Coronavirus / COVID-19 Information

As terms like “unprecedented” and the ever-present “new normal” firmly entrench themselves in our daily conversations, it’s refreshing to start this blog with two words that are familiar and commonplace in both ARI and Auto Truck’s vocabularies: resourceful and responsive.

Listening and responding to needs.

Many of our mutual clients operate fleets in industries deemed “essential,” and continued supporting their customers through the recent widespread shelter-in-place mandates. Through the course of regular phone and web calls with clients and prospects, the ARI, Auto Truck, and Kargo Master teams quickly picked up on the increasing fleet demand for a simple way to facilitate driver hygiene.

Even as restrictions continue loosening across the continent, businesses are still looking for practical ways to keep their drivers and customers as safe as possible moving forward. Simply put, fleets were looking for a mobile sanitation station.

Putting our resources to work – fast.

Luckily, we’ve “got a guy for that” when it comes to quality engineering and manufacturing. The engineering teams at Auto Truck and Kargo Master put their heads together and within a few weeks, designed and prototyped a sanitation solution that checked all the wish list boxes:

· Easy to mount and reconfigure for a variety of vehicle applications? Check.

· Holds all the necessary hygiene essentials in one place? Check.

· Includes a water supply tank? Check.

· Priced competitively? Check.

· Market ready in just a matter of weeks? Check.

The customer response was swift and overwhelmingly positive, and we forged ahead to begin the manufacturing process immediately. Here’s a sneak peek of the production version station, and visit Kargo Master for more images and details.

Building for the future

This seamless collaboration between Auto Truck and Kargo Master demonstrates how the combined expertise and agility of multiple Holman companies empowered us to develop and build a solution from scratch to sale in just two months. And because good things come in threes, I’ll leave you with one final “r” word – recovery.

As more businesses open their doors and kick-start activity, we’re working on more cost-effective product solutions to support fleet safety. Our teams are currently putting the finishing touches on a clear polycarbonate partition to reduce transmission of respiratory droplets. This shield has great promise for fleets that transport customers or operate with multi-person crews.

Think this may be a good fit for your fleet? Click to sign up for partition availability updates from Kargo Master and connect with your ARI and Auto Truck teams to start a conversation.

Click here for a downloadable version of this guide. 

Click here for a downloadable version of this guide.

It’s been a scary few months, and we’re not out of the pandemic-and-recession woods yet. Still, the resilience and innovation demonstrated throughout our industry and others is truly inspiring, like sunshine breaking through the leaves.

As you plan for the coming months, this is the ideal time to evaluate your cash and funding needs.

Follow our decision tree to plan the smoothest route forward.

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The Coronavirus pandemic has created a marathon economic slowdown that businesses are having a tough time enduring. If your business is facing these challenges, you’ll want to lean on your strategic partners for solutions.

In these difficult times, do your suppliers have the necessary resources to help your company cross the finish line in both the short and long-term?

Read the blog post. 

Do you remember it? That “oh no” moment (although you may have opted for a different word than “no”) when you realized that COVID-19 was going to cause a serious tsunami for your fleet?

Whether your industry experienced a surge or drop off in demand, you probably spent the last several months treading uncertain water. It seems like the floods are receding now, and as things settle, you’re realizing the currents have been intense and the swells deep.

Need some help resetting your compass?

To find your direction, you can rely on the four cardinal segments of your fleet vehicle lifecycle to point the way: buy, drive, service, and sell. Here are some simple ways to revisit your pandemic fleet practices as the continent slowly reopens, plus some convenient links back to our original articles for each part of the cycle.

BUY – The OEM factory closures threw off your vehicle replacement schedule as well as your budget plans. Depending on your company’s current position, you may have elected to freeze your ordering cycle and move that allocated capital into reserve.

With factories open again, are you ready to order vehicles? If so, leasing is a viable option for reducing your upfront capital expenditure.

To learn more, read COVID Cost Control: How will you navigate the capital expenditure tightrope?

DRIVE – Depending on your business, if demand for your vehicles went up, you should be leaning more on the newer, lower mileage vehicles. They’ll ensure reliability and efficiency at a time when every penny counts.

However, if utilization dropped and you parked some of your older, higher-cost units, now’s the time to figure out if you need to bring them back into active service or remarket them.

To learn more, read COVID Cost Control: Put Your Operating Costs in Park.

SERVICE – If vehicle demand has remained high, sticking to your preventive maintenance schedule is more important than ever. It’s the best way to deter component failures that will prematurely take your vehicles out of service.

But if your analytics showed below-normal utilization, you may have temporarily extended your PM intervals to route money back into your company’s stretched budget. It’s time to evaluate if business is picking back up enough to consider reinstating your regular schedule.

To learn more, read COVID Cost Control: Exploring maintenance and repair strategies during a pandemic.

SELL – Your vehicles are company assets, and you can sell them as part of a short-term strategy to reduce fixed expenses or increase cash flow.

Before selling underutilized assets, remain mindful of any increasing demand for those vehicles as conditions are turning around. You don’t want to be caught shorthanded, especially with factories operating at limited capacity or if your upfitted vehicles require longer build and delivery timeframes.

To learn more, read: COVID Cost Control: Avoid these three mistakes when liquidating assets

Grab an oar and row to shore

As you climb out of your short-term pandemic pace, and into a fleet recovery plan, revisit the conservative solutions you implemented at the onset of COVID-19 for allocating your capital and making the smartest use of your vehicles. Through flexibility and innovative thinking, you can steer your strategy toward calmer seas on the economic horizon.

As the world slowly transitions into pandemic recovery mode, organizations like yours are assessing the current and lasting effects on customer activity, future business opportunities, and the corresponding bottom line impact.

If your business has slowed significantly, your biggest challenge may be a shortage of cash to pay your bills. On the other hand, if your business is struggling to keep up with a heightened pace, you may be searching for capital to acquire resources that can help meet increased demand. And if you’re somewhere in between, you’re likely reassessing your strategic plans to ensure your business is prepared for what’s next and the changes it may necessitate.

Restrictions are slowly being lifted, and more businesses are opening each day. As the world begins to establish what this next phase is going to look like, do you know what your financial recovery plans look like? Do you want to recreate the success you were experiencing prior to COVID-19, or do you have new aspirations? But before you try answering these questions about your future, let’s first talk about where your company stands today.

