Vice President, Global Strategic Services, ARI
What is the state of the global fleet market right now?
ARI offers global fleet leasing and management services through an alliance of top tier market leaders under the name Global Fleet Services or GFS, and we’re finding that business is as robust as ever. Our partners in South America, particularly in Brazil and in Colombia, are doing quite well. Those markets currently have very healthy economies and our partners are dealing with increased order volume and demand from their customers.
Our partner in South Africa is also doing very well and implementing a great deal of new technology. The economy throughout the continent of Africa is under a lot of pressure at the moment, so growth from a fleet standpoint is not as robust as it was in the past. Much of that has to do with government regulation and safety concerns.
We are seeing a great deal of growth and activity in India, China and Australia with our partner ORIX. They continue to expand and they are doing more and more in India these days, but the environment in India is very insular. I would estimate that 85-90 percent of the economy is internal not external, so our partners are dealing with issues related to how to get their infrastructure up and running and how to keep things operating smoothly once they do get their infrastructure established. But, despite these start up challenges, India is where they see their biggest opportunity for expansion and growth.
China continues to be an expansion opportunity from both a consulting and leasing and fleet management standpoint, but there are still a lot of controls in China that make operating there somewhat difficult. We are trying to learn more and more and we think that as that market expands there are going to be significant opportunities there.
What sorts of trends are you seeing in the global market?
Just like in the North American market, companies across the globe are being asked to do more with less. Decision makers have more responsibility than they’ve ever had before. Maybe they had responsibility for a single country or a single region and now they are being asked to be responsible for operations across the globe. Maybe their company has grown or is seeking to break into new markets. Whatever the case, fleet managers are often being asked to be more strategic and to make sure the company’s fleet is being run as efficiently and as cost effectively as possible.
We also see a constant need for training, education and understanding, especially as fleet managers are asked to take over or move into new markets. For example, a trend we have found is that people think they can set a single, fixed policy for their fleet and then dictate that it be implemented around the world – but that doesn’t always work well. They need to understand that what is permitted (and not permitted) in one market doesn’t necessarily hold true for every market. We have spent a lot of time trying to train and educate people about the rules, regulations, market customs and cultural norms of different countries and regions around the globe and help them adjust how they manage their fleet accordingly.
For example, if a fleet manager has a successful fuel purchasing program in the U.S. and Canada, that same program is not likely to work in Mexico because there is one fuel supplier in Mexico – the government. So, if you don’t buy your fuel from Pemex, then you are likely to face significant trouble, because that is the only game in town. Can you issue a credit card? Yes, but is there a fuel card that most North Americans are used to having their drivers carry in their pocket that isn’t accepted throughout much of Mexico yet. So, you can have a policy in the U.S. and Canada that is implemented via a fuel card, but that policy won’t work in Mexico. That is just one example of the kind of thing a fleet manager needs to be aware of when moving into new markets. Essentially, a fleet manager should always begin with an understanding of the marketplace, and then adjust accordingly so that a policy meets the needs of the company and suits the customs and norms of the market. Another example would be the different lease types – i.e. open end, closed end – and how they may vary from country to country.
As a rule, fleet managers need to be aware of how fleets are handled and what the rules, regulations and market customs are when entering a new market so they can make effective decisions. We are putting a lot of emphasis on trying to make sure people learn and understand the differences between regions and markets, and encouraging them to let us know where they need the help and we will try to get them the answers they need to make efficient, smart, cost effective decisions.
Where do you see ARI going in terms of expansion?
ARI has been in North America – the U.S., Canada, Mexico, Puerto Rico and the Caribbean – for many years and we have a very strong presence in that market. We made our first foray into the U.K a year ago when we acquired a company by the name of Fleet Support Group, which we now refer to as ARI Fleet U.K. We have started to integrate our processes and bring some of our technology and staff on board there, but the company already had a strong presence in the market and offered a range of driver and vehicle based fleet management services. We think we can bring value to the marketplace and to our U.K. clients by introducing some of our innovative technology products and developing a new range of solutions that will help fleet managers run their fleets more efficiently.
Overall, the market in Europe is still very volatile. The banks – and the banks that own a lot of leasing companies – remain under a lot of pressure to deliver returns. The market is just starting, hopefully, to turn in the right direction. We are focusing our attention on fleet management services – essentially maintenance, accident, and driver based programs. But, we do have intentions to expand elsewhere in Europe, and when the right opportunity comes along we will look to take advantage of it.
Let’s hear about some of your experiences with your global partners.
It’s been an interesting experience, without question. And, you can learn about the marketplace and what the customer is looking for in the most unusual ways. For example, I was recently in Brazil and took a tour of some used vehicle lots. I am standing on a lot that probably had about 350 cars. Now of that number, probably 347 of the cars were silver, and there may have been one each that was red, black and white. I asked one of my hosts why almost all of the cars were silver, and their response was enlightening, but also logical and obvious at the same time: because that’s what the customers want.
