• Border Controls

Border Controls

Implementing international fleet deals requires both a pan-European and a parochial mind-set, says Nick Brownrigg, CEO of Masterlease 

Size matters when it comes to implementing international fleet agreements. This is not just the physical dimension and territorial footprint, but the ambition of the organisation and its understanding of global lease market issues, which is why 90 per cent of lease companies are precluded from bidding for cross border business. 

You have got to have a local presence and the ability to co-ordinate central pricing and reporting as well as live and breathe international account management while at the same time have the agility to act locally. That is why there is also something paradoxical about implementing pan-European fleet deals. Leasing companies that are targeting multinationals looking for economies of scale need to have half an eye on the international market, and the common issues that unite fleet drivers the world over, while the same time,  focus upon the cultural and parochial differences that divide them.  

As a company that manages over 200,000 vehicles across 15 territories, Masterlease has experience of both working at individual country level and cross border. We have secured three multinational clients in the last 12 months with a combined fleet potential of more than 7,000 vehicles. Our size and growth potential gives us international leverage, both in terms of purchasing power and service delivery performance. 

The growth of the multinational business has demanded a more sophisticated level of service; commonality or homogenisation across borders to cut costs and deliver economies of scale. 

In leasing terms this has meant consolidation and acquisitions with fewer companies chasing bigger multinational conglomerates. Outsourcing has grown to fit this model with everything from risk management through to back office administration including congestion charge collection being contracted out to specialists.

However, this process comes with its own health warning. Companies must find the balance between optimising outsourcing and maintaining customer service levels, especially where the outsourced company is itself outsourcing specific niche functions to join up its own offering while controlling its costs. 

From experience, there are many factors companies must consider before launching onto the international stage.  Are they big and brave enough to do it? How will they manage international business? What about their cross border processes? What is their in-country capability and their knowledge of local and international risk and tax regulation, for example?  

Growing interest in pan-European leasing deals 

Pan-European leasing is something that has been talked about for many years, but now a reality with increased interest in market. We are a relatively new player in the market – just 20 per cent the size of the largest player - but we have a broad and ever-increasing footprint which recently reached into Sweden and Ireland.  We expect to increase our presence to 18 countries this year alone. 

Customers are increasingly looking for pan-European fleet management contracts and it is vital to ensure systems and processes are in place to maintain a consistent level of quality and service in each country, as Masterlease is now demonstrating through the work we are doing with clients such as Hewlett Packard, Invensys, and Microsoft. 

Invensys, the global automation, controls and process solutions group, was secured last year. We now manage its entire vehicle fleet in mainland Europe and Australia, as part of a 1700 car contract. 

Invensys saw this strategic contract as providing multi-marque vehicles to sales and service personnel and executives in Australia, Austria, Belgium, Denmark, France, Germany, Ireland, the Netherlands, Norway, Italy, Spain, Sweden and Poland. It now delivers major economies of scale through cost savings and stronger in-country rate leverage. This meant that Invensys offices still benefit from the best rates even though individual territories may have been in receipt of a small number of vehicles. 

Managing the risk 

One of the most important issues for a leasing company is managing residual values across all markets.  We have invested heavily in this area to ensure our RV forecasting across our world-wide fleet is as accurate as possible. 

We can now more accurately predict the closest achievable future value for any new vehicle, modelling how we feel it will fare in the wake of global and local economic factors as well as the cultural differences, brand values of the vehicle, marque patriotism, technical specification, different territory regulations and political events that will impact the market. For example trade barriers between the US and Mexico will soon come down which means that the latter could be awash with surplus used American saloons. In this respect any risk management business such as full service leasing, needs to be ready for any political and commercial fall-out in order to protect their world-wide profitability. 

Process efficiency 

Another key area for multi-national leasing is the consistency of processes and service levels across multiple markets.  We aim to become a world leader in the leasing market by 2009 through implementing Lean Six Sigma, an internationally-recognised quality culture programme of customer-focused process improvements that shares best practice across the leasing borders in order to achieve consistent customer service worldwide.  This is critical to our future.   

Through Lean Six Sigma we will concentrate on improving core and enabling processes with intensive training and development of employees in all aspects of Lean Sigma methodology. Ultimately, it’s a cultural change that will become embedded in the DNA of our business. Through it, we can achieve a cycle of growing our business, retaining our customers, improving our productivity and reducing our costs.

