Does this summer’s announcement that Hertz is acquiring Donlen Fleet Management suggest that we may see an entirely new model of fleet management emerge to rival traditional, leased fleet management? To get a handle on the question, let’s think about what some of the advantages of a major new rental/leased fleet management combine might be.
For one, Hertz and Donlen buy and sell a heck of a lot of vehicles every year. Can you imagine the economies of process and scale that can be obtained in this functional area alone? Total cost of ownership has a lot to do with acquisition cost and disposition proceeds. Could this give the rental/lease combine a defining advantage over traditional fleet leasing management?
Then there’s the issue of creative talent, combining the best of breed from two diverse teams with a widening breadth of skills. Will this pooling of intellectual capital from two different perspectives be the catalyst for ingenious new ideas that couldn’t come from either business alone? Will destructive innovation change the market and industry like a true “inflection point” that will concern most and benefit some?
And what about comparative financing costs? Does the new rental/lease fleet management model, with its larger and more diversified asset portfolios, command better financial terms than traditional fleet leasing companies? On the other hand, could the combination of a leasing and rental business become a financial disadvantage to either?
Finally, it’s undeniable that a bigger fleet management enterprise has the opportunity to achieve greater economies of scale in information technology. The combine’s cost of building and maintaining technology can surely be leveraged, as it develops innovative means and ways to build out applications and systems that support the growth and efficiency of an enterprise that straddles two markets and business models.
So if all this adds up to a net advantage for the combined rental/lease model, the real question is whether or not it actually translates into demonstrated added value to potential customers when they make sourcing decisions. Unless and until those added values can be delivered to customer fleet accounts, not much disruptive change in the market will occur. And as we see, at least for now, many questions remain unanswered at this point.
Good luck to the market and to our industry.