Your rebuild plan needs a strong foundation

Your financial recovery plan depends heavily on how much your organization was impacted by the pandemic. While it’s tempting to jump straight to planning for a better tomorrow, you’re skipping the critical step of assessing where you are right now. Laying a solid foundation for your recovery strategy involves:

Let’s take a closer look at these building blocks.

Unlocking capital from your existing assets

Even if your organization had a strong credit rating prior to the COVID pandemic, you may have trouble acquiring new credit or extending existing credit. This is the case for thousands of businesses as lenders tighten the reins to preserve their own liquidity.

Until the economy stabilizes, carefully review your access to capital and ensure you have diversified sources of that capital. Your fleet may provide an opportunity to turn the equity of your vehicles into cash, which can help keep existing or add new vehicles in service for your company. In addition, this equity can possibly pay for fuel, maintenance, and other fleet related costs. If your needs extend beyond your fleet, accessing this equity will allow you to reinvest this capital into other parts of your business.

To unlock this equity, start with assessing the values of your owned vehicles, trailers and equipment. Then repeat that same assessment for your leased and funded assets.

OWNED ASSETS

• Sell any vehicles and equipment that are aged, costly, or underutilized.
• Consider a sale/leaseback. The leasing company sends you a check for the current market value of  your assets, then leases those assets back to you for their remaining service life.

LEASED ASSETS

• Evaluate if the lease terms are appropriate with shifting business conditions and possible changes to come.
• Assess your funded and open-end lease units to measure the difference in asset market values and current book value. If this difference is positive, evaluate if you can enter into a transaction to take advantage of this equity in those assets.
• For full service and closed-end leases, consider the alternatives of either entering into a new, longer lease term or exploring a new lower payment. Work with your current provider or consider changing to an open-end model.

Assessing your funding strategy

This is a good time to assess your overall funding strategy, including the funding related to your fleet and equipment assets. Should you fund all your vehicles, or just a few? Should the leases be open or closed? Fixed or float? Short or long term?

The economy is undergoing a major change, and we have no way of assessing if the worst is over. A smart approach is to be prepared going forward with plans for both positive and negative scenarios for your company. This is an opportunity for you to explore options for making more efficient use of your capital.

Open end leasing is a flexible funding option that can be structured to meet your company’s needs. It can help you diversify your funding partners and ensure you are being efficient in the use of capital that may be needed for other business needs, especially if other areas have limited access to capital.

Right now, leasing rates are low, which makes this an ideal time to lock in favorable rates for longer-term vehicles and equipment. Some of the industries that can reap great benefits from vehicle leasing right now are state and local governments, utilities, and last-mile delivery companies, among many others.

Moving to the next level

Once you’ve completed these steps, you’re on solid footing to begin identifying your near- and long-term measures of financial success, and anticipating any challenges that can pose roadblocks. To make good and long-lasting decisions, we recommend a team approach and include members from your accounting, treasury, finance, operations, and fleet teams. You should also look for guidance from the senior leaders steering your organization’s long-term goals.

ARI is ready to help. We have fleet management and leasing experts ready and prepared to advise you on the current market trends. We have helped many companies during this pandemic and are happy to share more information on how companies are dealing with the same challenges as you.

Learn how your vehicle equity can work better for you by downloading our short Sale and Leaseback eBook. Interested in exploring this option further? One of our fleet specialists can help.

Before COVID-19 came to town, your business had organizational objectives that your fleet operation played a critical role in achieving, such as budget compliance, productivity metrics, customer satisfaction, profit, and so forth.

In light of the pandemic, you’re likely now facing a vastly different budget scenario, your replacement schedule will need adjusting based on availability (and that budget, too), you’ve had to tune your preventive maintenance plans, and so forth.

So where do you start? How can you carefully balance your “then” with your “now” as you look ahead? This are questions posed by other fleet professionals just like you as OEM factories are reopening and a number of states loosen their shelter-in-place mandates.

Take a fresh look at fleet basics

Although “normal” feels like a lifetime ago in so many ways, as you build a fleet recovery plan, it’s still important to revisit best practice building blocks and original business priorities as you move toward your newly defined operating state.

While some practices may not be achievable due to current conditions, others will serve as beacons of normalcy for your fleet. Below are some questions to consider as you’re mapping out your pandemic recovery plan.

1. Financial Decisions

• Is your fleet overseen by one team who enforces a single policy and uniform processes across the board, or do fleet management practices vary by region or leader?
• Do you annually review and update your fleet management roadmap, or does planning occur on a more reactive basis?
• Have you consolidated to a single fleet management company or do you have more than one company managing various aspects of your fleet?
• What department does fleet report to – Finance? HR? Operations? Procurement? Risk/Safety? Sales? Itself? All of the above?
• How much of your daily workload is spent on fleet?
• COVID-19 Considerations: How have fleet oversight processes and funding decisions been affected by COVID-19? What was a short-term adjustment, and what needs to continue into the foreseeable future?

2. Supply Chain

• Are your vehicle specs and upfits standardized based on job function and/or business need?
• Do you review your selector annually to ensure the vehicles are still meeting your priorities for budget and performance?
• How many vehicles do you get from dealer stock? Have you fully explored opportunities for OEM incentives?
• COVID-19 Considerations: Do any of your specs need revision based on short-term utilization decisions and/or budgetary changes? How will you adjust your order quantities?

3. Connected Vehicles

• Do you have telematics devices in some or all of your vehicles to track driver behavior, vehicle performance, optimization, etc.? What was the primary reason for this decision?
• Are you able to see all of your vehicles and analyze all of your fleet expenses in one resource, or do you need to piece together data from various systems to achieve a consolidated perspective?
• COVID-19 Considerations: Do any units need to be reactivated? How will the pandemic’s impact on your business affect any future telematics rollouts?

4. Driver Safety

• Do you run Motor Vehicle Reports (MVRs) each time you hire a driver and then again annually? Do you then assign driver training based on the MVR?
• Do you have a real-time method of assessing driver risk and assigning relevant training?
• COVID-19 Considerations: How will personnel changes made during the pandemic impact MVRs and training assignments?

5. Cost Containment

• Do you have controlled authorization of maintenance and repairs?
• Do you control fuel expenses with card restrictions and fraud detection?
• Do you allow employees to use company vehicles for personal use? If so, do you collect a personal use charge?
• COVID-19 Considerations: Did you make any maintenance parameter changes in response to utilization fluctuations? Is this the right time to re-evaluate?

