VW INTERVIEW: Recession leads VW to revamp business car dealer operation
08 June 2009
"Profitability of the network is important - if dealers don't make money they can't deliver the VW level of service to customers," Vince Kinner
Paul Barker speaks to the Volkswagen fleet boss Vince Kinner about the brand's plans to transform the way in which it conducts its business with the fleet market - and with its network of dealers in particular
The recession is, predictably, forcing every business to look again at how it operates. In the good times, potential efficiencies or better ways of maximising profit can go unnoticed, but at the moment every income stream is under critical analysis.
Volkswagen is no exception. The UK's number three brand is planning some changes to the way it does business with the fleet market, primarily aimed at providing better service through its network of fleet dealers.
The German brand is to take back control of its fleet transactions with a revamp of its 'agency' system of supplying cars to corporate customers.
"We sell the car to a fleet customer and the dealer transacts - acts as an agent - and we pay them a guaranteed commission," VW fleet boss Vince Kinner tells BusinessCar. "But the levels of support they're having to put into the marketplace means we need to find a way to help them."
Kinner says the dealers have two problems, in that they are also loading their own commission into the transaction price agreed with a leasing firm or fleet, and that their cost base is higher than it needs to be.
The changes, due to be nailed down and confirmed to the market in the third quarter of 2009, will see VW headquarters take the transactions' debt and admin burden from dealers.
"Later this year we'll get back to transactions being more recognisable as between VW and the customer," says Kinner. "We need to make the agency process so complete that the customer feels like they are getting good value for money."
Kinner says the leasing industry has a service level agreement with the network that should be with the manufacturer, with VW taking responsibility for the retailer delivering on the promises.
"It's a huge job. It's very hard for the industry to adapt to different processes when most companies operate in a more traditional way but we're confident it can be done," he says. "But profitability of the network is important - if dealers don't make money they can't deliver the VW level of service to customers.
"We've got plans I can't share yet; we'll be more focussed about how we allocate cars to retailers and how we reward commission," he says. "There will be an announcement during Q3 and we're starting to talk to leasing companies now."
The move follows last year's focus on job charges to come up with standard nationwide prices for service or replacement-part work to avoid losing out to independent operators. Kinner claims "every major leasing company bar one" has signed up. "It's a combination of being competitive on labour and parts and the level of service you deliver. I'm confident the selling side will go hand-in-hand with that."
Kinner is also hoping VW's fleet specialist dealers will make greater inroads into the SME market. "We're very keen to encourage dealers to talk to SMEs. Fleets with 100 cars or less buy 30 per year, but some of those fleets could be one or two per year and that's the market for dealers, but they do get distracted," he comments. "We're trying to get across the principle that they should leave the big fleets to us and we'll bring them to you, and you concentrate on smaller business. SME is a huge operation and we don't have enough to deal with it all, but we have enough dealers with fleet departments."
Kinner also says fleets are starting to talk less about solus deals, although there is still a movement toward less choice on company car policies.
"It feels like fleets are trying to narrow choice between brands, but there is still choice out there. There's not as much talk about solus deals as there used to be," he says. "The solus deal expectation is that we'll sell cars at cost and we just won't do that. I'm happier with choice and I'm happy to sit VW against other brands."
Kinner feels VW will be one of the brands to benefit from the current financial climate.
"So many customers are sat waiting, but when they come back I'm confident we'll be one of the winners," he says. "We're getting asked to quote by fleets we've not spoken to before. VW is one of the brands less affected by difficulties in the market; people are looking for brands they have confidence in."
But Kinner feels the business car dynamic will have changed when we eventually move out of recession.
"There will be more careful consideration in the way people choose and spec their car, and at company car manager level I'm hoping for a bit more focus on making sure they've got the fleet structured in the best way to manage costs.
"We've gone through the good years of wide choice, now we need to get back to choosing the right car for the right job."
Part of that, according to Kinner, is an education process about VW's range of technologies.
"Bluemotion has a role to play, but I don't see Bluemotion as the absolute driving force behind VW fleet this year," he says. "We need to get the message across about other technology - TSI is one of the best-kept secrets we've got."
VW is leading the way in small-capacity turbocharged engines, such as its 1.4 TSI unit, that provide the power of a larger unit with the economy and emissions of a smaller one.
"People who decide what goes on company car lists are making a clearer association on saving money by providing cars that are cleaner," he says. "I'm not sure they've made the connection that they are really looking for cars that deliver more power from smaller engines."