Leonardo Cortina Riveroll
Managing Director Fleet Services
GE Capital Mexico
View from the Top

Outsourcing Fleet Management Reduces TCO

Mon, 09/01/2014 - 13:07

Q: What role is GE Capital Fleet Services playing in GE’s overall portfolio in the country?

A: Our division has been growing consistently in Mexico since we started here 20 years ago. We are now the biggest player in our sector in the country. Our profitability has been good and we greatly contribute to the financial health of GE Capital Mexico. However, the country is still learning about fleet management services. A few years ago, companies did not fully understand what a fleet management company could do for them; they relied on their own resources to handle their fleets. But now, they want to outsource the financing, the maintenance, and services that fleets require to companies like us.

Q: Once a company accepts the need for fleet management services, how do you convince them to rely on you?

A: Our promise is to reduce the total cost of ownership (TCO) of the fleet, so our discussions with clients revolve around that. At first, our vehicle specialists work with the customer to identify areas of opportunity to reduce costs. During this process we make a full assessment of their fleet, from the vehicle choices and the company policies to other data that is important for the full analysis we make. For example, it is very common for us to find that companies do not take into consideration the cost of insurance, the cost of preventive maintenance, or the fuel efficiency at the time of making a decision on which vehicle to acquire. All these data points could have a big impact on the TCO. A company might use for their distribution purposes vehicle A, but once you include all the costs of owning that vehicle, it might be better off with vehicle B. We put our knowledge, which is based on the millions of vehicles that we have data for, at the service of our customers.

Q: What is the range of profiles of your clients’ fleets?

A: Our customers range from having 30 vehicles to fleets of over 1,000. In terms of our priorities, we often target companies with a lot of sales representatives as they need a lot of cars. Big companies are also very interesting as there is more we can do for them on the consulting side. For companies with smaller fleets, we also offer TCO analysis tools as well as our online capabilities that enable them to see the cost performance of their fleet at any time. Naturally, we have consolidated our knowledge so we use the same infrastructure for customers with 30 units or 1,000 units. In the case of customers with a larger fleet, we offer the option of a dedicated fleet management specialist. This person is in charge of periodically reviewing the performance of the fleet with the customer and looking at areas of opportunity to keep improving fleet efficiency, which could be from a cost stand point or from a fleet availability stand point. In 2013 we launched a comprehensive online fleet management tool which gives the fleet manager visibility to the performance at both the fleet and vehicle level.

Q: To what extent do you work directly with OEMs on the specifics of the vehicles that will make up the fleets, as opposed to relying on the dealerships?

A: It always entails a combination. The dealerships are ultimately responsible for delivering the cars to the customers, so they play a pivotal role. We have agreements with dealerships that outline how much time the delivery process will take across Mexico. In the Mexican market, the network of dealers makes our lives easier. They take care of all the logistics needed to deliver cars from the plant to customers across Mexico. If the relationships with OEMs and dealerships are handled in the right way, they do not affect our efficiency or our pricing. We have a dedicated team that reviews and monitors every single factor. Every three months, this team checks with every dealership how many cars were delivered, which percentage of these were delayed, and why they were delayed. This constant review process allows us to quickly identify and isolate problems. Ultimately, it is our responsibility, and not the responsibility of the OEMs, to ensure that the dealers have the right customer service attitude. OEMs leave it to us to select the right dealerships, we sign the service level agreements (SLA) and we train the dealers to best represent the brands involved.

Q: In terms of financing, is leasing now seen as a viable alternative to purchasing?

A: Leasing is growing as it makes sense for companies in terms of cash flow efficiency. When a new vehicle is sitting in a dealership, it loses value. This does not happen when a vehicle is leased, so it makes sense to lease in cashflow terms. Leasing also provides an easy way to renew a fleet. If a company leases vehicles for 36 months, its fleet will be in a regular state of renewal. This removes problems associated with displacing its used cars or higher maintenance costs that come in the later years of ownership. Leasing also allows companies to use their capital in their core business, by investing in core assets that will help them be more efficient or increase their revenues.