6. Vehicle Downtime

• Do you coordinate new vehicle orders with OEM production schedules to ensure delivery when you need them?
• Do you have someone checking maintenance purchase orders for excessive or redundant work on the same vehicles that takes them off the road?
• COVID-19 Considerations: How will you adjust planned orders and replacements as a result of any short-term utilization and liquidation decisions?

7. Capital Forecasting

• Do you enforce a formal vehicle replacement policy? What are the criteria you use for replacement decisions (vehicle selector, driving pattern, operation, etc.)?
• Do you maintain a consistent annual budget for vehicle replacements?
• COVID-19 Considerations: How will you adjust your replacement strategy moving forward? Do you need to revisit your funding options?

8. Vehicle Remarketing

• What index do you use to measure your used vehicle sales performance?
• Do you allow employees to purchase used company vehicles?
• COVID-19 Considerations: Did you liquidate any underutilized or aged vehicles in the last few months? How will changes in the used vehicle market impact your remarketing plans in the next few weeks and months?

Build your new fleet foundation

With the right tools and partner, you can better position your fleet to successfully align with business demand, and identify opportunities to restore best practices where possible.

Whether you’re a fleet veteran or someone who’s suddenly found themselves in this new role, ARI can help you evaluate your fundamental fleet structure to ensure your pandemic recovery plan will optimize efficiencies, control costs and mitigate risk for your fleet’s future. As you’re planning for the coming months, weigh in on our newest Road to Fleet Recovery poll to share your thoughts and instantly see responses from other participants.

Click here for a downloadable version of this version of this guide.

As your organization continues to adapt and respond to the uncertainty of COVID-19, here are four opporutnities to get started on controlling your fleet’s operating costs.

Remember the days when you talked about ways to innovate and “think outside the box” with your fleet partners and industry colleagues? With the COVID-19 pandemic, there is no more box. Simple as that.

Today, fleet professionals are quickly learning how to perform a variety of planning acrobatics. While some businesses have slowed to a partial or full standstill, others are facing unprecedented growth and opportunity. Regardless of which scenario is playing out for your organization, we’re all facing the same challenge of navigating uncharted territory when it comes to vehicle expenses and allocated capital.

Starting from scratch…temporarily.

Now that you’ve addressed immediate fleet needs, such as driver distancing policies and vehicle cleaning procedures, it’s time to start looking ahead. The state of your industry, customer activity, and your company’s financial status will influence your next move. Are you trying to keep up with increased demand placed on your vehicles? Or are you facing the opposite challenge, where a slower business pace means that many of your vehicles aren’t fully utilized at the moment?

Your answer will help focus your short-term capital expenditure plan. With “closed until further notice” signs hanging on the doors of North American vehicle factories, now is a good time to build your temporary strategy.

Pay now, or pay later?

Your fleet’s capital expenses and operating expenses are always closely intertwined, and you’re familiar with maintaining a careful balance that works for your business. But that ideal replacement strategy you carefully ironed out is now freshly wrinkled thanks to the unplanned shutdown of OEM manufacturing.

So how can you address your immediate challenges without creating a future budgetary nightmare? Here are some additional actions to consider during your decision process:

• Explore leasing as a way to reduce upfront capital expenditures. If your business usually prefers to purchase vehicles, leasing can help avoid increased operating costs and downtime even in the face of reduced capital availability.
• Narrow your replacement scope. Prioritize the vehicles that pose the most risk to your operating cost budget, and make the most of your available capital.
• Quantify value of liquidating underutilized assets. Injecting capital into your business to help weather current financial challenge is always an attractive option, but make sure you understand any temporary variations in the resale market.
• Watch operating costs for aged and high-mileage vehicles. These are the vehicles you would have normally cycled out by now, whether you place orders or not. These vehicles can lead to trouble in the form of increased operating expenses.
• Factor in the lower cost of fuel. While fuel prices are low now, once global markets bounce back, the cost to operate your older vehicles will increase as well. If you opt to keep these vehicles in service, you’ll need to account for the increased expense.

The assembly lines are rolling, but fleets will still need to navigate hazards

In the three weeks since Automotive Fleet hosted a webinar on how COVID-19 has impacted fleet ordering and deliveries, manufacturers have started taking their positions at the (re)start line. That means good things for fleet management companies and upfitters like ARI and Auto Truck Group.

Starting engines in May…literally

At the beginning of this month, the global auto industry took its first steps toward restarting production as China announced it would start manufacturing auto parts again. This news was promptly followed by Michigan Gov. Gretchen Whitmer giving parts makers the go-ahead to restart their factories on May 11.

When it comes to the supply chain, timing is everything. By kicking off the reopening process with auto parts, the OEM assembly lines will have critical supplies in hand as they roll forward. Accommodating that one-week head start, Ford Motor Company, Fiat Chrysler Automobiles and General Motors reopened plants on May 18. Also opened the first half of the month: BMW, Honda, Hyundai, Kia, Mercedes Benz, Toyota, and Volvo.

On all accounts, the factories have implemented United Auto Workers (UAW) employee safety protocols and screening procedures using CDC and OSHA guidelines. Some corporate personnel continue to work from home while some plants are operating with reduced shifts. So while factories are opening, production capacity will be lower than normal as employee and customer health remains top priority.

What happens once the green flag waves?

The good news is that vehicles will soon be rolling off the line, and Auto Truck Group will have their chassis inventories replenished; this also means that managing your replacement cycle will get better from here. The bad news (well, maybe just “not-so-good” news) is that you’ll still have to be aware of any caution flags on the track ahead. Let’s take a closer look at the current factors, how they may impact your timing and budget, and when to consult with your fleet management pit crew:

Ordering

• Fleets are top priority. Knowing the commercial demand will be greater initially than retail demand, the OEMs have expressed their commitment to prioritize fleet orders. This would be a good start, with conditions in your favor.
• Model years are in flux. The OEMs’ goals are to build all orders received, but with new model year changeover approaching so quickly, there’s a chance that your 2020MY orders could be cancelled and replaced with 2021 models. If that happens, be prepared for these potential outcomes:
  • You could be facing longer lead times due to high demand, possibly up to 5-6 weeks.
  • Your volume incentives may be impacted. Depending on your OEM agreement, you could experience a shortfall for 2020 incentive but a windfall for 2021.
  • New model year prices typically increase two to three percent. You should carefully evaluate 2021 vehicle and options prices compared to 2020 models. If there is a larger than standard price increase, will the OEMs release options from packages to offset the increases prices?

