It’s been a task of epic proportions, but the amalgamation of the Lloyds Autolease and Lex leasing operations is finally nearing completion.

Lex Autolease has been almost 24 months in the making, a result of Lloyds TSB’s acquisition of HBOS. Much of the process has been overseen by Nigel Stead, the highly experienced managing director.

But with the job almost finished, Stead announced the worst kept secret in fleet: he would retire at the end of 2010 (actually semi retirement – he remains on the board at Athlon Car Fleet International, Lex Autolease’s partner in the pan-European alliance Fleet Synergy, and is tipped for a number of non-executive roles).

Rick Francis has been handed responsibility for taking the merged business forward. This, arguably, presents a greater challenge.

Lex Autolease dominates the leasing sector. It’s more than twice the size of the No2, LeasePlan, and that has been the source of some concern for fleets. Tales of breakdowns in customer service permeate the sector, but in fairness to Stead they were almost inevitable.

This was a merger on an unprecedented scale: there had to be some fall-out. However, that fall-out has been on a smaller scale than the paper figures at first suggest.

Fleet size has fallen by 64,885 vehicles to 307,133 (2008-2010, FN50 figures), but Francis says much of this was a strategic decision to withdraw from low margin business.

It included a lengthy run off of the Bank of Scotland Vehicle Finance operation, totalling 35,000 units, which will be concluded by June.

The broker business was trimmed back to around 31,000 units, but Francis anticipates growing this channel, possibly by a few thousand vehicles.

“We have significantly improved returns in this channel and the value drive, for example an increase in ‘with maintenance’ contracts,” he tells Fleet News in his first sit down interview with the fleet press. “We want to slowly grow this channel now.”
With four-fifths of the sales channels now merged (see panel below left), he is looking forward to finally taking the business forward.

“After Transition Five , we will have two or three months to clear up stuff,” Francis says. “Then we can start for the first time in a long while to improve the business rather than fix it. This is a big step for us.

“We have a large volume of ideas because we have re-examined every operational aspect of the business. We have had up to 50 people working full time on this and a cycle of 50 supporting them.”

Over the next 12-18 months, Lex Autolease will start exploiting its scale to the benefit of its fleet customers. Stead talked guardedly about the opportunities this would present; Francis is more candid about the impact that the removal of the “distraction” of integration brings.

“Customer service 100% right, 100% of the time is key. Do what the customer wants and stick to it – that’s the real value premium,” he says.

“We have a tremendous opportunity to leverage our scale and our learning. We want to go through a period of translating that ability back into customer service.”

Huge swathes of cost have been stripped out which will boost efficiency and competitive pricing.

However, while those costs included the net redundancy of 100 staff – fewer than initially expected – and the imminent closure of the Chester site, the biggest saving has come from merging two IT systems into one.

That alone sliced £10 million off the cost base.

For Francis, the savings are almost a side issue. He’s far more interested in discussing the areas of best practice that have been identified as a result of bringing together two leasing operations with decades of experience and knowledge.

There are many examples, but he highlights two: data usage and advice.

With its vast customer database covering every type and size of business, Lex Autolease has unrivalled access to fleet best practice. It intends to create a flexible way to share its knowledge to help fleets operate more efficiently and cheaply.

Advice, meanwhile, concerns how Lex Autolease’s consultancy arms are deployed, the quality and depth of their advice and how they bring back learnings that can be shared across the customer base.

“This is powerful for us because of our various customer footprints, for example sharing corporate ideas with small fleets,” Francis says.

Growth will come from all channels. The prospects in the corporate market (fleets with more than 500 vehicles) are “very strong”, particularly in vans. Around a third of the fleet is corporate and it grew last year.

The wins in corporate are relatively easy; far more difficult is the regional 50-500 sector. Here, where business is based on relationships, Lex Autolease has seen its volumes slowly eroding.

Reversing the trend centres on better understanding customers’ wants and needs, but also rebalancing prices. Staff have a key role to play.

“We have protected our people and their knowledge during the integration in order to retain their relationships with our customers,” says Francis.

Lex Autolease is competing hard on all fronts: the SME and captive motor markets are also in its sights.

The loss of the Ford business – due to Lex Autolease’s lack of European coverage – was “not part of the game plan”, but Francis believes the proposition for fleets with 5-50 units and white label business is strong.

“We have a range of products and a service offering that is good,” he says. “We have demonstrable growth in that market where we are the back office provider. We have the ability and the hunger.”

A decade spent working at Lex

By the end of the year, Rick Francis will have spent a decade working at Lex Autolease – most of it at the Lex operation.

Prior to his appointment as managing director, Francis was operations director at Lex Autolease, working alongside former MD Nigel Stead during the most intense parts of the integration process.

His new role amalgamates both positions.

Before that, he had a number of senior roles including managing director of Bank of
Scotland Vehicle Finance and interim managing director and finance director for Lex Vehicle Leasing. He has also worked in the broker industry, which will help him as he looks to build business in that sector.

Merging two giants of contract hire

“We started with the principle of which operating platform to choose,” says Rick Francis of the integration of Lex and Autolease. “We chose Autolease. Why? Cost – the Lex platform was expensive.”

Capability was build into the Autolease system to accommodate elements of the Lex business, such as white label products.

The next step was to merge each channel in turn.

Under review
Lloyds Banking Group’ strategic review of its business has again set tongues wagging about the future of Lex Autolease.

Rick Francis is relaxed: “We are a very strong, financially robust
business,” he says. “We have one of the highest returns within the bank because we are a service business, not just a lender. It means higher returns.”

The review is expected to be completed by mid year. But with few companies with a spare £3 billion, the most likely outcome is that Lex Autolease will remain part of Lloyds.