EXCLUSIVE INTERVIEW: Lex fleet size may drop to improve service
30 April 2007
Jon Walden, MD of the UK's largest lease firm, Lex, and second only to the Chancellor in the BusinessCar Power List, speaks exclusively to us about how he sees the market developing and Lex's plans for the year ahead.
Business may be going extremely well for Lex, but managing director Jon Walden is still taking a cautious approach to the future.
By his own admission things are good: "Lex had a very good year in 2006 - our profit was up 22% to £64m before tax." The leasing company has also just secured what could be the largest contract, in terms of vehicle numbers, the market will see this year with a 6000-strong deal with Rentokil.
Yet despite what looks like a strong market for car sales, Walden plans to keep vehicle numbers from running out of control.
"Our ambition is still to become a world-class company in our market, so it's about quality not quantity, and you may even see our fleet size drop.
"If we have to give up scale to do this I will do for quality, for our customers. We're not a pile them high, sell them cheap firm."
Walden's caution is not limited to his own business, however, and he sounds a warning to rival fleet firms who he thinks are being overly optimistic.
He explains: "The overall contract hire market is still benefiting from a strong economy. Looking over time, there's still a strong demand for fleet vehicles, but margins are under pressure and some firms are setting unrealistic growth targets and incentives for their sales people to go out and get the business.
"It may be strong in terms of units but margins are under pressure."
Part of the reason for the market's performance and the ability for contract hire companies to strike what look like attractive deals is residual value strength.
Walden says: "Values have been holding up well in the past 12 months and on some cars we've seen small increases, but there has to be a big health warning with this.
“There's still a strong demand for fleet vehicles, but margins are under pressure and some firms are setting unrealistic growth targets and incentives for their sales people to go out and get the business.”
"We've seen values go up before, but in 2000 we saw a collapse. It's a cautionary note."
Walden, who is known for only talking about business projects that have come to fruition, hinted at a few projects that were still at the planning stage.
"On the customer front, it's about service and speed of service. Why do customers have to wait six months or more for a car?
"People say this is the age of instant gratification. I had a letter from a customer recently who's ordered a car that had just come out and there was an eight-month wait before it was due to arrive.
"Or, what about getting your car serviced? Why should that take two weeks?"
Walden attributes the public's change in attitude toward waiting for a service or product to the internet making people generally less tolerant to delays.
As for a solution, Walden says Lex is still at the thinking stage. However, he did say: "We'll work with the supply chain. I think it's a historic attitude [of this industry] and a sharpening of attitudes is needed because customers are experiencing better elsewhere.
"That will keep Lex at the forefront of the business."