Upfitting

• Upfitters are ready to build. With OEM production ramping up, upfitters like Auto Truck Group are getting an influx of vehicles and chassis to build on.
• Filling the pools. Bailment pool inventories for producing standardized vehicles will be replenished.

Transportation

• Transport is moving again. The backlog of stranded vehicles produced prior to the plant shutdowns are slowly, steadily being transported for delivery. You can track them via delivery status updates. The same goes for upfit vehicles waiting to be transported.
• Make time to talk. Communication is key as many new parties are stepping in to carry the load.

Licensing

• Extensions are ongoing. For the most part, expiration dates on vehicle registrations and temporary tags continue to be extended 30-60 days, depending on the state.

Delivery

• Continue planning ahead. If a dealership is open, it’s mostly service staff onsite, so getting pre-delivery inspections completed or finding someone who can facilitate a delivery is a chore. The best strategies are tenacity and continuous follow up, but even then might not be enough if your drivers can only step foot inside a dealership with an appointment.

Important tools to keep close at hand

Until OEM production, upfitting, transportation, licensing and delivers are operating at a normal pace, you may still need some mid-term recovery strategies. Avoid reactive maneuvers and instead regroup with your strategic partners like ARI and Auto Truck to use your own data to plan temporary solutions. Here are some things to keep in mind along the way:

• Out of stock purchases may not be available due to dealership closings or low inventory. If demand goes up while inventory is down, prices may increase.
• Buying low-mileage used vehicles that are still under warranty is a potential recovery tactic.
• Short-term rentals could also get you over the hump.
• Be cautious when liquidating vehicles. You may wish you retained them as demand rebounds.
• If the used vehicle market remains soft, look at extending your leases.
• If you leave vehicles in service past their scheduled replacement date, keep a close eye on their operating costs.
• Review your fleet for underutilized vehicles to replace older, higher cost ones.

Keep your eyes on the finish line

The best attitude for a positive outlook is knowing all of this is temporary, and we’re already seeing signs of recovery. Don’t get bogged down in the short-term difficulties – stay focused on your recovery plans and long-term measurements for winning.

If you need more help evaluating your fleet needs, ARI and Auto Truck are here for you. We can help you track order status and adjust upfitting approaches to ensure you have the vehicles and operational strategies needed to get your company past the checkered flag of recovery.

After months of disruption, the automotive supply chain is beginning to get back in gear but the unprecedented shutdown across the industry has skewed traditional ordering cycles. Some businesses were forced to cancel new vehicle orders due to financial uncertainty while others scrambled to find any available vehicle amidst the closures to keep up with increased demand.

Now, as we approach the traditional ordering season, many organizations are faced with adjusting their acquisition strategy on-the-fly. And just like revising your summer itinerary, you’ll need to be mindful of avoiding costly spec’ing and ordering detours.

Here are three common spec’ing and ordering hazards that could cause you to miss your exit to recovery:

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Even if you’re not watching the drama series “Ozark”, you’ve probably stumbled on its intriguing premise of a financial-advisor-turned-money-launderer anti-hero played by Jason Bateman. What you may not know, however, is that Bateman also works as a director and executive producer on what’s shaping up to be one of Netflix’s best-performing original series.

SPOILER ALERT: Sadly, I can’t reveal that ARI and Auto Truck Group have slated Jason to produce our virtual meetings. I can tell you how we share common “star” qualities with Mr. Bateman – loads of talent, ability to succeed in a variety of roles, open to trying new things, and a dedication to memorable experiences.

As the COVID-19 pandemic translated to open-ended travel shutdowns in the first quarter, we put these performance qualities to work hosting remote vehicle specification review meetings for our customers. This wasn’t Auto Truck’s Zoom debut– as we’ve used it in the past to overcome winter weather challenges– but it was definitely the right time to increase our web production value!

Same series, new plot twists

When shelter-in-place mandates and travel restrictions ramped up in mid-March, Auto Truck had a number of newly spec’d builds rapidly approaching the review step. Even when we have an approved spec design, budget, and parts list, we always want to confirm everything aligns with the customer’s expectations before forging ahead. This applies to simple changes to an existing spec, or building out a brand new specification. So we dusted off our webcams, confirmed our customers were on-board to give Zoom-based reviews a shot, and started planning.

The magic happens behind-the-scenes

If you faced a quick transition from the office to working from home, you can likely relate to the planning details required for hosting a successful web conference. Video and sound working? Check. Webcam positioned properly? All good. Agenda to help the conversation flow? Sent. Pants on? Let’s do this.

For a spec review where the customer’s vehicle is making its starring role debut, we must solve for more layers of celebrity-level complexity. While our builds don’t insist on sparkling water or model name stenciled on their trailer doors, it’s still our job to film all of their “best sides” for our client audiences.

Making Zoom magic happen for a specification review requires a trusted production crew. Here’s a rundown of how ARI and Auto Truck prepare for a meeting:

Over the last three months, we have received positive reviews from fleet customers on these spec “episodes.” They are pleased with the process, and how Zoom helps to focus on certain build elements one at a time. Working together, ARI, Auto Truck, and our customers can move our shared business forward in spite of pandemic challenges.

A permanent shift in programming?

Web conferencing has become a valuable channel for ARI and Auto Truck to continue using even as the United States and Canada start returning to more normalized conditions. But our people and customers agree that web conferencing is not a permanent replacement for the in-person experience. That sentiment goes deeper than wanting to tangibly interact with the vehicles in our facilities: it’s truly about the people and our relationships.

The most valuable part of the face-to-face spec review experience is the strengthening of our partnerships, followed closely by the “inspiration” factor. While we’re always excited to suggest ways for improving a spec, seeing that enhancement already incorporated into another company’s build helps inspire our customers to move forward with new ideas.

The future offers channel choices

As we’re able to return to in-person spec reviews, ARI and Auto Truck will continue using web conferencing whenever it can add value for our clients. For example, Zoom can be extremely useful in:

• Reviewing minor and/or routine specification updates with longer-term accounts
• Helping clients control their travel expenses, especially in the post-pandemic recovery phase
• Expanding participation to include field personnel who would not typically attend in-person
• Avoiding cancellations of time-sensitive meetings due to inclement weather

Thanks for tuning in for the latest episode of how the Holman family of businesses are putting our automotive competencies to work for fleet customers. Please remember that ARI and Auto Truck are here for you.

