Fleet-ing Thoughts

So the year end numbers are in and it’s no surprise that Detroit is down in sales and market share significantly. What is also clear is that this is due, in no small part, to the reduction in daily rental sales that so plagued the industry for so long. Likened by Bob Lutz, GM Vice Chairman and product Czar, and others, as drug withdrawal, longer term this is good for the industry, but creates short and intermediate term horrors (plant closings, layoffs, share reduction, supplier bankruptcies, in short, what we see now and continue to see).

In fact, just today I saw Bob Lutz in an interview at the Detroit Auto Show, where, despite the blockbuster sales of some major product lines, like the Cadillac CTS and the new Malibu, the reporter emphasized the 2007 reduction in North American sales. Lutz’s response was to remind everyone that a lot of the reduction was, indeed, the result of cutting back sales to daily rental companies. Clearly, GM was the first to bight the bullet, and consequently, they look like they are in the best shape starting out 2008 (with 2007 market share down .9 of a percentage point), Ford followed soon after but had almost double a market share reduction (1.6% points), and Chrysler last year was the only one of the big three who did not significantly cut out unprofitable daily rental program cars and thus only suffered a minimal market share decline (.1 of a percentage point). But, as they say, look at them now: Chrysler just announced a 20% reduction in daily rental sales to start off 2008, along with major employee cuts, plant closings, and product contractions. The US UAW seems okay with it, but the Canadian CAW seems up a bit upset, and their contract talks start next fall, as I recall. At any rate, unlike GM & Ford, it certainly looks like Chrysler’s major drug withdrawal pain is yet to come.

I think for the major daily rental car companies the major financial pain of the reduction of program buy-back vehicles has yet to be felt. It’s been delayed or massaged by the “temporary fixes” of running vehicles in the fleet longer (which is becoming obvious to daily rental car customers), and using the Internet and the latest technologies to squeeze out efficiencies in the wholesale remarketing disposal process. However, these tactics can reduce but not delay the inevitable, which is a severe increase in daily rental car operating costs. If these folks can’t significantly raise daily rental prices, over the long haul (and that looks like a hard thing to do in this current economic downturn) to absorb these cost increases (that heretofore the Detroit Manufacturers absorbed in hundreds of millions of dollars in annual write downs when these units were returned and resold), a major day of financial reckoning, I think, will be at hand.

I think there may be one more wrinkle that may exacerbate the upcoming major daily rental companies’ financial troubles, in addition to their increase in operating costs. As most of these companies’ fleets are entirely financed with big bank loans, and the bank lending crises catastrophe makes money scarce for even good credit risks, the large daily rental companies that depend on easy money may feel a double whammy coming…just my observations on the industry, we shall see what develops. One thing I think is a sure bet, that given the current credit situation, GM & Ford are glad they got rid of their daily rental companies when they did a few years ago to private equity buyers when those folks had the cash to buy, because those deals would be a lot tougher to pull of in the finance crunch we have today.

While apparently marketing researchers have determined that people tend to form preferences for things like music and clothing during adolescence and early adulthood and these preferences stick throughout their lives, when it comes to cars, this tendency has only been found to be statistically significant among men. And it’s most prevalent among war babies and baby boomers born in the US between 1936 and 1964, men beginning to drive around the time Detroit manufacturers first began building models aimed at young people – pony cars like the Mustang and muscles cars like the Pontiac GTO.

This nostalgia thing now gives an explanation to something that has confused me. I have to tell you that I never understood the appeal of the retro cars like the Chrysler PT Cruiser or the Chevrolet HHR, but in view of this cultural phenomena, it make sense, as does the increased popularity and sales of the current Ford Mustang (one of the few bright spots in the Ford car sales stats today), or the push for the resurgence of the Chevy Camaro and the Dodge Charger.

