Automotive Fleet

JAN 2014

Magazine for the car and truck fleet and leasing industry

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where in the world. Initial resistance by some lessors dissipated rapidly as the efectiveness of the drop-shipment system became obvious, and it is now the universal solution in the U.S., envied by others throughout the world. Te introduction by PHH of the frst costplus lease laid the foundation for the explosive growth of the industry. Ideally structured for the North American market, open-end/costplus leasing provides the most cost-efcient and fexible solution for business feet for the vast majority of clients. Wheels consummated its frst cost-plus lease with Pfzer in 1953, and it now represents 97 percent of our portfolio. One interesting side note is that the introduction of cost-plus, rather than fxedprice, leasing led to the development of large and sophisticated feet management departments at our clients. Without fxed, guaranteed costs, the users felt the need to develop in-house expertise to control expenses of the feet. ➜ 1960s: Clearly, the introduction of computers to the industry was the highlight of the 1960s. Sophisticated automation allowed the feet management industry to efciently increase in scale and scope, resulting in improved quality, lower cost of operation, increased purchasing power, and the beginning of the Information Age. ➜ 1970s: Te energy crises of 1973 and 1979 totally changed the automotive and feet management environment. Previously, a feet selector consisted of an eight-cylinder Chevrolet Impala, Ford G500, or Plymouth Fury. With fuel scarce and more expensive, the science of vehicle selection became paramount and vehicle selectors became much more diverse. Te expertise of the feet manager became much more important as calculation of TCO, with all of its many dimensions, became relevant. And, it became increasingly 1972 Introduces fuel and maintenance management. 1 974 Jim Frank becomes second president of Wheels. 1976 on 50,000 vehicles lease. important to match vehicle capabilities to the business requirements. Tis is also the era in which automation and information technology began to bloom as feet management companies learned to leverage the power of computers for information and decision management, not simply operating efciency. Te 1970s also saw the birth of sophisticated outsourcing of maintenance management by clients to leasing companies. At the request of the Chicago and Northwestern Railroad, Wheels built our frst cost-plus maintenance management program, the beginning of a move to outsourcing that has ultimately transformed the feet management business. ➜ 1980s: Interest rates (an all-time high Prime rate of 21.5 percent) and infation soared in the 1980s, putting increased pressure on costs and emphasis on expense control in feet. Te focus on cost was emphasized even more by the pressures of globalization and leveraged buyouts, all of which enhanced the importance of efective feet cost control. Te sophistication of both feet management companies and feet managers grew dramatically, as did fnancing capability in the feet leasing industry. Prior to the 1980s, the primary source of lessor fnancing was subsidized funding from the OEMs. Due to the soaring interest rates in the early 1980s and severe fnancial distress of all of the OEMs, the successful feet lessors initiated funding strategies directly in the capital markets. Today, with sophisticated securitizations and commercial paper programs, we are among the most efcient and costefective fnancial institutions in the world. Te 1980s also saw a signifcant trend toward sole sourcing in feet management. Previously, clients felt that they needed at least two lessors in order to evaluate efectiveness. 1985 Begins handling registration renewals. 1988 EMPLOYEE REFLECTIONS "I started working at Wheels as a temporary employee on a two-week assignment and 30 years later I still have the opportunity to advance in the company. I'm the temp employee who never left!" — Pepper Hillsman, 30 years Supervision of Fuel Management But, with the growing sophistication of technology and data, clients had the tools to evaluate their suppliers without running a concurrent competition. Sole sourcing simplifed operations and enhanced the client's buying power of the client, it was a natural, and it ultimately migrated to the OEMs as well. GE's entry into the business in 1986 was also signifcant. As GE acquired feet lessors, the number of suppliers for large national feets declined from more than a dozen to less than a handful. Tis concentration of the supplier base beneftted the clients, as the remaining companies have grown to a size and level of sophistication where they ofer a much enhanced value to clients. ➜ 1990s: Te 1990s were truly revolutionary for the feet industry, driven by a continued move toward outsourcing and the proliferation of products ofered by the feet management companies. Today, Wheels offers 37 diferent feet-related products to our clients, quite a change from the day when our total operation was vehicle purchasing, disposal, licensing, and fnancing. ➜ 2000s: If the 1990s were revolutionary, feet management in the 21st century has been transformed, driven by powerful forces: ● Fuel prices. Gasoline prices spiked to move than $4 per gallon. Concerns about 1 998 Creates DriverView, frst online driver ordering system. 100,000 vehicles on lease. 1989 Launches frst Windows-based client service tool. 1999 FleetView is released. Dan Frank, son of Jim Frank, joins Wheels. D. FRANK JANUARY 2014 I AUTOMOTIVE FLEET 29

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