Face to face: Keith Allen, ALD automotive

IN the constant quest among businesses to expand and build a company that towers above the rest, few think of looking down to check the foundations on which they stand will take such a load.

As the heavy burden caused by a rush of new business increases, the underpinnings of customer service, everyday management and cost control can begin to crumble.

In the leasing industry, where growth for some companies has been spectacular, the used car market and residual values hold the key to whether a company stands tall, or collapses under a heap of debt.

While the bulk of its business may be in finance and the glitzy world of new cars, there is no profit without a healthy used car market to take vehicles returning from customers and turn them into cash.

ALD Automotive, which has ambitions to continue its impressive recent growth, has a unique perspective on business that means it keeps its feet on the ground while it reaches for the stars.

If managing director Keith Allen wants a snapshot of the used car market, he can look out of a window of his offices.

And if he wants to know whether used car values are meeting expectations, he can nip outside and ask one of the salesmen working within yards of his desk. This is because ALD's Bristol headquarters plays host to a unique disposal operation, simply branded Car Supermarket, which can lay claim to being one of the most efficient in the industry.

Almost all cars that reach the end of their contract with customers come to the Bristol site, where they can be inspected for damage, repaired, serviced, valeted and put on sale in the firm's own used car supermarket, or sent off to other disposal partners.

The used car supermarket and a sister-site called Trade Zone, which disposes of high-mileage stock with more than 80,000 registered miles, currently sell about 250 units a month.

It is a valuable addition to a disposal programme that also takes in traditional routes such as other car supermarkets and used car dealers.

Just 30% of its disposals actually reach the stage of being sent to auction. New vehicles are also brought to the ALD site for inspection and preparation that helps enhance the work carried out by dealers.

So as the company sets its sights on building its fleet size to rival some of the biggest players in the market, it feels its hands-on approach will keep the business under control.

Already, this thorough approach has paid dividends in ensuring the company has kept a steady financial course, returning a profit for most of the past five years, apart from a one-off annual loss when it set aside cash to cover the unprecedented fall in used car values that hit the industry in the past few years.

Indeed, it has been such a successful approach that some rival leasing companies have been down to see how the operation works.

Its plans for growth will continue an increase in fleet size that has been ongoing for several years. Since 1999, ALD has grown from a fleet size of about 12,000 funded vehicles to more than 40,000 today.

The latest landmark in growth came in March, when parent company Societe Generale acquired Hertz Lease and its fleet size doubled.

Allen said: 'Societe Generale has been very supportive of ALD in the UK and is committed to the car leasing and fleet management markets across Europe. Indeed, this latest acquisition has now made the ALD Automotive group the second largest car leasing company in Europe, with over 500,000 vehicles managed across 17 countries.

'It is keen to see further expansion to help raise the profile and recognition of the brand and we are confident we can help it achieve this in the UK. Already, we are being considered for contracts that wouldn't have come our way when we were smaller.'

He added: 'While organic growth and maintaining our existing customer portfolio remains fundamental through providing a high level of service, achieving this goal is more likely through acquisition.'

Allen took the helm in 1999 and has been working to increase the size of the firm's funded fleet.

Innovations have included the launch of a Dealer Services business line and a personal contract purchase product, AutoChoice, which has helped boost the fleet significantly.

Current business volumes now number more than 13,000 units a year, compared to 3,800 before Allen took over.

Allen insists a focus on both investment in its people and in IT is vital to guarantee a profitable future. Technology has been an important part of the expansion, enabling the company to work more efficiently as volumes increase and helping it avoid becoming top-heavy with new staff.

For example, the firm uses Ebbon-Dacs' Leaselink software to offer customers an online vehicle procurement tool.

It has also introduced Epyx One-call, which automates the maintenance approval process in the majority of cases without human intervention. Using technology, the firm believes staff can now focus on delivering good service rather than the basic routines, so that employees can add value to the business and to customers.

ALD Automotive also offers the QuDOS online service, which allows customers to specify a new car, compare it with other models, assess options and order, and there is a link to a website offering its used cars for sale.

QuDOS also speeds up the quotation process and enables customers to view reports online.

The firm believes this investment has focused on ensuring employees are committed to helping the company grow and maintaining customer service levels despite the increased number of contracts.

Allen added: 'We have the philosophy that people should enjoy working here. Despite several changes of ownership, we have retained a consistent management team, which is very rare in this industry.

'That in turn shows our staff, including those coming on board through acquisition, that this is a company they can believe in.'

Currently, the company is ensuring that its expanded teams from the Hertz Lease acquisition effectively work together and already the company operates a standard pricing and residual value policy.

At present it has 210 employees in Bristol, 130 in Northampton (following the acquisition) and 20 in Wilmslow.

New product launches and fresh ideas lead to extra business

Despite the work to integrate ALD's new teams, there has still been time for a string of new product launches, including PoolFleet, a new 'mini-lease' concept, the publication of a new risk management guide and expansion of its employee car ownership scheme, AutoChoice 2.

The company also launched a scheme earlier in the year to help its customers register vehicles on the controversial Motor Insurance Database following new laws introduced in the EU Fourth Motor Insurance Directive.

The service gives customers simple tools to collate basic fleet data on a fortnightly basis, with ALD Automotive providing daily updates to the MID covering all the customer's vehicles, whether supplied by ALD Automotive or not.

As a result, major new contract wins are due to be announced over the next few months, to add to successful gains earlier in the year, including Air Products, Alcoa, Pfizer and Oxfam.

And while growth continues, ALD's unique view of the used car market ensures there is a constant reminder of the importance of putting profitable business before growth.

David Yates, marketing director, said: 'The used car supermarket is an excellent disposal channel for us and gives us a very accurate picture of what the used car market is really like.'

Allen added: 'We have worked hard getting the business right and getting the platform right and that has ensured we have been able to deliver sustainable results and ride out the dips on residual values.'