The statistics presented in the article are very well put together and paint a very clear picture. Last year for instance, 6.8% of self-described auto collectors said they were searching for a vehicle they once owned, compared to just 1.6% in 1985, according to CNW Market Research, Inc. And on the market price index side, it’s clear that demand is clearly outstripping supply, as the collector car industry is up 60% since 2002, and is now a $25 billion dollar a year niche – that’s no small piece of change.

Alas though, one statistic proves that the odds of finding “loves labor lost” is very, very slim. In a nation with more than 244 million vehicles currently registered, and cars from 35+ years ago neither as durable nor as technologically advanced as current models, chances are most of these “object of desire” vehicles were scrapped a long time ago. The Lost Car Registry Web site has been up over five years and has 700 postings, but Keith Ingersoll, the founder, knows of only five reunions between the original vehicles and their original owners. Still, long odds would never keep a real “car guy” from continuing the search, at least the way I see it.

Labels: Bob Lutz, Daily Rental Fleet, Jennifer Saranow, Lost Car Registry, Wall Street Journal

“I Spy”…I’m Starting to Get A Bit Concerned…I Bet Other Folks Will Be Soon As Well…

Combine Telematics/GPS Systems, with Current “Normal” Surveillance Cameras, and Innovations like “Beacon” on Facebook and Privacy Truly Does Become a Thing of the Past


This blog entry started out as a simple highlight of a “Letter to the Editor” in the September issue of Automotive Fleet Magazine that I thought raised a particularly interesting point in a new area of the law, surrounding a relative new technology, that is, telematics/GPS installation systems for fleet vehicles. These systems allow fleet managers and employers to monitor and have a detailed online digital record of the entire history of fleet vehicle’s excursions-- every stop, every time the motor is turned on or off, etc. The letter writer managed a utility fleet that had the devices installed in a pilot program and the company’s union had put in a policy grievance based on privacy issues and changes in working conditions. They basically argued that the devices could be used in vehicles but the results of monitoring could not be used for disciplinary purposes. Having no direct case law as precedent, the fleet manager was subject to the pre-arbitration ruling that stated emphatically that telematics systems cannot be used for disciplinary purposes, and that no judge or arbitrator would allow an invasion of privacy to this degree. However, it did suggest it could be used for breaches of criminal law – in short, an employee could not be taken to task because the telematics system revealed he spent the afternoon at a local bowling alley (or worse) as opposed to being “on the job,” but if the installed telematics revealed that the vehicle was used in an armed robbery, then the tracking evidence could be utilized as evidence. The writer’s question was simply if anyone else faced this issue and if this is the case in all circumstances, then the “legal brick wall” greatly reduced the benefits of installing telematics/GPS systems.

Now one of the reasons why Automotive Fleet Magazine is the “bible of the fleet industry” and why I think the “Letters to the Editor” section is way more informative than similar sections in other magazines, is because Ed Bobit, Mike Antich, and the rest of the crew do an excellent job to investigate and get the best answer/responses for good topical issues and questions. This was indeed the case once again, when this reader’s query was answered in print by Ann P. Fourney, attorney for the automotive issue focused law firm of Hudson Cook, LLP in Washington, D.C., where she responded that the cited “grievance by the union in question may be based on a collective bargaining agreement management and the union,” and, “if so, the issues involving work conditions will be resolved in accordance with the collective bargaining agreement and applicable labor laws,” “However, these labor relations issues do not implicate federal privacy laws.” Fourney went on to say that “Generally speaking, fleet-oriented telematics/GPS products, used in accordance with the vendor’s instructions (and with the notice provided to the employee) do not violate privacy laws,” and “In fact, a properly designed telematics/GPS product reflects a careful balance between an employee’s right to privacy and an employer’s legitimate need for the information.”


So That Was It, The Issue, the Question, and the Answer--Until I Picked Up a Newspaper This Week…

So simply, there was the concern and the answer, providing a brief but information filled topic that I wanted to provide more exposure to in this blog. I thought it was interesting both from a fleet and legal perspective (because of my background I’m one of those strange folks that looks for the intersection of both topics), and that was the end of that, until I was reminded of the issue this week, in two distinctly different articles in Wednesday’s issue of the Wall Street Journal (November 28, 2007). They were different articles but each dealt with the what is now the perceived issue of privacy, and when looked on together from a broader perspective, and combined with the “telematics at work” issue, really makes one think about how personal privacy is fast becoming a myth propagated by the uninformed.

