company. • As the vehicles are off balance sheet, the financial ratios of the company are stronger.
• Servicing and maintenance are part of the monthly cost and budgeted. Desired degree of outsourcing • No administrative burden linked to buying and maintaining a fleet. • Advice on vehicle brands and makes, mileage and length of contract linked to legal, fiscal and environmental criteria. • Flexibility to change the parameters (term and/or kilometres) during the contract, aligning the budget with actual use of the vehicle. ■ Filip Van Mullem
ALD International & financing in Europe
Pascal Serres, Deputy CEO of ALD International.
«In Europe, we would strongly recommend a closed-end full operating lease set-up, with an open view on the cost components,» says Pascal Serres, Deputy CEO of ALD International. «This method is now widely offered throughout Europe and is clearly the leading financing method for corporate fleets. We also believe that despite the ongoing discussions about the new accounting standards, the fundamental benefits of full service leasing (cost control, risk management, outsourcing, reduced admin, no capital required…) will remain. Having said that, ALD has a significant portion of its fleet under “fleet management” contracts (ie. services provided on cars that are funded by our customers), which makes us quite specific on the market.»
P.11
I INTERVIEW I CEO’s
Mike Masterson, CEO of ALD International.
A shared philosophy on quality and customer care
Please first tell us what your companies stand for.
What lies behind the collaboration between ALD Automotive and Wheels?
Mike Masterson: ALD International is the international key account division of ALD Automotive, which belongs to the French Societe Generale group and was created in 1946. Today ALD Automotive manages over 900,000 vehicles in 37 countries.
Mike Masterson: In our search to be a real global player we have found with Wheels a partner in a continent where the fleet market is somewhat different to Europe, but that shares the same values as ourselves in terms of service, quality conditions, respect for the existing customer, care for personnel and market and product innovation.
Jim Frank: Like ALD, Wheels is a pioneer in the fleet management and leasing business. Founded in 1939 and the world wide originator of the concept of commercial fleet management and leasing, Wheels now leases and manages over 300,000 vehicles in North America making us the 3rd largest supplier in North America and the only company that has grown without acquisitions.
Jim Frank: We understand the need for many of our clients to find global solutions for their fleet requirements and after reviewing many alternatives, determined that the most effective answer for our clients was the partnership with ALD.
What are the ongoing strategies of your two companies? Mike Masterson: We will ensure that we remain a leading player in leasing and fleet management with the aim of being a true partner to corporate clients. To do this we will continue to make sure we provide the highest service level regarding our product portfolio, and this on an international level without disregarding cultural differences between countries. Jim Frank: Our strategy is completely in sync with that of ALD which explains the success of our ongoing relationship. We are very sensitive to the fact that different countries and cultures require different solutions, but we will always be focused on superb quality and value. We are able and committed to investing in our business, one aspect of which is continuing to build on our global solution in partnership with ALD.
P.12
Are there any unique points to the collaboration? Mike Masterson: First of all Wheels Inc and ALD Automotive are not competitors as we don’t act in the same markets. There’s no geographical overlap but with the partnership we cover more than 80% of the corporate market worldwide. Through this partnership each can take the best parts from the other management model, share experiences on financing, driver management, new technology vehicles, risk management, and so on. Jim Frank: The level of communication and cooperation between Wheels and ALD is quite extraordinary. At Wheels we are enhancing our North American products based on important insights we have learned from ALD and it is clear that ALD’s products will also benefit from nuances gleaned from Wheels. Given inherent differences in the markets, the products will never be identical, but there will certainly be convergence that will benefit our clients.
Special Edition dedicated to US fleet decision makers
Since April 2009 Wheels and ALD International have been operating a global partnership in terms of leasing and fleet management services. Both companies are among the major industry leaders in the United States and Europe respectively, and share the same values such as quality of service, customer satisfaction and process and reporting transparency. In the future they intend to further expand their collaboration. Jim Frank, CEO of Wheels, Inc.
What about the advantages of the partnership for your customers?
How do ALD Automotive and Wheels respond to current trends: cost reduction, green fleet & mobility management, driver management,...
Mike Masterson: The international customer has a single contact globally and the same level of services everywhere. The customer can also use a common consolidated reporting model that allows him to optimize fleet management in the most transparent way. And last but not least the customer profits from this partnership as Wheels and ALD Automotive share investments on research and innovations to develop new services.
