Market Trends

The Adverse Impact of Staggered Production Schedules on Fleet Planning and Ordering

January 6, 2014

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Today, OEMs introduce new models throughout the calendar-year. Year-round new-model introductions are facilitated by the National Highway Traffic Safety Administration (NHTSA), which allows vehicles to be designated the next model-year if manufactured by January 1 of the preceding calendar-year. For instance, a vehicle produced Jan. 1, 2014 could be designated by  an OEM as a 2015 model-year vehicle. Other reasons for year-round introductions include the need to influence CAFE averages, competitive leapfrogging, keeping the lineup fresh, maintaining year-round floor traffic at dealerships, and parts availability.

However, for many fleet managers, the staggered release of new models from various OEMs has become confusing and frustrating. Each model-year, I hear fleet managers voice a recurring complaint about the impact of staggered production schedules, especially when it occurs with high-volume fleet vehicles. In particular, year-round new-model introductions complicate fleet planning and the ordering process. Not only that, but, due to multiple plant assignments and model configurations, some model lines may have variable final order and startup dates.

This frustration is exemplified in the following lament by one fleet manager: “I’m tired of the staggered model-year production schedules. I used to be able to place all orders at the same time, now I seem to be placing orders throughout the calendar-year, because of these production schedules.”

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There are also budgetary ramifications, depending on how the corporate fiscal year is set up, along with incentive payments. “Fleet managers also need to factor in mid-year model changes when negotiating their OEM volume incentive programs,” said Jan Freund, director, manufacturer relations for Wheels Inc. “I know Chrysler uses a date parameter program, but Ford and GM are still on model-year programs. Fleet managers should touch base with the OEMs on this aspect of mid-year changes.”

Although there has been much discussion about the impact of staggered production schedules on fleet managers, there is also an adverse impact on drivers. “A change in a model-year selector list creates dissatisfied drivers and much noise in the process. So, unless there is a compelling reason, I leave these models off the selector until the next full cycle,” said Charlie Szymanski, manager, global property casualty insurance & auto fleet for PPG Industries in Pittsburgh. “Another issue is that the new releases typically cost more and have fewer incentive dollars. That means that all of the work that went into communicating the cost of the selector list becomes invalid. This ultimately translates into a lack of trust with the fleet manager. For instance, VPs can perceive fleet managers as only relaying messages from the OEMs rather than managing the process. Lastly, new roll outs often have unforeseen delays in order to delivery. This only creates further frustration.”

Sometimes, early introductions, if not managed properly, can result in negative unintended consequences for lifecycle costs.

“Due to improving fuel economy, early launches of a strong retail vehicle, where production volumes are managed, will generally have a positive impact on depreciation and fuel spend. Of course, this is providing there are no challenges or delays with the launch and the vehicle being replaced is coming off-lease at the appropriate time,” said Rick Shick, VP vehicle acquisition & strategic sourcing services for Donlen. “If not, you could potentially offset some or all of the gain from the early launch of a vehicle. It’s important that you’re in a positive equity position on the vehicle being replaced.”


Viewing Fleets as Partners

The history of early introductions goes back to the 1980 model-year with the introduction of the then all-new, front-wheel-drive GM X-Platform cars, such as the Chevrolet Citation, which was one of the top-selling fleet vehicles of its day. The Citation was released in April 1979 as an early 1980 model. There was hand wringing at the time as to the possible negative residual impact of the early introduction. However, this didn’t happen and the serendipitous April 1979 release was just prior to the second gasoline shortage later that year. As a result, the more fuel-efficient 1980 Citation sold around 800,000 units. Since then, many OEMs have varied their new model release dates. This trend became more formalized with mid-model-year introductions during the January to March time frame, but slowly proliferated to introductions now occurring throughout the calendar-year. The advantage of mid-year vehicles for fleet is the benefit of 16-18 months of use, but with the vehicle depreciated for only 12 months.

While fleet is important to automakers, the retail market dictates new-model introductions. From a retail perspective, staggered introductions allow OEMs to spotlight a new model without the “clutter” of numerous other models competing for consumers’ attention. The auto business is very complex with lots of moving parts. There are many factors that dictate when a new vehicle will be released and when buildout will occur for the predecessor model. Although today’s OEMs are very sensitive to the voice of the customer and are attentive to advice received from fleet advisory boards, there is frustration about staggered production schedules. This frustration is best exemplified by one fleet manager: “Once again, I can’t do all of my ordering at one time because of exasperating staggered production schedules. When possible, OEMs should be more tuned to the fleet replacement cycle and work more closely with us as a partner.”  

The fleet-minded OEMs have been terrific partners to fleets and, together, there should be a way to mitigate the impact of staggered production schedules for  their largest customers.

Let me know what you think.

mike.antich@bobit.com

Comments

  1. 1. Bob Cavalli [ January 26, 2014 @ 02:39PM ]

    Mike, great commentary. The staggering of new model year intros has been a challenge that has been building for years. 'Back in the day', fleets were able to plan new model year budgets when the new model year intros were in early fall; there might have been the occasional "19__ 1/2" model that hit production in the winter or even spring, but for the most part orders were placed in August/September for the first wave of new year purchases. I think the proliferation of staggered intros is due in part to the dizzying advance of technology...and the fact that by necessity production and model introductions are driven by consumer, not fleet, markets. Consumers are less interested in when the new model comes out, and more interested in price and the vehicle itself. Fleets must budget millions for a coming model year, and staggered intros throws a hefty monkey wrench into the process; and they also must plan replacements with a keen eye on model year. I'm not sure what the answer is, but the challenge isn't going away any time soon.

  2. 2. Natalio [ January 26, 2014 @ 09:11PM ]

    Hello, l live in PA and l'm a CDL driver, and l got a DUI, so my questions is: What are my chances of getting my record expunged from my MVR? If not, How can l get it removed/expunged like the driver from Illinois? Thank you for your time.

  3. 3. Natalio [ January 26, 2014 @ 09:13PM ]

    Hello, l live in PA and l'm a CDL driver, and l got a DUI, so my questions is: What are my chances of getting my record expunged from my MVR? If not, How can l get it removed/expunged like the driver from Illinois? Thank you for your time.

  4. 4. Natalio [ January 26, 2014 @ 09:16PM ]

    Hello, l live in PA and l'm a CDL driver, and l got a DUI, so my questions is: What are my chances of getting my record expunged from my MVR? If not, How can l get it removed/expunged like the driver from Illinois? Thank you for your time.

  5. 5. Steve Kibler [ January 28, 2014 @ 07:27AM ]

    Poor Natalio needs to simply quit drinking and driving... If innocent - fight it; if not - get help.
    Great points of interest Mike. Fleet managers have very few reoccurring calendar items; we are fire managers more than we are fleet managers. When the OEM's change release schedules, their purchase price seldom reflects any dealer price incentives, like provided through our State bid cooperative purchasing agreements. Because of some horrendous order-to-delivery times, our agency has started leasing more vehicles. We get them in service quicker and decommission the old one quicker.

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Author Bio

Mike Antich

Editor and Associate Publisher

Mike Antich has been covering the fleet management and vehicle remarketing markets for more than 20 years. During this period, Mike has written or edited more than 4,600 articles on the subjects of fleet management, manufacturer fleet activities, the fleet leasing industry, and vehicle remarketing. He was inducted in the Fleet Hall of Fame in 2010.

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