EU versus own country regulation 

The fleet industry is increasingly complex and regulated, so companies need to be mindful of the rafts of risk, health and safety, technical and tax related issues that affect them, many of which I believe need to be harmonised across the EU to give greater clarity.  

 There are, for example, too many ‘shades of green’ in European vehicle policy and all countries must encourage driver behaviour change so that they are more environmentally-friendly with their choice of vehicles.  

Some countries are very forward thinking, but others are far from joined up.  Equally, those countries at the vanguard of environmentally-friendly initiatives are not always consistent with their messages. 

 The Dutch Government, for example wants to ban diesels in urban centres unless they have particle filters that trap soot, but some diesel manufacturers argue that this policy could be harmful to the vehicle and result in more breakdowns if only used for urban driving because the filter needs a blast of open road driving to make it effective. 

Currently European regulations on the car’s contribution to environmental damage remain sovereign state decisions, so little can change in terms of more effective carbon control unless the issue is dealt with at EU level.   

However, as any international fleet management company will tell you, different car tax regimes make it impossible to effectively plan pan-European fleet policies to achieve a common aim of reduced CO2 output. Global warming requires a global response.  When the UK moved to a CO2 based taxation system it resulted in the ‘dash for diesel.’   

However, in other countries less importance is placed upon the environment when making fleet decisions so multinational companies managing pan-European fleets are faced with different legislative rules when they cross international boundaries. Each country has its own emissions targets, but surely we would get there quicker if all EU countries worked together?” 

In the UK there are tax breaks for diesels and low C02 engines. Our system also encourages cash allowances for cars, but in other parts of Europe there is no tax advantage, so bringing all vehicle policies into line makes little sense. In these circumstances, some argue that harmonisation of fleet policies should take a back seat to ensure that policies remain attractive in the country they are offered.  

Flexibility and providing the right vehicle for the right cultural and climate is the watchword of all cross border agreements. 

For example Scandinavian drivers need both winter and summer tyres, and in Romania, where there is next to no motorway, tyres take a pounding and need regular changing. According to experts, the balance is therefore 60 per cent harmonisation and 40 per cent flexibility. 

Equally, the pan European regulation and risk map is varied on many issues and fleet operators must advise drivers as to what policy applies to which territory if they are to comply with sovereign state legislation.  

However, cross border transparency is being achieved through a combination of effective management reporting at the group consolidated level and by the consequential development of best practice as determined by the joined up processes determined within our Quality framework. Once entrenched in the corporate DNA, it can guarantee a consistent level of cost-control, quality and service in each country, irrespective of the individual regulatory regimes. 

Top tips for cross border deals: 

1. Customers must be clear about why they want to appoint a pan-European provider and what else they want to achieve with the change e.g. reduce cost, headcount, or provide a more consistent approach
2. Make sure the Leasing Service Provider (LSP) understands the objectives of the customer
3. Have a clear contractual relationship and structure: Master Service Agreement (MSA) + Local Service Agreement (LSA) with a schedule defining exactly what will be provided and the level of service expected as well as the measures and consequences of non-performance
4. Contract at a local level in each market and clearly identify service differences
5. Have a corporate guarantee in place as this speeds up the implementation process - particularly if new markets are added after deal agreed
6. Obtain a high level sponsorship for the deal within the LSP and the customer’s organisation
7. Make sure the implementation team of the LSP is professional and experienced in Pan European deals
8. Have fixed and regular communication exchanges based on honesty and transparency. As soon as something goes wrong: say it!
9. Have a well detailed, structured and “tailor made” implementation plan agreed by both parties.
10. Keep the implementation process as simple as possible! 
11. Have a true pan European sales leader from the LSP to be the central communication point with authority to drive local markets to follow the implementation plan with a local leader in each market reporting to the pan European leader.
12. Have a true pan European leader with authority from the customer’s organisation to be the central communication point to direct local markets to follow the implementation plan
13. Have a local leader from the customer’s organisation in each market reporting to the pan European leader.
14. Make sure the LSP has a central support team to follow-up the implementation with the local support teams
15. Choose an LSP that allows flexibility towards inevitable issues or implementation adjustments
16. Have an account manager to be responsible for "business as usual" when implementation is complete