Mike Masterson: The trend towards cost reduction can’t be denied, but through our partnership, we are convinced that we have the best overall cost structure throughout our organization structure, our global IT system and the range of geographical hubs. This means that we are able to be very competitive without compromising on quality. In green fleet management & mobility we are working closely together, and our aim is to be a leading supplier in terms of mobility.
Jim Frank: It all starts with the customer. Our client benefits from vendor consolidation, best of the best solution in North America and Europe and the power that comes from consolidated data, turned into actionable information with our outstanding analytical tools combined with international account management.
Jim Frank: As Mike mentions, we have programs and initiatives to address each of these areas. Equally if not more important, we have the intellectual resources through our global account management group to tailor programs to our client’s requirements and we also make the commitment to effectively implement in partnership with our clients. Looking ahead, it is also clear that priorities will change as the economy improves and other unforeseen events occur, so what is most important is that we and ALD are committed to investing in the business and anticipating future trends and requirements. ■
Steven Schoefs
What do you expect from 2012? Mike Masterson: I’m confident that we will continue to grow in 2012, and we will do that quicker than the market, because we have a professional organization, excellent partnerships with the key accounts and a deep relationship with existing customers. All this combined with the solid platform we have built up with Wheels, brings us and the customer a lot of good in the future. Jim Frank: After 5 years of record results at Wheels in spite of the problems of the economy, we are very optimistic with regard to 2012. With our conservative and powerful financial base, we are well prepared for whatever new challenges might occur in 2012. And as our relationship with ALD continues to develop and mature, we are very excited about the ever improving value proposition we will be able to bring to our International clients.
P.13
I TRENDS I GREEN FLEET II TCO
Greening the fleet to reduce costs
TCO or Total Cost of Ownership An analysis of corporate strategies reveals that CSR (corporate social responsibility) is high on the agenda. Green fleet management can contribute to these strategic targets and can also help reduce costs.
As the market matures, it is clear that the EV market is set for significant growth and we are at the early stages of its development. (Peugeot iOn) An analysis of corporate strategies reveals that CSR (corporate social responsibility) is high on the agenda. Green fleet management can contribute to these strategic targets and can also help reduce costs. Reducing CO2 emissions can be achieved globally by working on vehicle selection, i.e. ‘rightsizing’ vehicles and taking into account the environmental performance of the car during the selection process. The impact of rightsizing and how to include the environmental performance of the car should be determined according to local culture, operational needs and car taxation levels at local level.
Calculate savings
To start reducing the CO2 emissions levels of the global fleet, the first step is to measure the CO2 levels of the current fleet. Corporates can start from the theoretical CO2 emissions based on the reference fuel consumptions given by the car manufacturers or, when available, use the real fuel consumption to determine CO2 emission levels, or a combination of the above. Globally, reducing the CO2 footprint of the car fleet should result in savings in the fuel costs. Since the fuel cost represents around 25% of the total car fleet cost in Europe, saving 20% on CO2 emissions should reduce your car fleet cost by 5%. The timescale within which it is feasible to reduce 20% of CO2 emissions depends greatly on the starting position, but is achievable for most fleets within 2 to 3 years. For countries where CO2 emissions already determine to a greater extent the amount of car taxes payable, reducing CO2 logically means paying less tax too.
The EV market set to grow
Over the last 12 months, electric vehicles (EV) have been quite a hype in Europe. Both manufacturers and energy providers have invested substantial marketing budget to demonstrate their expertise and new developments. But Europe is still at the early stages of its EV development and implementation in fleets. Across Europe, a variety of subsidy programs have been set up but recent research show that EV sales remain stubbornly unresponsive to financial incentives. It is reasonable to conclude that EV sales are more affected by other factors such as the degree of urban geography, market maturity, driver acceptance, driving range and the charging infrastructure than previously thought. Although Europe witnessed a ten-fold increase in registrations (first half of 2011), total sales in Europe account for 5,222 EV, with Germany, France and Norway leading. ■ Caroline Thonnon
P.14
The TCO or Total Cost of Ownership defines all costs related to the vehicles, including initial cost, operating expensive (fuel, maintenance, insurance, repair,…) And finally, its sale value as a used car. The actual TCO is not available until the end of a vehicle’s life but it is worthwhile to project TCO for vehicles to be included in your fleet, based on projections of expected costs and anticipates resale value.
