Fleet Managers Target Costs.

<FONT SIZE="+3"><B> Fleet Managers Target Costs</B>

Lynn Woods

In keeping with today's focus on getting the most bang for the travel management buck, fleet and travel managers are paying more attention than ever to reducing their car fleet costs.

Some are replacing pooled fleet vehicles with rentals, while others are finding that the opposite tack-substituting leased vehicles for car rentals-is the answer to cutting costs. Still others are using one strategy to supplement the other.

Related to the attention paid to fleet costs is the growing link between the corporate travel and fleet management functions as companies downsize. "I've seen more of a shift of the leased vehicles of an organization also being handled by the travel department," said Tom Hutchins, senior vice president and general manager of the vehicles division at AMI Leasing in Worcester, Mass.

Part of the reason for the merging of the two, previously separate jobs is a move on the part of many companies to outsource fleet management to the leasing company, leaving fleet managers either without a job or with new responsibilities-such as travel. This year, 318 corporate fleets are being managed by outside fleet management companies, compared with only 50 in 1990, according to Michael Antich, editor of <I>Automotive Fleet Magazine </I>in Redondo Beach, Calif.

In fact, Runzheimer Inc., a travel management consulting firm based in Rochester, Wis., received so many inquiries about fleet management costs that it recently introduced a service that enables companies to track, assess and compare the costs of leasing vehicles, owning them and reimbursing employees for using their own cars.

Even at companies where fleet management and travel remain entirely separate, there is more awareness of the overlap between leased vehicles and car rentals-and interest in ways money might be saved through better communication between the two departments.

For example, John Scott, a supervisor at GTE Telephone Operations in Irving, Texas, said that while travelers occasionally use pooled vehicles instead of rental cars, he would like to coordinate with the company's travel management department to increase that frequency. "Our utilization is 50 to 60 percent on average for the pool," he said. "The vehicles are available for use more than they're needed, but travelers don't know about them."

Whether it's more economical to use pooled vehicles or rental cars depends on a number of variables and encompasses not only cost but also practical considerations for a particular company. Some companies are saving money by cutting back or eliminating fleet and using rental cars. At NationsBanc Services, employees are instructed to first call the fleet manager to see if a pooled vehicle is available if they are traveling to one of the eight cities where the company maintains fleets. However, NationsBanc has downsized its fleet of pooled vehicles from 230 to 114 (out of a total leased fleet of 450 cars) and as a result, is doing more rentals. "We have negotiated rates, and it's cheaper," said Andrea Barnett, fleet manager at the company's Charlotte, N.C., office.

One the most dramatic changeovers is occurring at The Southern Co., an Atlanta-based holding company for five electric utility firms. About a year and a half ago, the company eliminated its fleet of 500 corporate-owned vehicles and switched to rental cars. The company negotiated a contract with a car rental firm serving local markets, and Southern splits responsibility for liability with the rental firm. While the arrangement is being phased in on a utility-by-utility basis, Don Burdeshaw, a service chairman on Southern's fleet managers committee, said the firm is happy with the results.

"The fleet was getting too costly to maintain," he explained. "By changing to rental cars, we were able to eliminate garages and mechanics." Another benefit is that employees will never get a car with more than 30,000 miles on it. Some of the pooled cars, Burdeshaw said, had 100,000 miles-a mileage level that is not atypical for pooled vehicles, regardless of whether they are leased or owned.

In addition, because employees pay for a rental car and are reimbursed, there's an incentive to be more efficient with business-related car usage. Previously, people would use pooled vehicles to make a 25-mile trip for a two-hour meeting and tie up the vehicle for the entire day, Burdeshaw said.

While renting instead of maintaining a fleet works for some companies, others find the reverse is true. A common scenario is to have employees use pooled vehicles at locations where they're available, instead of a rental car. At American Cyanamid Co., a subsidiary of American Home Products in Wayne, N.J., employees taking a two- or three-day business trip by car often use a pooled vehicle. "Taking a pooled car is as much as 35 percent cheaper than a rental car, even with the corporate rate," said manager of fleet and travel Karen Boniface.

State Compensation Insurance Fund, based in San Francisco, saves $100,000 a year at headquarters by using pooled vehicles instead of rental cars. The company maintains a fleet of 30 cars at its home office and a handful at each regional office. "If an employee flew in from San Francisco to Los Angeles, someone from the L.A. office would pick them up and get them a pooled car at the office," said transportation manager Scott Glantz. Travelers who visit more than one location on a single trip, however, would almost always rent a car from Budget or Dollar, the company's preferred vendors.

Airport Shuttle Service

Sprint/United Telephone has taken a more unusual position with its fleet: Although it maintains 300 cars and does not use rentals, it also has a fleet of vans that it uses for airport trips.

The company started a 24-hour airport shuttle service two years ago using leased vans. Because the company is located in Mansfield, Ohio-an hour and a half from the major airports in Cleveland and Columbus-the service has proved to be the most efficient way to convey employees between the airports and the office, said fleet and transportation manager Jim Baker. In the past year, the savings have amounted to $100,000.

Baker started the shuttle service after he noticed that many employees were using pooled vehicles to drive themselves to the airport, where the cars would sit, unused, until the person's return.

It's not unusual for the vans, which are driven by retirees, to make 40 trips on a weekend. Cellular phones enable drivers to know travelers' flight schedules, so arriving employees are picked up promptly. But the real boon is the money saved on car rentals-which have been eliminated for Sprint employees in all of Ohio-and the more efficient usage Baker gets out of his regular fleet. "There are 20 to 25 vehicles at our disposal on off-hours," he said. "We already own the resources, versus subsidizing car rentals and mileage reimbursements for employees who use their own car."

Some companies use both fleet cars and rental cars. Graco Inc., an equipment firm based in Minneapolis, doesn't have pooled vehicles because of problems managing and maintaining them, said fleet and travel manager Ronald Finelli. "They tend to get abused" because of the use they get from multiple drivers, he said.

The company does have a fleet of 110 leased cars, and is about to outsource its management to the leasing company. But even with these cars, sometimes Graco saves money by substituting a long-term rental car for a leased vehicle. Particularly in the winter, when rental car fleets in Minneapolis and Detroit tend to be underutilized, Finelli has been able to get a great deal from one of his two preferred car rental vendors on a rental for, say, someone arriving from overseas who needs a car for a month or two. "If I put them in a normal fleet car, it would take time to get it delivered," he said.

At Cotton States Insurance Co. in Atlanta, manager of administrative services Patrick Hardy has downsized his leased fleet to reduce costs. Employees who had an assigned car but didn't clock the necessary mileage now are required to use pooled vehicles. The company also recently signed corporate contracts with two car rental companies. "Most of my travelers are officers, and in the past they used whichever car rental company they wanted," Hardy said.

As a result of the new contracts and fleet downsizing, Hardy estimated his firm has saved $40,000 to $50,000.