The first article that I saw on the topic in the WSJ last Wednesday was in the editorial section, the “Business World” article written by long time Journal editorial writer, Holman W. Jenkins, Jr., entitled, “I Spy.” In it he highlights a new movie, “Look,” co-produced by Barry Schuler, about surveillance. Interestingly enough when combined with the topic of the second article I’ll cite from the paper that day, Jenkins’ says that Schuler began thinking about the topic when he was CEO of AOL, and "the subpoenas began arriving for access to member’s emails." It also said that “Adam Rifkin, the film’s director and screenwriter…had a similar epiphany: He was nailed by a traffic camera for running a red light.”

The film “Look” is a “loose-hanging collection of intersecting plotlines…whose stories are seen entirely from the perspective of surveillance cameras at ATM machines, high school parking lots, a department store stockroom, etc.” (Hey, it occurs to me they could have included dealership “F & I” closing rooms, as lots of those have video recording cameras running as well these days). “The characters are mostly unaware that their behavior and misbehavior is being recorded. The audience isn’t. Hence the film’s ingenious charm.” (the film apparently sports an “R” rating and was lucky to get off that easy).

The article goes on to state that Schuler’s research found that most of the nation’s 30 million closed-circuit private surveillance cameras aren’t monitored by security pros (surprise?), but manned by minimum wage teenagers, the very same folks who like to make unauthorized highlight reels and post them on YouTube… You get the drift here folks…the movie is fiction but the underlying situation is very real – this is not a movie of what may happen in the future, this is happening right now, all the time, in lots of places.

What is coming in the very near future, however, is of even more concern. “The surveillance cameras of the future will be networked – linked to each other and computers capable of face recognition and other kinds of pattern recognition, and thus able to extract information about who and what the camera is seeing.” As is quoted, “In a much-noted October speech, Donald Kerr, who serves as No. 2 overseeing the nation’s intelligence agencies, laid out a hard truth – “in our interconnected and wireless world,” he said, “anonymity- or the appearance of anonymity – is quickly becoming a thing of the past..And our only hope for “privacy” (meaning some degree of control over who has access to private information), he argued, is by trusting government.”


Okay, so is anyone concerned yet?

If not, let me move on to the final article in the Wall Street Journal, that ran the very same day, in the front page of the “Marketplace” section, the “Portals” column by Vauhini Vara, entitled, “Just How Much Do We Want to Share On Social Networks.” In this article a new automatic “service” on the social networking site Facebook is highlighted, called Beacon, which, get this, automatically follows its members around the Internet and reports back to all listed friends all of that member’s Web based transactions ( all purchases: clothes, movie tickets, books, online films etc.) – by the way, apparently a Facebook member doesn’t get a choice in this if you join this social network, which is why, I think business/professional social network sites are sorely needed that adopt the best business networking traits of social networks but thatprotect things like privacy and aren’t geared towards kids, even college kids, that frankly don’t know any better than to accept these “innovations” for the sake of feigned “closeness” with hundreds of online “friends,” any more than they yet have not gotten tired of “thrown sheep”or “pokes” from “friends.”

If you buy something from an online site that has signed up with Beacon, a note is sent to your Facebook profile automatically, and in an area of your friends Facebook account under “news feeds” which gives them updates on friends activities…and of course, an ad for the purchase site can accompany the news feed note. Its reported, “Fandango (the movie ticketing site), Blockbuster and Overstock.com are among the few dozen commercial sites on board already” – why wouldn’t every online vendor sign up, as no compensation is paid to you for the broadcast of your purchase behavior (as the article says, you get nothing from the transaction, “except the satisfaction of having yet another way to broadcast your every move to every friend”).