Elements of the TCO: Funding and depreciation (40 to 45%) Fuel (20 to 25%) Maintenance, repair and tires (10 to 12%) Insurance (9 to 12%) Unrecoverable taxes (3 to 5 %) Damage costs (2%) Supplier management fee (1 to 3%) Rentals (1 to 2%) Administrative costs (3 to 4%) Traffic fines (1 to 2%) Other (around 10%) The TCO, although commonly used, is not a fixed formula. Main components of the fleet budget can be influenced by market economics, list prices, interest rates, residual values and of course the fuel price. According to new evolutions in the European Union, experts predict that both taxes and fuel costs will continue to rise, and the residual (resale) values of vehicles will probably not return to their pre-crisis levels. Having these evolutions in mind, it is clear that identifying the Total Cost of Ownership is a complex exercise, but one that every fleet manager should complete. Once the TCO has been calculated, a cost per kilometer between vehicles, regions, entities, can be compared and monitored. ■ Caroline Thonnon
Actions such as driver awareness, improved driving style, the right selection of vehicles, can immediately decrease TCO.
Special Edition dedicated to US fleet decision makers
I TRENDS I MOBILITY II Driver Management
From Fleet Management to Mobility Management
Car sharing for corporations is the newest trend in European fleet management as it can be a real mobility solution. For the past ten years, several important developments have deeply affected business related Mobility. The year 2000 brought the first broadband innovations changing the way people now connect and communicate. As from 2006, the planet, fuel, traffic and pollution problems started pressing for more environmental engagement. Since 2008 the impact of the financial crisis accelerated the general quest for a global mobility strategy and for a better work-life balance. On the one hand, these developments are opportunities for further convincing travelers and decision makers of the need for more economic, efficient and sustainable transport modes. More than ever, “past motorists” change traveling attitudes and behavior, starting to walk, cycle, use public transport (bus, tram, metro, rail) or adopting carpooling and innovative car sharing schemes. An increas-
ing number of companies now develop Mobility Plans for employees, implementing new car parking management as a powerful mechanism to influence how people travel to a site, offering innovative multimodal information and solutions or paying employees an incentive to use alternative modes to get to the workplace. On the other hand, modern communication technologies have also triggered the «New Way of Working» revolution with promising effects on congestion and the need to travel. This “Work Revolution” allows and helps staff to work from home or Smart Work Centers, thus substituting telecommunications for some business trips to reduce travel expenses and carbon footprint.
Dare to think Smart connectivity tools and smart mobility initiatives start playing a fundamental role in building a greener planet, a sustainable society and improved work-life balance, relying on the critical first question: “travel or not travel?” If the answer is “no”, what are the smartest audio-video communication tools available and if the answer is “yes”, what is the smartest way to travel considering environment, safety, comfort, speed and cost. Smart mobility is about “think twice” (travel or not), “think green” (sustainability), “think integrated” (with technology as the glue). ■ Filip Van Mullem
Driver Management or the big attitude question
Driver Management helps to steer the fleet management into a strategy that safeguards not only the lives of the personnel, but also positively impacts the business of the company. One of the most important trends in European fleet management is the growing attention paid to driver behavior. This driver behavior fits into the CSR policy of the company, and includes green, safety and mobility. These three elements can be used as efficient accelerators to start new fleet initiatives and are impacted by driver behavior. The driver and the driver’s attitude have an impact on almost 35% of the Total Cost of Ownership of a fleet, and the difference in cost between ‘good’ and ‘bad’ driver behavior can be as high as 15%. On top of this, more than 80% of road accidents in Europe are caused by the attitude of the driver. Managing driver behavior will reduce the differences between the estimated cost of ownership of a fleet and the real cost of ownership, through an improvement in driver attitude, the condition of the cars and the mobility of employees.
To create an efficient driver behavior policy, you first have to know who your drivers are. So putting together driver profiles, measuring and controlling driver performance are musts if you want to create correct driver behavior throughout your organization. Because you can only effectively steer change by using concrete figures and having correct data. And of course you also have to inform the worst drivers about their attitudes and give them tips to improve safe and sustainable driving. You can proactively steer attitudes in the right direction by organizing safety and/or eco driving sessions.