I wondered further about the marketplace, because in the U.S. – and in other markets – having all the same color car is just about the worst thing you can do. In many markets, you have to have some differentiation. And the host’s response was even more enlightening: the silver cars look very much like the guardrails that are prevalent in the country, so if the cars rub the guard rails, it doesn’t show up as much as it might on a different color car.
Now, my host was joking somewhat, but I know what he was saying was also somewhat true, because I have driven there and it is a little crazy. It is something that we would never think of doing – having 98 percent of the cars on a sale lot all the same color – but they had no problem with it, because their customers didn’t really care what color the car was, they just wanted transportation. In fact, silver had an advantage – it might not show marks quite as much as other colors. Now, in the U.S or on the continent of Europe, consumers would never stand for that. In those markets, you have to have variety. You have to have a selection. Also, in Brazil they think nothing of just putting pure ethanol into their tank because they can support ethanol so much easier down there. You are hard pressed to find ethanol in the U.S. except in the Midwest. Seeing all of that first hand was an incredible experience and I learned quite a bit about how markets can vary across the globe.
Another interesting story came from an experience I had with our South African partner. I have been to Africa, and much of it is still very basic and undeveloped. South Africa has a very good economy and is very sophisticated in parts, but you can also go twenty miles outside of Johannesburg and be in the middle of the jungle. I have seen cars being worked on by the side of the road, where they literally dug a hole in the ground to change the oil in the car. There is very basic maintenance there – there are no garages, so they make repairs right as the car or truck may need them, often right on the side of the road. Yet, they have some of the most sophisticated telematics solutions that we have ever encountered, and they are very proud of this for two reasons: it allows them to govern the speed of the vehicle and they can monitor and track where vehicles are with geo-fencing. The drivers accept it because they know that if they don’t get a speeding ticket it saves them the money and it saves their job. Jobs are very valuable there – unemployment is very high. So, they don’t mind having a telematics solution govern the speed of the vehicle. Or, if the truck gets hijacked they want to be found. Their safety is very much a concern.
Yet, when we explain that same technology to our partners in Australia, they rejected it outright because Australians care deeply about freedom. They don’t want anybody to constrain the speed of their vehicle or know where they are. So, between these two southern hemisphere economies one economy – South Africa – loved the telematics solution and accepted its use, while another – Australia – resists the technology recognizing that it would never fly in the marketplace.
It is incredibly interesting how you have to understand the cultures, what their values are and what is important in each to know what will work and what won’t work. Over time, telematics may come to be more broadly accepted in Australia, especially as companies begin to realize the benefits of the technology – i.e. fleets can save fuel, which results in cost savings, and can improve overall safety for drivers. But, without understanding their culture and their values, you might not understand why telematics isn’t more broadly accepted today. Similarly, you wouldn’t understand why telematics are universally embraced in South Africa. Ultimately, it is about understanding the culture of the market in which you are trying to operate.
Is the acceptance of telematics the same in the South American countries?
Brazil is starting to use telematics. They have the infrastructure to support it, and I have not heard positive or negative reactions about the adoption of the technology. There is very little use of telematics in Colombia and Peru at the moment – certainly not to the extent that we have it here in North America. I think however, once the benefits and advantages of telematics devices become more widely known, we’ll begin to see the acceptance of telematics solutions beyond the North American market.
The biggest challenge we have found at ARI with telematics isn’t necessarily encouraging the use of telematics, but rather once you begin to use them and begin to encounter the enormous amount of data they provide, the challenge becomes how to deal with the data. I have heard people say for years, “I have tons of data and ounces of information, and I would much rather have more than just a few ounces of information.” So, at ARI, our focus has been on how to compile all of that data your devices may be producing, possibly across multiple platforms, and develop useful methods for finding and reporting the actionable information that lies within that enormous pile of raw data, and in that way we hope to deliver real value to fleet managers who are always looking for better ways to manage their fleet.
What is your take on ethanol blends?
With regard to car and truck fleets, we haven’t seen a very significant impact resulting from the use of ethanol blends. We have found is that if the vehicle is truly a bi-fuel vehicle and meets proper standards, pretty much every gasoline has some ethanol in it – some have as little as 10 percent mixed in, but some can have as much as 50 percent grade. For vehicles that can run on 85-95 percent ethanol, those vehicles have to be engineered to handle it and clearly have less trouble. For example, in South America where ethanol is much easier to find, many of the vehicles there are engineered to handle that.
For the most part, where we have found a negative effect as a result of ethanol in gasoline has been in smaller engines. So, for example, if a truck that has a generator or some other kind of equipment like a pump on it that that runs on gasoline, over time the effects of ethanol on those smaller engines can be incredibly bad. And, if that ultimately affects the overall use of that truck, and in turn slows down the operation of your fleet, that is even worse. From a car or truck standpoint, we haven’t seen any substantial negative results from the use of ethanol blends; however, we do anticipate potential detrimental effects on fuel system components over a long period of time.
