Automotive Fleet

FEB 2014

Magazine for the car and truck fleet and leasing industry

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T oday, OEMs introduce new models throughout the calendar- year. Year-round, new-model introductions are facilitated by the National Highway Traf c Safety Administration (NHTSA), which allows vehicles to be designated the next model-year if manu- factured by January 1 of the preceding calendar-year. For instance, a vehicle produced Jan. 1, 2014, could be designated by an OEM as a 2015 model-year vehicle. Other reasons for year-round introductions include the need to inf uence CAFE averages, competitive leapfrog- ging, keeping the lineup fresh, maintaining year-round f oor traf c at dealerships, and parts availability. However, for many f eet managers, the staggered release of new models from various OEMs has become confusing and frustrating. Each model-year, I hear f eet managers voice a recurring complaint about the impact of staggered production schedules, especially when it occurs with high-volume f eet vehicles. In particular, year-round new-model introductions complicate f eet planning and the ordering process. Not only that, but, due to multiple plant assignments and model conf gurations, some model lines may have variable f nal order and startup dates. T is frustration is exemplif ed in the following lament by one f eet manager: "I'm tired of the staggered model-year production schedules. I used to be able to place all orders at the same time, now I seem to be placing orders throughout the calendar-year, because of these production schedules." T ere are also budgetary ramif cations, depending on how the corporate f scal year is set up, along with incentive payments. "Fleet managers also need to factor in mid-year model changes when ne- gotiating their OEM volume incentive programs," said Jan Freund, director, manufacturer relations for Wheels Inc. "I know Chrysler uses a date parameter program, but Ford and GM are still on model-year programs. Fleet managers should touch base with the OEMs on this aspect of mid-year changes." Although there has been much discussion about the impact of staggered production schedules on f eet managers, there is also an adverse impact on drivers. "A change in a model-year selector list creates dissatisf ed drivers and much noise in the process. So, unless there is a compelling reason, I leave these models of the selector until the next full cycle," said Charlie Szymanski, manager, global property casualty insurance & auto f eet for PPG Industries in Pittsburgh. "Another issue is that the new releases typically cost more and have fewer incentive dollars. T at means that all of the work that went into communicating the cost of the selector list becomes invalid. T is ultimately translates into a lack of trust with the f eet manager. For instance, VPs can perceive f eet managers as only relaying messages from the OEMs rather than managing the process. Lastly, new roll outs of en have unforeseen delays in order-to-delivery times. T is only creates further frustration." Sometimes, if not managed properly, early introductions can result in negative unintended consequences for lifecycle costs. "Due to improving fuel economy, early launches of a strong retail vehicle, where production volumes are managed, will generally have a positive impact on depreciation and fuel spend. Of course, this is providing there are no challenges or delays with the launch and the vehicle being replaced is coming of -lease at the appropriate time," said Rick Shick, VP, vehicle acquisition and strategic sourcing services for Donlen. "If not, you could potentially of set some or all of the gain from the early launch of a vehicle. It's important that you're in a positive equity position on the vehicle being replaced." Viewing Fleets as Partners T e history of early introductions goes back to the 1980 model- year with the introduction of the then all-new, front-wheel-drive GM X-Platform cars, such as the Chevrolet Citation, which was one of the top-selling f eet vehicles of its day. T e Citation was released in April 1979 as an early 1980 model. T ere was hand wringing at the time as to the possible negative residual impact of the early introduction; however, this didn't happen and the serendipitous April 1979 release was just prior to the second gasoline shortage later that year. As a result, the more fuel-ef cient 1980 Citation sold around 800,000 units. Since then, many OEMs have varied their new-model release dates. T is trend became more formalized with mid-model-year introductions during the January to March time frame, but slowly proliferated to introductions now occurring throughout the calendar-year. T e advantage of mid-year vehicles for f eet is the benef t of 16-18 months of use, but with the vehicle depreciating for only 12 months. While f eet is important to automakers, the retail market dictates new-model introductions. From a retail perspective, staggered intro- ductions allow OEMs to spotlight a new model without the "clutter" of numerous other models competing for consumers' attention. T e auto business is very complex with lots of moving parts. T ere are many factors that dictate when a new vehicle will be released and when buildout will occur for the predecessor model. Although today's OEMs are very sensitive to the voice of the customer and are attentive to advice received from f eet advisory boards, there is frustration about staggered production schedules. T is frustration is best exemplif ed by one f eet manager: "Once again, I can't do all of my ordering at one time because of exasperating staggered production schedules. When possible, OEMs should be more tuned to the f eet replacement cycle and work more closely with us as a partner." T e f eet-minded OEMs have been terrif c partners to f eets and, together, there should be a way to mitigate the impact of staggered production schedules for their largest customers. Let me know what you think. AF The Adverse Impact of Staggered Production Schedules on Fleet Planning and Ordering AUTOMOTIVE FLEET I FEBRUARY 2014 10 MARKET TRENDS BY MIKE ANTICH A F 0 2 1 4 t r e n d s . i n d d 1 0 AF0214trends.indd 10 1 / 2 3 / 1 4 9 : 3 2 A M 1/23/14 9:32 AM

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