Integrate all drivers When building up a driver behavior strategy, do not only focus on the worst case drivers, but try to integrate everyone, so that you can create socially driven control and socially driven motivation. Along with this you can stimulate the overall conditions for encouraging optimized driving behavior by regularly checking the condition of fleet cars. Too many of them do not have the correct tire pressure, have bodywork damages or have not followed maintenance regulations. All these aspects directly lead to less safety and less sustainability. More and more fleet suppliers have created products, services and online tools to help European fleet managers to manage driver behavior and to steer fleet management towards a strategy that safeguards not only the lives of the personnel, but also positively impacts the business of the company. ■ Steven Schoefs
P.15
I case study I NOKIA SIEMENS NETWORKS
II Pfizer
M. Kimmo Kunnas
Nokia Siemens Networks Take ‘green’ seriously
Kimmo Kunnas, Head of Travel & Fleet at Nokia Siemens Networks, believes that sustainability is now a must regarding fleets in Europe. As a minimum this means setting CO2 limits for cars, but the most advanced companies are also taking steps towards an integrated optimized total mobility. Kimmo Kunnas was the laureate of the International Fleet Green Award in 2010, so it was logic to ask him what a European fleet manager can do to make fleet management even greener. Kimmo Kunnas: We have harmonized car policies at a European level, concentrating heavily on reducing the carbon footprint of our fleet. But our approach is not limited to CO2 emissions, it also includes reducing the total emissions of our fleet. Car choices impact directly on emissions, so taking green values as one selection cri-
Kimmo Kunnas of Nokia Siemens Networks: « Being green also means being cost conscious. » terion within TCO is efficient way to decrease the carbon footprint. As a result of this we have reduced our average emissions by over 30g/km. NSN started by setting up a global maximum for the CO2 emissions of new cars and created a new ‘low emissions rewarding’ car policy. What main advice would you give other fleet managers? Kimmo Kunnas: Get top management support and commitment, set clearly measurable targets and follow-up and report progress to stakeholders; update the targets, communicate, separate service fleet targets from benefit car targets, for benefit cars use the carrot instead of the stick. Assure flexibility in the policy for future developments and annual reviews in advance. Don’t underestimate the importance and impact of green fleet initiatives: being green also means being cost conscious. Don’t just settle for ‘greenwash’, but take it seriously and integrate it into strategy and sustainability targets. ■ Tim Harrup
M. Fred Turco
Pfizer
Head office doesn’t know it all With 3 countries in North America and a further 42 in Europe, external differences such as taxation, local customs, finance models, supplier maturity are elements Fred Turco, Senior Director Global Fleet at Pfizer, had to take into account. But what about internal measures for car policy harmonisation? Fred Turco explained to us that the concept of company cars differs from one side of the Atlantic to the other, and that differing scales are also an issue. Fred Turco: In the USA a company car is typically a ‘tool of the trade’. This means there are no more than 5% management cars and 95% service cars. However, in the EU a typical split is 20% management cars to 80% service cars. This creates a completely different policy dynamic because management vehicles are part of the compensation package. So we have to ensure we focus the policy on things that really impact on performance and that matter.
P.16
Fred Turco of Pfizer: « Focus on the ‘what’ and leave the ‘how’ to local markets. » What are the main elements a fleet manger should concentrate on to harmonise the policy? Fred Turco: Establish the business case for having a governing policy and ensure the appropriate internal stakeholders endorse the business case. Establish governance roles and responsibilities. Ensure the policy outlines key principles and minimum performance criteria. Focusing on the ‘what’ and leaving individual market autonomy on the ‘how’, is key to effective implementation. Ensure there is an effective means of reviewing, maintaining and executing against policy. Establishing a common policy is a start point not a finish. And what should the fleet manager avoid? Fred Turco: Don’t be too prescriptive, and don’t think that a central/regional fleet organization knows it all. And don’t underestimate the amount of change amanagement time, project management skills and communication that will be necessary. ■ Steven Schoefs
Special Edition dedicated to US fleet decision makers
I case study I Accenture
II Microsoft
M. Alain Duez
Accenture Mobility for employee satisfaction With more than 230,000 people in more than 120 countries, Accenture’s objectives in terms of mobility are to optimise total cost of mobility, reduce CO2 emissions, and increase employee satisfaction. Alain Duez, Global Fleet Commodity Lead at Accenture, told us a little more. “Mobility is the future and is now the way to talk about Fleet. The buying mindset is changing towards a long term view in which the environment is key. Mobility is part of the environment and is becoming a tool to attract new staff, a tool to offer flexibility, a tool impacting our CO2 footprint and hopefully a tool to reduce cost too.”
