Interview with Mark Conroy
These are difficult economic times for virtually every sector of American business. How are lessors being impacted by the tight credit situation? I’m interested in how lessors are dealing with funding issues from banks and other financial institutions.
Certainly, lessors are impacted by the tight credit situation in that banks and lending institutions are requiring much more data and information regarding risk, terms and with whom a lessor is choosing to lend money. Today, more than ever, fleet management companies must review and explain more than the financial statements of the clients that they provide funding and services. Current business trends, types of equipment, future business probabilities, ownership, growth strategies, management team expertise, competitors' strength, company history and commitment to their industry and community are pieces of information that can effectively help the lessor provide comfort to their lenders.
From the lessor’s risk side of the equation, we are not unique from many other businesses in this economy that are trying to make the best credit decisions for their portfolios. Risks are fewer, amortization terms are shorter, original credit line is set using as much business and common sense as possible, accounts receivables attract more scrutiny, updated client financials are tracked to make sure lending should continue. Accountability is critical; integrity a must when reporting to lenders today. Lessor management teams are spending at least 20% of their time now with banks as their information requirements have easily tripled. Whether government or financial institution policy, the world’s lending rules have tightened dramatically. Those lessors that are leveraged correctly and have solid business plans for the future will prosper and continue providing clients with deserved value.
How are the automaker bankruptcies affecting lessors?
We have seen interviews already with industry leaders who worry that the Chrysler bankruptcy and any other impending bankruptcies may bring more challenges to fleet lessors and their clients as the year progresses. Plant closings or delays, inventory supply, labor layoffs, supplier issues, last minute production changes, residual markets and a myriad of other issues are certainly going to affect deliveries in 2009. The best job we can do as lessors is to stay on top of the situation at each manufacturer and not only provide the latest information, but provide solutions through pools, stronger out of stock knowledge, managing maintenance and risk better or assisting with more effective life cycle replacement cycling.
As a fleet manager, I would be close to all manufacturers and increase my knowledge to help forecast what’s ahead. They want to give you the information you need. Just ask. Read the industry Internet eNews sources and magazines on a daily basis. Ask fleet professionals and peers at industry Conferences like AFLA and NAFA what they have learned.
Fleets are being asked to cut costs everywhere and undoubtedly many of them are asking their lessors to restructure their rates, even though the margins have been getting thinner and thinner. How are lessors responding to this? How should fleets approach this?
There have been pressures on both the lessee side to cut costs and the lessor side to raise rates as capital availability has been strained and banks are readjusting to the new economy of accountability and transparency. I think if you have a good working relationship with a client you should be able to listen to their needs, communicate your needs and come to a resolution that fits both parties. Let’s face it - if you are taking your client to a level of service expectation that exceeds what they anticipated, they will work with you as a true business partner. Conversely, a lessor should do the same with clients under trying conditions to understand where their business model is going and how you can work together to get through their challenges. Getting in front of their management team or decision makers to clearly explain today’s funding options will make the process smoother and build credibility for the fleet management lessor and fleet manager partnership. Rate structure is based on credit; the more solid the credit, the better the rate. In all cases, service delivery needs to be at its highest level to keep clients and consistently deliver what you promised no matter what business environment we find ourselves.
Again, with respect to cutting costs, what are you advising your clients to do now to help them save money?
I think that if you focus on just one or two aspects of fleet you provide a disservice to your client. I believe you have to push hard to meet the knowledge brokers in your client’s employee or management base that have the correct answers where cost reduction can be found and implemented. This is not to say move past the fleet manager; it is to say that the fleet manager will help their cause by enlisting those in the company that have more detailed data for their particular department. There are far too many areas of cost in fleet management to ignore any of them especially as the risk, fuel, funding, maintenance repair, glass, manufacturing, telematics, insurance and other industries are changing products, service and rates daily due to the economy as well. Like your personal budget at home, there are always ways to find savings if you work hard at it.
My advice is that no matter what the size of your fleet, it is worth the time to accept nothing less than full comprehensive analysis of all costs for the benefit of your company. Dig deeper within the culture of your organization to find the true motivations for the why’s, what’s and how’s of fleet related cost. It may take more questions that you have ever attempted. Some walls may need to come down. Use your lessor to help you identify those areas. Take some time with them to think of areas that you may view as routine and simple, but will prove that your analysis is detailed enough. Third tier fuel suppliers, charging more in personal mileage, a deductible paid by the employee for an "at fault" accident, telematics to reduce fuel and track routes, driver vehicle care and safety improvements, etc. Know what funding instrument your lessor charges. How is the rate determined monthly? Is it published or an internal blend? Just a few margin points can spell savings. Everything should be considered.
What are some of the service challenges lessors are facing in light of their own needs to cut costs?
Service challenges can come from everywhere when lessors are dependent on national account facilities, dealers, manufacturers, state license facilities, repair shops, non national accounts, up fitters and fuel suppliers to perform some of our work. Managing that process more efficiently is important. Consistent delivery from those suppliers aid the end user client and keep the fleet management company service levels high. The internal key for a lessor during this time is making sure their employees are responsive, fully trained and experienced. The worst scenario in this business is depending on an inexperienced person or a weak cross-trained individual to handle the daily tasks of a fleet without full preparation. Inexperience costs money and reduces client satisfaction.
Another situation that can stress a lessor from a service standpoint is handling requests from clients that may be detail intensive utilizing multiple resources within the lessor organization...especially if the client deadline is too short to accomplish it correctly. Although a great way to prove your value and responsiveness, asking for 35 vehicle quotes with three different amortization tables, an intense reporting project or an extremely detailed RFP to be completed in a very short timeframe can be challenging. Communications between lessor and lessee should be off the chart to make sure both are satisfied with the timeline and end result.
We have all experienced phone tree call center personnel handling our credit card or travel requests with the service level less than spectacular to say the least. To be fair, there are some well-trained call centers where you can feel that the customer is first just by the way your call is handled and questions are answered. In this business, every client touch is an opportunity to increase value and build relationship. The phone call and average speed of answer, the letter, the email, the response, the grammar used in the written word, the accuracy and timeliness of the finished task, a friendly voice that tells the client all is well, the call from a management team member thanking you for the business, a visit to their offices. Working with clients in an atmosphere of building relationships through professional fleet consultation should do anyone well in this industry.
BIO: Mark Conroy is a 29 year fleet management industry veteran who has spent the majority of his career in sales and marketing including international marketing and global harmonization branding efforts. He has managed nationwide sales forces for large, medium and small fleets and currently holds the position of Vice President Sales & Marketing for Union Leasing, a subsidiary of Chicago Freight Car Leasing. (CFCL) CFCL is an 80 year-old fourth generation family-owned business and has owned Union Leasing since 1989. In 2007, Conroy was President of the Automotive Fleet and Leasing Association after serving on the Board as Executive Vice President, Vice President and Director of Lessors in prior years. He remains active on the AFLA Executive Board in 2009.
Conroy and his wife Tami reside in Roswell, Georgia and have three children: Sommer, a 20 year-old junior at Georgia Southern University, Christian, an 18 year-old incoming freshman at University of Georgia and Jack, a 10 year-old rising 5th grader at Roswell Elementary Grade School. CONTACT: mconroy@unionleasing.com
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