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Answers to Seven Fleet Questions

When the heads of seven major fleet management companies convene on a panel together, it’s a good time to get their views on issues such as changes to lease accounting standards, how the new fuel economy standards will affect fleet and which alternative fuel will break out in five to seven years.

NAFA (the fleet management association) held its annual conference and expo in St. Louis this week, and in keeping with tradition, the heads of the major fleet leasing and management companies convened on a panel to answer burning questions on the minds of fleets today. Here is a snapshot of their responses:

Will new rules force all leases “on the books?”

There has not been any breaking news in the past year regarding FASB's (Financial Accounting Standards Board) efforts to develop a new model for the recognition of assets and liabilities arising under lease contracts — essentially requiring all leases (closed or open) to be on the balance sheet. Any changes were originally scheduled for 2012 implementation, but an exposure draft released in 2010 solicited 900 responses from the industry and prompted a new exposure draft, expected later this year. The earliest of any new rules implementation would be in 2015 with full implementation by 2016.

This shouldn’t keep you up at night: Similar to last year, Jim Frank of Wheels said that the “impact of these rules could be insignificant for our clients.”

What should fleets do to prepare for the 2016 EPA fuel economy standards?

George Kilroy of PHH reminded the audience that it’s the manufacturers that have to achieve the new CAFÉ requirements, not fleets. And the consensus is that the industry is in good shape to meet those standards. However, meeting the next set of even more stringent standards in 2025, “is a different discussion,” said Clarence Nunn of GE Capital.

Frank warned that we’re enjoying vehicle prices right now “at 2002 levels,” and that as we bear the cost of technology to reach the new standards, vehicles will be more expensive. In addition, the manufacturers will use price to drive people away from less fuel-efficient vehicles, he said.

How can we impact driver behavior to improve fleet safety and fuel economy?

The panel agreed that modifying driver behavior has a huge impact on fleet safety. Frank commented on the enormous spread in fleet accident rates, from 10-12% for fleets that take safety seriously to 40%-plus for those that need help. Impacting driver behavior can lower those percentages greatly.  

As well, positively modifying driver behavior can have a 10-20% impact on fuel economy.

But Gary Rappeport of Donlen commented that fleet management companies can’t drive this change themselves; it takes an institutional commitment from top management. Nunn backed that up. “The FMCs can’t deliver enforcement,” he said. “We can’t have that conversation with the top sales person who’s also your worst violator.”

Kilroy counseled to make the drivers “willing participants in the solution.” Mike Pitcher of Leaseplan suggested letting drivers compete to improve safety. Carl Ortell of ARI counseled to keep the program simple, and make sure to reward drivers for their efforts.

Is technology benefitting or hurting fleets?

Whether causing driver distraction or a more expensive repair, technological advancement in vehicles can certainly cause headaches for fleet managers. However, the panel’s consensus is that all this new technology is very much helping fleets do their jobs better.
 
Technology has impacted safety with collision prevention controls such as adaptive cruise control and blind spot monitoring. It is providing better fuel economy, making vehicles last longer and elongating the preventive maintenance cycle. All this has provided a net benefit to depreciation.

Technology allows the collection of data on almost every aspect of driving and fleet and that data is actionable, Carl Ortell of ARI said.

CONTINUED:  Answers to Seven Fleet Questions
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Author Bio

Chris Brown

Executive Editor

Chris is the executive editor of Business Fleet Magazine and Auto Rental News. He covers all aspects of the fleet world.

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