Do you see this new Mobility notion becoming widespread? Alain Duez: The concept of Mobility is still a young element that brings with it a lot of questions and makes some companies hesitate before investing in a full program. We see some Mobility options being tested and implemented, but rarely a full Mobility Plan. Mobility is also linked to the company profile and its employee profile, tax rules, the capacity of public transport to offer a full solution to the business, and we can see that all these elements are still not mature enough in all countries to enable companies to really go for it. But we are on the way to seeing change and some companies are becoming pioneers. Not
M. Bruce MacLaren
Microsoft Bruce MacLaren is responsible for fleet across the globe for Microsoft. We asked him (an American based in Europe) to tell us how he sees the differences in these two major markets, and to give an insight into how Microsoft has tackled the issue of crossborder policies. Bruce MacLaren: The US is composed of 50 individual states which are united in a federation. The marketplace is homogenous in nature. The US has one currency. The common language is English. Across the Atlantic, there is no such thing as the united states of Europe. Each country has its own language and culture which have long histories. Americans communicate over 50 states in their mother tongue. Many international business people in Europe use English as a second, third, or fourth language. European nations trade in multiple currencies. Each European country or marketplace enjoys a unique structure in terms of taxation or automotive chain supply.
What are the do’s and don’ts when it comes to fleet management harmonization in Europe and US? Bruce MacLaren: I think some thought needs to be given to what can be common across borders and what cannot. Do not try to harmonize local culture, taxation, or law. Do not try to dictate one support model for each country. Do not mandate a specific funding or fleet management model. The right support model always comes from taking the best of the local marketplace. Spain is not Germany. The standard of living is much different as are the segments of vehicles one drives. Any policy must allow flexibility in those areas in order to be successful. Decide the principles of how to manage the car fleet. Should the maintenance, repairs, tires, insurance, etc. be insourced or outsourced? Should the financing be done in house, through a bank, or a leasing company. There are no ‘right’ answers. The true answer lies in knowing what the corporation is trying to achieve.
At Accenture adding rail subscriptions to a lease car contract leads to efficient selection of transport modes. to go for Mobility is not an option, so we are sure to observe innovation and changes for the next 3 years. What are the do’s and don’ts when it comes to implement new mobility initiatives in Europe? Alain Duez: Understand each country and employee profile. Have key stakeholders in agreement with the plan. Make the link between HR and Finance for the right balance. Have all ideas on the table and take time to brainstorm. Don’t hurry…but don’t lose time as not implementing might put a company behind the game…impact on recruiting, cost, image…etc… Promote understanding and commuTim Harrup nication. ■ Bruce MacLaren of Microsoft: « The true answer lies in knowing what the corporation is trying to achieve.» How does this all relate to what you did within Microsoft? Bruce MacLaren: We created a global policy which mandates certain principles, but leaves freedom to account for differences in local practice, culture, law and tax. The principles were achieved through listening to our stakeholders and driving consensus. We started with principles upon which could easily be agreed: cost coding, basic employee responsibility, health and safety, environmental standards and procurement best practices. Effective communication is critical to success. We have outsourced all local administration to suppliers in a multisupply context. We manage those suppliers with a central-led category team reporting to me. We have fully implemented our environmental strategy of reducing our C02 average to 130g/km. Our goal is the same as the OEMs: zero emissions through sustainable fuels. ■ Steven Schoefs
P.17
Car Policy
The first step towards a car policy harmonization is to ensure that the initiative and the business case for it is supported by the Board and all internal stakeholders.
Creating harmony across Europe International companies with subsidiaries in Europe have an interest in creating a European car policy to express and share the common view on fleet management policy rules. But not every car policy element can be centrally managed, as cultural differences and local legislation drive certain elements. It is important to ensure that the initiative and the business case for a global car policy are supported by the Board and all internal stakeholders (HR, Procurement, Operations and Finance).