What would you advise a fleet manager now just taking over global responsibilities?
I think trying to tap into as many resources as possible, be it periodicals, websites, the fleet management providers, consulting companies. Be a sponge, try to absorb as much as possible and have an open mind. Try not to dictate policy too much – instead, set a policy, but be aware that you may need to adjust that policy based on a country’s regulations or regional norms. Most of all, adopt a learning environment in your mind – constantly be learning, so that you can bring that learning to bear on how you operate your fleet.
That is something that we have adopted at ARI – a culture of learning. We understand that we have grown a good deal over the past several years and we continue to grow. At the same time, our business model is evolving, so we have to make sure that our employees understand that things are different when you are interacting with someone from a different country or a different region of the world.
We are putting a lot of emphasis on education and learning for our employees so they understand the global marketplace also. Through ARI University, our company’s comprehensive, in-house training and development program, we are able to offer courses specifically about global fleet management that highlight the similarities and the differences between countries and regions. We encourage people to expand their education, to get an undergraduate degree or go for a master’s degree, and support that effort with tuition reimbursement. We also encourage people to take courses like international business and learn new languages to help broaden their horizons. And again, simply encouraging all of our employees to keep an open mind so that they can be open to change and opportunities for learning when and as they comes along.
What kind of structure do you have at ARI to support your global alliances?
We are constantly expanding our support for our global alliance within ARI, and have added staff both in Europe and at our global headquarters in New Jersey to support our global alliance partners. And again, from a perspective of integration and learning, we are making sure that more and more areas within the company understand what our partners’ goals and aspirations are around the world and how we can support that. Whether it is data integration, or report generation, or sharing of best practices, we seek to truly collaborate with our partners so they can gain from the investments we have made and, ultimately, the customer receives the very best in terms of service and advice. One thing that is very flattering is that often our partners want to learn more and more about the North American marketplace because they feel that North America has some the best and greatest modern fleet management ideas and techniques, and they want to learn and absorb as much as possible.
When it comes to Europe, we understand the European marketplace is different and there is no “one stop solution” in that marketplace. As a result, we try to make sure we understand what the best practices are for each type of fleet, whether it is a car fleet, a truck fleet, a large fleet, or a small fleet.
We then seek to align ourselves accordingly and we are always picking the brains of our European alliance partners so we can be sure to stay current. We also work closely with our customers to find out exactly what their needs are, making sure we dig to get what they need and answer whatever questions they may have. And, once we have a solution, we share that information and what we have learned with our people back in the U.S. and in our other locations – Mexico, Canada, Puerto Rico – so that our entire team can be up-to-date with the latest information when it comes to our global operations.
How can global fleets best leverage their buying power with the OEMs?
I think the OEMs have had their own growing pains, especially Chrysler and GM as they came out of bankruptcy, but most of the manufacturers appreciate the value of global alliances. I think there are still challenges as different markets develop and get up to scale – in some areas of the globe, you simply can’t get certain vehicles because the demand is not there to support an OEM venturing into that marketplace. And, if you recall I mentioned being flexible when you develop global policies, that would then present a case where if you have already set a certain policy designed around a specific vehicle, and you enter a new market where that vehicle simply is not available, you will need to be flexible in terms of how you deal with the policy you already have in place.
Essentially, you have to see where your footprint is, what the options are and – in the end – do not align yourself with one supplier. It is more advantageous to have at least two, or even three, so that you can leverage your buying power as much as possible to maximize your returns. Also, for the most part, large rebates and incentives are not available when it comes to global markets, so you need to keep that in mind. The best approach is to negotiate aggressively with regard to possible incentives you may be seeking in the U.S., Canada, Mexico, Europe, or Australia, and then seek to leverage that negotiation to obtain additional incentive from a global standpoint. You may not gain a significant amount of dollars – but it will be something towards your bottom line. And, if you do negotiate an incentive, be sure you have a method to monitor and track the fleet. When it comes to global fleet incentives, the OEMs are very strict about tracking and reporting, and that is something that, together with our partners and affiliates, we have put a lot of effort into coordinating so that we can give that information back to our fleet managers to apply for those global fleet incentives. As I said, they may not be big dollars, but there are still dollars there that can count towards your bottom line if you are careful and have methods in place to track and report.
Jim Creighton is Vice President of Global Strategic Services for ARI. In that role, he is primarily responsible for ARI’s strategic planning efforts. He also serves as chairman of the board for the Global Fleet Services (GFS) alliance and on the board of ARIZA, ARI’s joint venture in Mexico. He was formerly vice president of global operations, vice president of global strategic services, director of operations, and has held various management positions in operations and client administration. Employed by ARI since 1983, he has a bachelor’s degree in business logistics from The Pennsylvania State University.