In a matter of a few short weeks, the COVID-19 pandemic fundamentally altered the landscape of our industry. With everyone’s health and safety the top priority, the entire automotive sector came to a virtual standstill for several months. We’ve used this time to to develop a road map as an industry to help us navigate the road ahead together. And while this crisis is unlike anything we’ve experienced in our lifetime and not yet over, the way organizations continue to adapt and respond will endure long after we overcome this current challenge.

Recently, Vice President of Operations John Hart spoke with Work Truck to discuss how Auto Truck Group adjusted in the face of the pandemic by prioritizing the well-being of our personnel and continuing to leverage Holman’s core automotive competencies to support our customers with creative solutions.

“Fortunately, our leadership across the automotive industry allows us to pivot quickly and address supply chain challenges for our customers during this period of uncertainty,” noted John. “The diversity of the Holman organization, including ARI’s supply chain expertise and Kargo Master’s manufacturing capabilities, helps us mitigate a number of factors even in times of uncertainty. Auto Truck, ARI, and our customers continue to work collaboratively to minimize supply chain delays and develop alternate plans for navigating any pandemic challenges that do arise.”

In the article, John also offers some advice for fleet stakeholders working to manage disruptions in the supply chain.

“The best advice I can offer fleet managers is to remain focused on the long-term view,” said John. “Having a well-developed, strategic replacement schedule and adhering to it as closely as possible (given the current circumstances) is the best way to minimize disruptions and ensure business continuity.”

Finally, John shared how Auto Truck is poised to adopt much of what we’ve learned during the pandemic to emerge as an even stronger organization moving forward.

“While it’s an adjustment for all of us, we will also uncover valuable solutions,” said John. “For example, our sales team recently completed a vehicle pilot review remotely. Additionally, our engineering team has reviewed a number of body designs remotely with our customers, using advanced technology to get immediate feedback to help keep production on schedule.”

To read the entire article, visit WorkTruckOnline.com and for the latest updates from Auto Truck Group and our business partners from across the industry, be sure to check out our COVID-19 resource center.

With the entire world feeling so out of alignment these days, you’d think every link in your vehicle supply chain would be taking a beating too, right? Here’s the good news – many truck and equipment upfitters are operating at normal capacity or very close to it for now. How and when those conditions will change ultimately depends on other links, such as chassis and material availability, in your particular chain.

So what can you do right now? Developing a short-term plan for your Q2 upfit orders is your best strategy for fulfilling your company’s immediate vehicle and equipment needs. Then you’ll need a long-term approach for Q3 that addresses your 2020 recovery plans and sets up your company for the 2021 ordering cycle.

Let’s walk through the order-to-delivery steps to understand where the industry stands now, and figure out where you may need to adjust your future approach.

Orders

Can you believe that 80 percent of all North American automakers stepped offline the third week of March? We’re all hoping that production starts back up in May, but the decision to reopen for each OEM depends on public health conditions and how the factories plan to provide proper health protection for their workforce.

Don’t panic, and definitely don’t throw out your 2020 replacement schedule. Use it as your new starting point, adjusting as needed to align with the fleet demand you’re seeing right now. Is it going up or coming down? Whatever it may be, you may need to move orders out, delay some deliveries, and be ready for even more sudden changes.

When the assembly lines get moving again, it’s been said the OEMs plan to build all the orders they got before they shut down, and fleet orders will be at the top of their work piles. You should know, there’s a chance that orders for 2020 models could get bumped up to 2021 models. If you still need your Q2 orders to go through, you may be thankful to take whatever year is available as long as the vehicle overall meets your needs. Think of this as a short-term solution – part of your recovery strategy. Then make plans to talk with industry experts about your 2021 selector, to make sure your orders for next year are spot on for your fleet needs.

Upfitting

So far, most upfitters haven’t felt a huge hit by the OEM factories closing. That’s because they are still working with either the custom orders or pool vehicles that were already in-house when the pandemic hit.

But you could run into trouble if a key supplier cannot supply your upfitter with parts for your vehicles and equipment. Your upfitter may have to come up with another option, relying on their engineers to see what else can be done. Unfortunately, if there’s only that one solution for your truck, you might

have to wait a little longer. The upfitter will work with you to reset your delivery time frame and make every honest effort to get it done.

Aside from those one-off parts issues, until the standard inventory of vehicles, equipment and other materials dries up, upfitters can keep building. So for the short-term, there’s still a possibility your new vehicle upfit needs can be met. However, if the factories do not reopen before the upfitters’ inventories run out, that’s when you’ll feel the long-term impact. You may have to go back to the drawing board with your fleet partner’s engineers and analysts to sketch out a long-term plan for your new “not what I originally planned” normal.

In the meantime, you should be extra vigilant with your providers to fully understand what you are getting and when you are getting it. You don’t want any decisions to turn into unexpected surprises and the wrong vehicles and equipment. Everyone is coping with the disruptions, and it’s great when you can be flexible and patient right now, but you still need to retain as much of your business operations as possible. Your company is relying on you to keep the fleet strong through the recovery stage. If you need those specialized vehicles to get you there, hang in and push for what you need.

Delivery

Third-party transportation companies are stepping it up big time right now. They are grabbing what they can from the OEMS; they’re filling the void for railcars; they are working with upfitters and also filling gaps for dealerships whose operations are iffy. With many new players in the supply chain, everyone’s intentions are good, but the communication chain can experience some hiccups.

Stay in constant contact with your providers! Track your vehicles through every stage of the delivery process and ask as many questions as you need to if things start looking off track. Yes, delays will happen, but keeping everyone’s expectations in check is the key to staying organized and in control.

The link holding the chain together

So many things are out of our control these days. Looking at the big picture, the state of the auto industry plays a critical role in North American economies. Everyone is anticipating the day that the OEMs will open their doors; for everyone it will signify a big step away from this craziness. Realistically, when that happens, a bottleneck will form, probably as Q2 rolls into Q3.