Areas for harmonisation The harmonized car policy typically mentions the categories of employees to be provided with a company car and for what purposes the company car can be used. It is sensible to impose certain safety options regardless of the individual country concerned. This is becoming less of an issue for fleet managers, however, as the European Union is making more and more safety devices which were previously only seen on ‘higher grade’ models, compulsory: ABS, ESP… Other areas which are quite easy to harmonise are the general rules concerning whom to contact in case of an accident or a problem, the payment of fines for traffic offenses, the requirements to keep the car in good and clean condition, to ensure that manufacturers’ service and maintenance guidelines are adhered to.
P.18
Local choice There are some areas where local differences will mean that it is sensible to allow the local fleet management team a degree of independence. It may be that the central management team has negotiated an agreement with a particular manufacturer or a lease company, for advantageous prices across Europe. This is a recommended step that can bring simplicity, coherence and cost effectiveness, but always keep local habits in mind. In some countries, there is a marked preference for local brands, and this is the sort of cultural nuance which can be respected. If not, such apparently minor issues can even have an impact on recruitment and retention.
Driver focus On top of all these areas, there are other questions which the company needs to consider, including who can actually drive the car and who pays for private use petrol? Or, is it customary in all countries for the company car to be used for holidays, and for driving in other countries? Local – and often differing – tax rules need to be considered when setting up rules within this domain. It is quite clear, however, that all drivers need to have the appropriate license, that driving after drinking or taking drugs is not allowed, that local laws on the use of mobile telephones must be respected. And finally, always leave enough flexibility to react to change. ■
The Do’s of the European Car Policy • Establish governance roles and responsibilities including who reviews/endorses and who approves policy • Ensure the policy outlines key principles and minimum performance criteria that are relevant to all countries • Focusing on the ‘what’ and leaving market autonomy on the ‘how’ is key • Ensure there are resources effective for reviewing, maintaining and executing • Be sensitive to language and cultural differences • Establishing a common policy is a start point not a finish
ALD Automotive & the Car Policy
In recent years, Europe has seen a strong evolution from ‘user chooser’ car policies based on monthly rentals or even list prices, towards more restrictive policies with a limited number of models available per category. This means applying some standard rules which then need to be adapted effectively to local markets: hence the need for both a clear international mandate and some – albeit limited - degree of flexibility at implementation stage.
Steven SCHOEFS
Special Edition dedicated to US fleet decision makers
I company profiles I
the partnership ALD Automotive
Wheels
CEO: Mike Masterson
CEO: Jim Frank
Deputy CEO: Pascal Serres pascal.serres@aldautomotive.com
Headquarter: 666 Garland Place Des Plaines, IL 60016 USA
Tim Albertsen tim.albertsen@aldautomotive.com Headquarter:
Main shareholder: Mike Masterson
15 Allées de l’Europe 92588 Clichy cedex - France
Privately-held
Jim Frank
URL: www.wheels.com www.globalfleetreporting.com
Main shareholder: Société Générale
Active in the market since: 1939
URL:
Total number of staff (globally 9/2011): 600
www.aldautomotive.com Active in the market since: 1946
Pascal Serres
Total number of staff (globally 09/2011): 4,000
International Coordination Unit Wheels, Inc. 666 Garland Place Des Plaines, IL 60016 USA
International Coordination Unit ALD International Tours Société Générale 17 cours Valmy 92987 LA DEFENSE - France
Vice President of International: Bill Robinson brobinson@wheels.com Tim Albertsen
Sales and Business Development Director:
Sales Manager, Canada: Dan Hebert - dhebert@wheels.com Alvaro Alonso - aalonsooc@ixe.com.mx
Total fleet (Sept. 2011):
North America: 320,000 Country presence: 4 + 3 additional
Total fleet:
Stéphane Renie
1,200,000 vehicles worldwide 43 countries covered by the partnership
Country presence Algeria Austria Belgium Brazil Canada China Czech Republic Croatia
Denmark Egypt Estonia Finland France Germany Greece Hungary
Dan Hebert
Sales Manager, Mexico:
Stéphane Renie stephane.renie@aldautomotive.com Europe: 859,232 vehicles Rest of the world: 30,180 vehicles Country presence: 37
Bill Robinson
India Italy Latvia Lithuania Luxembourg Mexico Morocco Netherlands
Norway Poland Portugal Puerto Rico Romania Russia Serbia Slovakia
Slovenia Spain Sweden Switzerland Turkey UK Ukraine United States
Additional Coverage Australia FleetPartners New Zealand FleetPartners Ireland Johnson & Perrott
P.19