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The Awakening

A shortage of new vehicles in the near future, is causing many fleets to rethink their strategy. PHOTO General Motors

Canadian fleets are getting back to business as the economy wakes up from a coma.

As the Canadian economy slowly awakens from a deep COVID-19 induced sleep, fleet managers are preparing their vehicles and drivers for day-to-day operations under very trying conditions.

The past few months haven’t been easy, but there seems to be a light at the end of the tunnel. “We’re definitely moving out of this,” says Basil Marcus, Commercial Director, Foss National Leasing.

Since Foss services fleets of varying sizes—from local trades all the way up to large corporate fleets—they have a window into a broad cross-section of the fleet market.

“We’re seeing activity right across the board,” Marcus adds. “That’s very reassuring. We’re seeing a lot more people going back to work.”

Remarketing was shut down for the entire month of April and much of May, with signs of life and online auctions booting up in June. In addition, dealerships started to open up, and when that happened, they needed inventory, which in turn helped remarketing values.

“The residuals have been great, especially in the truck segment, and that’s helped our customers move some of their vehicles right now so that they can get out of the vehicles they were supposed to get out of a few months ago,” Marcus explains.

There’s also a large demand from American buyers. They’re buying virtually and shipping those vehicles across the border. “That makes a huge difference,” Marcus adds.

Best practices

While it’s easy to get caught up in the needs of the present, Marcus says he’s advising his customers to plan for the future.

For instance, while it may be possible to start ordering new vehicles now, they likely won’t go into production until later this year, which means fleets won’t be able to take delivery until sometime in the new year.

So, if fleets want new vehicles sooner rather than later, Marcus says, they’ll want to be at the front of the line when orders open up again.

“We’re also working on depreciation with our customers to help them understand where we are today while projecting residual values four to six years into the future,” Marcus explains.

“We want to make sure we’re protecting our customers as much as possible from being on the wrong side of depreciation when that vehicle goes to market.”

The tough questions

Greg Grant, General Manager of EMKAY Canada compares the challenges fleet managers are facing with the bigger “back to business” picture.

“Many companies are looking at their office space and asking, ‘Do we need all this real estate?’ That’s much like a fleet. Fleets are asking, ‘Can we get by for the time being with a reduced fleet that will allow us to cut costs.’”

On the vehicle procurement side, Grant says some of his customers are taking their time. “As manufacturers get their production online,” he explains.

“Some fleets are waiting for the next model year to make their purchases because production timelines are four to six weeks longer than typical.”

Capital expenditures

Romy Bria, Director of Client Relations for ARI Canada recommends a balanced approach as fleets get back to business.

“Some customers are looking at strategies to generate cash flow immediately and have considered disposing of under-utilized assets and other solutions such as sale/leaseback scenarios,” he explains.

“We’re recommending a balanced approach—if they do liquidate assets to generate capital for their organization, how can they be sure that they’ll still have enough vehicles on hand when business ramps up again?

This is a question we’re helping our customers navigate and a challenge that is even more important when you consider the prolonged shortages of new vehicles because of supply chain issues.”

Back to basics

In these times of uncertainty, Bria is recommending a “back to basics” approach with his customers.

“The basics of asset management apply to every fleet today,” he explains. “If, for example, you have under-utilized assets and you have equity in them, that may be an opportunity to dispose of those vehicles and get immediate cash flow into your business.

“Other asset management principals, like swapping out assets—if one is under-utilized and another is over-utilized—you can remarket the one that’s beyond its useful lifecycle and keep the newer one because your maintenance costs will be lower and your reliability will be higher.”

Focus on Safety

“As fleets start up again, the priority is safety,” says Wayne Rose, Senior Vice President Sales—Fleet Services, Jim Pattison Lease. He offers the example of landscape companies, which used to pack a truck with four or five employees for the trip to the job site.

“They can’t do that anymore,” Rose says. “So they have to get other vehicles, or they have to find a way to install partitions. One of our suppliers, BDS Fleet Service, has come up with a system that separates passengers in a vehicle from one another.

Their plastic sheeting is transparent, and it puts the driver and each passenger into their own isolated partition with the vehicle.”

Safety can’t be left to chance. In fact, Rose recommends putting everything in writing. “The first thing to look at is whether the company has a vehicle policy. The policy should be well documented and should cover areas such as sanitizing vehicles.”

And when it comes to Jim Pattison Lease’s corporate offices, Rose says the company is going all out to make sure people feel safe.

“You want to make sure people are safe and that they’re not afraid to come back to work. We’ve had all our offices deep cleaned while they were empty.

We’ve also reduced the number of employees we have on-site at any given time. We’re also asking our employees to fill our health questionnaires every two weeks.

In addition, every regional manager has a list of who is going to be in the office every day. So, if someone does come down with COVID-19, we will know right away who they were in contact with at our office.”

Your most important asset is your people, Rose says, and that couldn’t be truer than today. “We’ve done everything we can to protect the health of our staff, customers and suppliers,” he concludes. “And that’s just common sense today.”

 

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