Upfitters understand this and the challenges that you are facing with unexpected spikes or drops in your need for vehicles. Everyone keeps saying “we’re in this together.” You hear it everywhere, and that includes the upfitting industry who are committed to supporting your personal and professional wellbeing.

Communication is the link that helps hold your supply chain together. Your upfitters can help you manage short-and long-term goals by working seamlessly with your fleet partners on your ordering, upfitting, and vehicle management needs. When upfitters are right in there with your FMC, you’ll get faster answers, avoid fumbling, and mitigate delays.

And, there’s an upside. Today’s coping techniques are setting the stage for a better tomorrow via rapid innovation. Upfitters are seeing how video calls can speed up pilot reviews and design feedback sessions – and they cost a lot less and take up much less time than everyone traveling everywhere. We’re all going to emerge from the coronavirus as stronger, more agile people and companies.

What does the future look like?

It’s hard to tell how short short-term planning will last and when specifically we’ll transition to the recovery stage. The common phrase these days when looking toward the future is “in stages.”

Your ARI team is here to support you, and help reinforce the links in your chain through communication with your key suppliers. Please reach out to us with your questions or concerns.

About a month ago, ARI offered some perspective on how the COVID-19 pandemic impacted the used car market while also examining how previous economic downturns may help provide a road map for what lies ahead. So what’s changed during the last four weeks or so? Luckily, for all of us, the answer is a lot.

The Road We’ve Traveled

When we look in the rear view mirror, we see the market highs of February in the distance. The pandemic initially disrupted the used car market in early March, tempering demand and slightly depressing market values. By the end of April, the impact of the pandemic was significantly more pronounced. Prices had declined by approximately 15-18% from February’s highs as many auctions and dealerships were forced to temporarily close and transition to online sales.

Fortunately, as the calendar turned to May, the automotive industry started to stabilize. Many auctions and dealerships worked to establish protocols for reopening and manufacturers took steps towards restarting production as shelter-in-place restrictions were eased in many regions. Today, the majority of dealerships and auctions have resumed in-person sales and new vehicles are beginning to roll off the assembly line (although production capacity remains lower than normal).

So what does this all mean for the used car market and its recovery?

We’re Picking Up Speed

The positive momentum continues to build as overall economic conditions trend in the right direction. As dealerships and other businesses across the country continue to reopen, we’re certainly seeing a significant shift in buyer sentiment.

During the last several weeks, many consumers has received stimulus checks and tax refunds, providing a much needed catalyst for the retail segment of the industry. Consumers are beginning to buy vehicles again, driving the market and, in turn, increasing demand for wholesale units. The uncertainly of the spring has given way to a summer of optimism; and market data echoes this sentiment.

Here’s a closer look at the road that led up to now:

While there is still some level of uncertainty ahead, the good news is that we’ve likely seen the worst of the market volatility. In all likelihood, it is safe to expect these positive trends to continue – and perhaps even improve further – as we move into the summer months. However, it’s important to keep in mind that despite these positive signs, there’s still work to be done.

Proceed with Caution

Cautious optimism is a phrased that has been often used to describe various aspects of the COVID-19 pandemic and that same feeling also applies to the current state of the used car market.

Although buyer sentiment and key metrics show the used car market is headed in the right direction, the pandemic resulted in an extremely deep valley. We also need to be mindful that it is unlikely to be a seamless recovery and there will certainly be bumps in the road. One of the biggest X factors we’re currently monitoring is how rental car companies will respond to the dramatic declines in utilization.

The scale of rental car fleets in North America is measured in millions. With the demand for these units down an estimated 60-80%, there are thousands of vehicles sitting idle and not generating revenue. Further complicating the matter is the uncertainty surrounding how these businesses will emerge from the COVID-19 pandemic; will there be mass a mass sell-off of assets? What will happen to vehicle values in these asset classes? Will the risk of bankruptcies grow?

All of these are great questions but without a crystal ball, we need to consider several “what if” scenarios:

• If there are additional bankruptcies or this sector of the industry fails to return to pre-pandemic levels, we should expect to negative pricing pressure as these fleets look to right size and address utilization trends.
• Conversely, OEM production has slowed significantly during the pandemic and as a result, many 2020 model year vehicles have been cancelled. This lost production may help to offset any potential oversupply as if/when these companies begin to right size their fleets.

It is also important to keep in mind that rental car fleets are typically comprised of late-model vehicles that are popular with consumers – sedans, crossovers, SUVs, etc. – so the impact to vocational fleets that often feature a large number of complex trucks and vans would likely be minimal.

Record unemployment, an extremely high volume of used vehicles in the market, unpredictable long-term demand, and the potential of a COVID-19 resurgence all loom as additional potential threats to the market’s recovery. But without hesitation, we believe it is safe to say that the used car market is no longer reacting to the uncertainty of the pandemic but rather well on its road to recovery.

Again we strongly recommend that companies don’t overreact (positively or negatively) but remain agile. As this recovery continues, adjust accordingly to potential detours along the way but always do so with an eye towards your long-term destination.

Be sure to stay tuned to ARI’s blog for the latest updates and strategies for recovery as the fleet industry continues to emerge from the effects of the COVID-19 pandemic.

If your industry and business have been severely impacted by the pandemic, you may be facing difficult decisions involving your fleet as you work to overcome trying economic conditions. If you’re faced with decreased demand or halted operations, this is the time to remain agile and look for creative solutions to help sustain your business now without sacrificing future success.

When revenues are down and cash flow has slowed, selling some of your vehicles and equipment is a plausible, short-term option for reducing your fixed expenses and generating much needed capital. If you are ready to create a plan, you need to determine how to choose which vehicles and equipment will go, and make certain you’re prepared for the long-term effects.

Are you asking the right questions to achieve your goals?

Your strategy for liquidating your vehicle and equipment inventory should address two key goals: to eliminate a portion of your operating expenses, and to maximize returns. However, there’s a third factor to keep in mind as well – be mindful of inadvertently driving up operating costs associated with aged vehicles.

As you look to reduce your fleet size, you’ll want to avoid shifting too much of your operational burden onto your older, more costly assets. Here are three common mistakes to avoid, and three questions to ask instead.

AVOID: Selling vehicles that are still useful to your business in the long run.

ASK: How often are the vehicles DRIVEN?

Vehicles that are in high demand are likely helping you generate revenue. You don’t want to interrupt that prosperity, so if you have to dispose of active vehicles, go for the older or higher mileage vehicles and equipment that are utilized less.

