While paging through our historic January issue of Automotive Fleet, which chronicled 75 years of “fleet,” I was reminded of the huge role dealers used to play for fleet buyers. Later, I ran across the “Ward’s Mega-Dealer 100” listing by the nation’s largest chain dealer groups and their fleet stake (see chart).
|Rank||Mega Dealer Group Name||Total Dealerships||Fleet Revenue||Fleet Units|
|2||Bommarito Automotive Group||13||$931,577,440||35,703|
|3||Sonic Automotive, Inc.||119||$223,204,000||8,626|
|4||Larry H. Miller Automotive Group||45||$155,858,648||5,331|
|5||Penske Automotive Group||191||$134,743,000||5,308|
|6||Van Tuyl Group||69||$142,544,934||4,937|
|7||Hendrick Automotive Group||73||$91,200,534||2,844|
|8||Asbury Automotive Group||79||$69,600,000||2,679|
|9||The Suburban Collection||32||$70,736,611||2,591|
| || || || ||142,684|
After musing about both reports, I reflected on my personal experiences on the OEM fleet advisory boards. At these board meetings, with some of the largest and highest volume buyers participating, many problems and improvements are discussed. Most of the issues are eventually resolved, benefiting both OEMs and fleet buyers.
I believe I can say, without question, the perennial issue that continues year after year is, “Why can’t the delivering dealer give the fleet driver a better turnover?” This issue always remains and it’s still a mystery to me why it cannot be solved.
So, what do we know as factual?
1. Fleet sales are “good” and profitable sales, and all OEMs (except Honda) have active programs in force. There are incentives at every level and concessions are made to foster sales.
2. Factories support through individual fleet and “fleetail” marketing strategies that embrace dealers. We’re all fully aware of the “fleet” program. Ford has “Business Preferred” for smaller fleets, mainly sold and serviced by their dealers. Similarly, Chrysler has its “Business Link.” GM slices it even thinner with “Business Elite” and “Business Choice.” So, you would think that between all these overt programs, every dealer would be fleet-minded — not so.
3. Viewing the chart, one will note the Top 10 Mega-Dealers sold more than 142,000 vehicles to fleets last year. (The Top 10 sold 250,000 just five years ago). Of special note is that No. 1 (Holman) with 15 dealerships is also the parent of ARI, a very large fleet management company (FMC), purchasing many new ones. Another dealer listed reportedly acts as a conduit for a large daily rental company. More to the point, they enjoin the fleet concept.
4. In analysis, the fleet ordering dealer is ensured of a fair and acceptable profit by a standard rate by the OEM, although a share may be required by the courtesy delivery (CD) dealer for inspection, prepping, and turnover to the fleet driver. In some cases, depending on the OEM, there may be a “distant delivery” fee, some incentive with the co-joining financing, or simply a direct fee to the delivering dealer. No dealer is asked to do something for nothing.
5. Here’s where the challenge comes in. The delivering dealer or FMC, because of volume force, negotiates a marginal fee for the CD (or they move on to another dealer that accepts it). (I know of one major FMC that switched from a good large urban CD dealer to another unproven one for a $1 difference).
6. This leads to an unpopular scenario for the dealer principal and trickles down to the person handling the CD. This is precisely where it breaks down; no enthusiasm for fleet. It’s where if a “hot” fleet (and retail) car comes in on the lot, the sales manager may just grab it for a retail sale. Or, he or she may eliminate CDs altogether.
Knowledge is the only instrument of production that is not subject to diminishing returns.
We do not know one millionth of one percent about anything.
-Thomas Alva Edison
Never try to tell everything you know. It may take too short a time.
My take on all this is that, while it’s a very difficult challenge, it can and should be fixed. One out of every five vehicles sold new in the U.S. is fleet. GM has made “fleet” a fifth full brand within the company, with a VP title leader. The recognition is there; it’s the devil in the detail, I think.
Every new OEM hire goes through training; it’s all retail — everyone outside the fleet department is whitewashed with the “retail” brush. When they make district manager calling on dealers, they think “retail” first (and maybe not think “fleet” at all). OEMs need to make “fleet” a brand across the board. Some suggest following Nissan’s lead by paying the CD fees directly to the delivering dealer. (Why doesn’t that make sense?)
OEMs can make you (the dealer) change your whole building façade that may cost thousands. They should be able to ensure a good CD (maybe the “courtesy” part is a misnomer right now).