Life is good for Hitachi Capital Vehicle Solutions’
commercial vehicle arm. Profits are up and its impressive list of
recent deal wins include an A1 specialist vehicle fleet management
contract with Connaught. Antonio Fabrizio reports.
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Hitachi Capital Vehicle Solutions’
commercial vehicle arm is gaining much of the ground lost during
the recession, largely as a result of having won a number of
sizeable deals recently.
The UK lessor – which is part of asset finance
provider Hitachi Capital, itself owned by Japanese giant Hitachi
Group – has reported a 50% increase in new business in the first
three months of this year, after signing contracts with a number of
utility companies and blue-chip firms. Its largest recent deal has
been to provide fleet management to all of Centrica’s 10,000
vehicles.
Jon Lawes, MD of Hitachi Capital’s commercial
vehicle division, said: “We have worked with Centrica since 2005
looking after both their fleet management and funding requirements.
Since then, we have funded an increasing percentage of Centrica’s
fleet, which has continued to support the increase of business, but
generally the situation is improving across the whole division. We
put funding arrangements in place with a substantial number of
firms in 2009 and we are now starting to see the benefit of
it.”
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By GlobalDataWithin the utility sector, the division has also
won a deal to provide the contract hire and maintenance of the vans
and HGVs for National Grid, one of the lessor’s historic customers.
In addition, it recently won a tender to be joint funder with
Automotive for the next two years for the NHS Blood and Transport
fleet, which is comprised of some 600 vehicles.
The most recent deal – signed a few weeks
ago – is with Connaught Environmental (see How Hitachi can ensure Connaught manages its
own risk), which operates in the UK social housing and
public sector markets for specialist vehicles worth over £2m
(€2.4m).
Staying afloat in the downturn
According to Lawes, who has been in vehicle
leasing since 1994 and with Hitachi since 2001, dealing with
blue-chip organisations with large fleets rather than smaller
companies has helped Hitachi Capital Vehicle Solutions during the
downturn. In addition, the company itself took a number of steps to
respond to the crisis, Lawes said.
“If you look at the companies we are doing business
with, they are strong organisations, which reacted quickly at the
early stages of the recession. However, we also took quite quick
action in changing ourselves and the market we are working towards,
not drastically but becoming more and more focused on robust
organisations with strong balance sheets.”
As part of this refocus, the lessor has exited the
broker market, and Lawes said his company has no plans to re-enter
it.
The vehicle solutions arm now comprises three
divisions. Alongside the commercial vehicle division – which is
based in Trowbridge, and with a team of 60 people reporting to
Lawes – there is a company car division in Newbury and a third
division in Leicester, acquired in December 2008, providing driving
instructor cars for the independent driving schools.
The total fleet size is 45,000 vehicles, of which a
little less than 18,000 are commercial vehicles. Within the
commercial vehicle unit, the lessor runs 16,500 light commercials
and car-derived vans, of which 5,500 are on a typical operating
lease with maintenance, while the other 11,000 are purely on fleet
management. Additionally, it runs 1,300 HGVs of 7.5 tonnes and
over.
The refocus and a general improvement in
the van market have had a positive effect on the company’s
profitability. Profits for the financial year ending in March 2010
reached £10m, significantly up from the £3m figure recorded in the
previous financial year.
“All in all, we are in a very different place now
from where we were a year ago. Our profits are now on the same
levels of two years ago,” Lawes said.
At the peak of the crisis in 2008, within the
lessor’s vehicle solutions division 13% of the staff were made
redundant.
Since then, however, according to Lawes, there
haven’t been any further redundancies and the company has now
“stabilised”. It currently employees 203 people across the three
vehicle solutions divisions.
The second-hand light commercial vehicle market has
also improved due to a shortage of supply in the van sector. This
has helped to fuel performance across the whole industry, and
allowed the lessor to even make a profit on van residual values.
However, the truck sector remains challenging, and Lawes said that
he does not expect recovery before 2011.
“In the used truck market, at the moment the
problem is not about oversupply, it is that demand for a
second-hand truck is much less than it would be for cars and vans –
which makes things much more challenging for us,” he said.
Even within the improved van market, Lawes
continues to be cautious.
“Despite the recent improvements, van registrations
are still 60% of what they were two years ago. Everyone is chasing
the same registrations for finance,” he said.
But he warned about the risk of price-driven
strategies to win business: “By now, we all should have learned
from this recession that driving prices down and increasing
residuals will cause another problem later on.”
Improving services
Lawes said that the relationship with the
parent company has also helped to achieve a better performance than
a number of independent competitors. The company has additionally
been investing in innovation with a number of programmes, including
a new e-commerce system which will allow customers to monitor all
of their fleet management information online.
The company has invested £1.1m in the
project – which has involved a number of specialists including IT
outsourcing service provider Harvey Nash – since it started around
six months ago. It is expected to be completed by the end of
2010.
Hitachi Capital is also investing in training and
ancillary services for customers – particularly in the case of more
complex vehicles.
All in all, Lawes said he is positive about
the future: “We must realise that because we have a recession, what
comes out of that is opportunity. We have worked with our customers
to understand their business objectives, and by taking this
approach have developed solutions that add real value.”