Since these older units are no longer operating in prime condition, they are likely incurring higher expenses for fuel and maintenance compared to newer, more efficient vehicles. Cut those excess costs by retiring these units, particularly those in a positive equity position.

AVOID: Finding your fleet shorthanded when business ramps up.

ASK: How soon will DEMAND rebound?

Before prioritizing any vehicles or equipment for resale, consider when your company will feel any pain associated with selling these units. Although a lot of uncertainty remains, try to anticipate how quickly demand may ramp up once economic conditions begin to improve. You don’t want to be caught shorthanded. In some cases, you may want to consider parking certain vehicles and equipment instead of selling them. Temporarily parking your higher-cost assets can help lower operating costs without reducing your inventory, ensuring you have vehicles ready as business returns to normal.

AVOID: Selling quickly without a value-based strategy.

ASK: How many DOLLARS can you recoup?

You can reduce fixed expenses by selling leased vehicles if their resale value exceeds the amount owed. Also, selling owned assets is an easy way to generate cash from sale proceeds. You should look for a resale partner with expertise in assessing the current used vehicle market to help determine the value of your vehicles and equipment, especially when conditions are highly disrupted like they are right now.

Most importantly – ask for help

If you’re not sure where to start, or if you’ve complied an initial list of assets for potential sale, ARI can help. We can advise which vehicles and equipment can yield the greatest returns in light of current market trends, and help you explore strategies for your specific needs, including quick asset liquidation for immediate cash infusion when you need it most.

As your organization continues to adapt and respond to the uncertainty of COVID-19, let us help you explore creative ways to streamline your operating costs in a way that works for your unique circumstances, and ultimately position your business for a brighter tomorrow.

As COVID-19 continues to disrupt virtually every aspect of our daily lives, the used car market certainly isn’t immune to the impact of this unprecedented pandemic. Like many of us, the initial reaction by this segment of the industry was to adjust to the immediate threat. Most auction venues, wholesale buyers, and dealerships quickly suspended operations to ensure the safety and well-being of their personnel. But now, as the used car market begins to course correct, what does this mean for your approach to remarketing?

With the market changing daily, the ARI Remarketing Solutions team is closely monitoring the latest information and emerging trends to ensure our strategy evolves accordingly. Striking the ideal balance between maximizing resale values and maintaining a reasonable time to sell – in this radically disrupted market – is critical for remarketing vehicles during this time.

So while the coronavirus outbreak is unlike anything we’ve experienced in our lifetime, we can take stock of the past to help anticipate the future. Let’s take a look at what’s happened since March, reflect on how the used vehicle market responded to previous economic downturns, and develop a road map for what lies ahead.

What’s Happened So Far

It goes without saying that the COVID-19 pandemic has tempered demand for used vehicles in both the U.S. and Canada and, in turn, there has been a steady decline in wholesale values from the highs of February. Here’s a brief summary of how the used vehicle market responded as demand waned.

• In the beginning of March, auction activity started to decline slightly as dealerships in COVID-19 hotspots began closing and auctions started shifting to online sales. Prices declined by about 1-2% during the first week of the month.
• During the next two weeks, growing pandemic uncertainty and more dealership closures resulted in excess inventory and reduced demand, further decreasing valuations. Compounding these factors was an influx of fleet vehicles as many companies looked to right-size their fleet as business slowed. Prices declined approximately 7-9% during these two weeks and conversion rates saw a steep decline.
• Toward the end of March and beginning of April, auctions previously shutdown began to reopen for digital sales and a few auctions that were operating exclusively online begin to reopen lanes and increased staffing in certain areas. Price declines began to level off and conversion rates showed signs of modest improvement.
• By Mid-April, auctions continued to slowly recall employees and adjust schedules to begin to work through the backlog of grounded inventory for sale. Prices in certain segments, particularly newer models, are still declining but conversions continue to improve with modest week-over-week gains.
• As of this week, the market remains relatively status quo with no significant changes. Auctions in certain regions are beginning to develop strategies for possibly resuming in-lane sales and this is an area we continue to monitor closely.
• Overall, market values have declined by approximately 15-18% from the highs of February with the sharpest declines on newer models and in regions impacted most by the pandemic.

Looking in the Rearview Mirror for a Glimpse of the Road Ahead

Unfortunately, there’s no remarketing crystal ball. We can anticipate certain economic factors, such as additional unemployment claims. With many variables yet to play out, it is extremely difficult to predict when the market will rebound but we can look at past events for some clues.

In a recent article published by Used Car News, Chief Economist Tom Kontos at KAR Global, an ARI auction partner, reflected on recessionary market responses and how they may apply to the current pandemic. In the 2001 recession, the downturn in average used vehicle values continued for approximately 20 months. During the most recent recession ending in 2009, wholesale used vehicle prices fell by more than 15% year-over-year in just 10 months.

So what does all of this mean for our current situation? Candidly, we’re not sure yet. But we can consider these historical insights when anticipating trends in the coming weeks and months. Here are some things the industry can likely expect as we begin to move forward:

You can view graphs of the historical patterns mentioned here in the special COVID-19 edition of Kontos Kommentary on KAR Global’s website.

Our Roadmap for Success

During this time of economic uncertainty, we continue to monitor the used vehicle market on a daily basis. Our team of veteran remarketing professionals are available to help you assess rapidly evolving marketing conditions and develop a remarketing strategy customized to the needs of your business. Whether it’s diverting vehicles to open auction, executing transactions that balance price and speed of sale, liquidating assets in bulk to generate immediate cash flow, or potentially holding vehicles until market conditions stabilize, we’re working hand-in-hand with our customers to navigate this uncharted territory together.

Overall, our remarketing strategy remains the same. We continue to leverage all sales channels including our network of auctions, virtual venues, our proprietary equipment platform, and our recently enhanced employee sale portal. Additionally, our Canadian remarketing centres remain operational and we continue to purchase vehicles through our unique ARIBuyDirect program.

As the COVID-19 pandemic continues to strain economic conditions, you may find yourself challenged to strike a delicate balance of helping your organization weather the current storm while still positioning your business for a brighter future. The best advice I can offer you: don’t overreact, and remain agile. Adjust accordingly for near-term challenges; be mindful of your mid-term plan; and always have an eye on your long-term strategy.

As governments across the globe work on mapping out potential paths back to normalcy, people are coming together (virtually, of course) more than ever. We’re all facing a diverse range of challenges at the moment. Some are entering their second or third month of working remotely, others are still out in the field delivering essential services, and many are dealing with the challenges of reduced hours and temporary furloughs due to closures. Despite these differences, we are united in the desire for a timely, safe return to more familiar lives.

If you’re already tackling initiatives to bolster your fleet and business health, and caring for yourself and your family, what’s next on the list? Consider putting those keen leadership skills to work toward giving your company’s emotional health a fresh boost! All it takes is an open heart and an extended hand to spark positive results for your business and the people that keep it running.

While your primary responsibility may revolve around vehicles, the fleet includes drivers and other employees, too. Happy employees translate into happy customers, so don’t hesitate to collaborate with your Human Resources and employee engagement counterparts to boost morale.

Check out the ideas below, and download this portable list to share with your colleagues:

Give your team something to feel good about

• Overcoming challenges is something worth celebrating, so make time to recognize your team and colleagues daily. Simply maintaining our regular duties in the face of unprecedented hurdles is anything but regular, so acknowledge when you see others hanging tough!
• Fostering a sense of teamwork is more important than ever. Many teams are split between working from home and working in the field, and it’s normal to feel disconnected right now. Pull those who work independently into a larger group and let them celebrate what everyone is achieving collectively, and find ways for essential workers to join in, too.

Help everyone feel connected and informed

• Feeling out of the loop can increase peoples’ anxieties. Share whatever information you can about what’s happening across your organization so employees have an understanding of where they stand, and what may come next. A strong sense of confidence in communication channels can will mitigate fear of “being in the dark.”
• “All work and no play…” makes quarantine feel super monotonous. You can break up the day by giving everyone the chance to talk, smile, and laugh about non-work related topics together. Use all the resources you can, from your company intranet to your social media channels, and video-based communication platforms.

Open the door and let others know you care

• When you are brave enough to be transparent about your own circumstances, those around you will feel more secure opening up about what they’re facing throughout the day. Creating a compassionate environment through empathy can make it easier for others to reach out and connect with others who are experiencing similar challenges. Not everyone is comfortable engaging personally in the workplace, and that’s okay. Consider this the virtual equivalent of an “open door” that some will walk through, and others may take the cue but choose to confide in a friend or relative instead.
• Your colleagues may want to reciprocate, so let them offer their support to you as well. In the end, you’ll strengthen your mutual respect and relationships.
• If your company offers wellness tools like telemedicine or mental health support, remind team members that they are available. Also encourage people to connect with available resources for childcare, work-life balance, remote fitness classes, etc.

Click here for a PDF version of this infographic.

Focusing on tomorrow

“With the new day comes new strength and new thoughts.” ― Eleanor Roosevelt

Relative to your fleet, you want to keep your drivers as safe and healthy as possible. You’ve likely shared plenty of fleet guidelines for driver distancing, vehicle sanitization, and remote practices, but ensuring everyone gets the emotional support they need is just as critical. By caring and spreading compassion in as many areas of your life as possible, including your workplace, you will strengthen relationships, others, and even yourself.

As you’re planning for the remainder of 2020, tap into your ARI resources. We’re analyzing what industry best practices may look like in the new normal, and can support you in adjusting your fleet spend, vehicle ordering, remarketing, and other areas to align with your company’s needs.

When it comes to your business, we know that customers and the job at hand come first. But that can often mean that some of the behind-the-scenes necessities of fleet management can fall by the wayside. Especially driver training, which can be a major asset that can promote a safe workplace and also save your fleet money every year.

Vehicle accidents cost businesses around $60 billion each year, but dedicated driver training can reduce crash rates by 40 to 60 percent.

Are some of your drivers currently grounded due to work-from-home pandemic procedures? Maybe now’s the time to take advantage of those cost savings by using those extra hours to educate your team on safety measures on the road.

Driver training can be done entirely online, an advantage that is more valuable now than ever. Your drivers can work from anywhere, and can take the training when it’s convenient for them, be it after the kids go to bed or when they’re most productive early in the A.M.

Better yet, you can tailor your company’s driver training to each of your drivers, meaning that each hour spent learning is the most valuable it can be. There are three easy ways to keep training at the forefront for all drivers:

First day of school

The first step in customizing your training program is to give all of your drivers a skills assessment. This is usually done when a driver begins working with your company, but can be a great way to understand where each employee is coming from and how they view driver safety. ARI’s skills assessment is a 50 question online tool which asks the test taker to respond to real-life driving situations. It tests their knowledge of safe driving habits and judgement.

Fleet managers and the driver receive the results of this skills assessment. After that, the driver will begin receiving their customized training syllabus, built entirely around the results of the test, which looks at six key areas of driver safety:

It is also important to set explicit driving behavior standards through a vehicle use or driving safety policy. Your policy can be turned into an online policy module that drivers can take anywhere. The online policy module helps your drivers understand what is expected of your company, while also keeping them informed of your safety procedures as they move further their tenure.

Never stop learning

Now is also the time to consider refresher training, a great tool for seasoned drivers who need to stay informed in their roles. These training modules can be scheduled every quarter or month, depending on your company’s preference.

You want to make sure that your training program modules are specialized specifically for your fleet. That includes courses that work for your vehicles, be it cars and light duty, medium, or heavy duty. These modules also should be broken out even more depending on the driver, giving them training that works around the vehicle they’re in on a day-to-day basis. That includes programs for:

You can mix and match your modules to the vehicles in use (even motorcycles or bicycles) then adjust in time as positions or role expectations change.

Adjust and correct

In an imperfect world, accidents can happen. Training takes those incidents and turns them into learning opportunities, especially when training is designed to address the causes of accidents.

After a road incident, you have the chance to review what happened, and have training modules automatically assigned to the driver for preventable accidents. Automatic assignments reduce the time from when an incident occurs to when remedial action is taken.

This type of proactive behavior helps reduce the chance of accident occurrence, and also can help reduce insurance costs around incidents for the future. When utilized properly, training can keep your drivers safer and serve as a long-term cost savings measure for your company.

While we’d all prefer that our lives would get back to normal sooner rather than later, you can use this opportunity to organize your driver training program and build a safer, more cost-effective future.

Click here for a downloadable version of this guide.

Click here for a downloadable version of this guide.