David Weiger doesn't think of himself as a truck salesman, which is a surprising admission from the president of a truck dealership. Yet Palm Peterbilt, Ft. Lauderdale, FL, has focused more on servicing trucks than selling them since it was founded in 1966.
And this service focus could become an even greater component of Palm's revenue stream in the future — perhaps as much as 30% to 40% of its overall business over the next 10 years.
The dealership has been handling preventive maintenance (PM) agreements for years, but sees more outsourcing opportunities for a number of reasons: Trucks are more complex; the cost of building and equipping facilities has grown; and technicians are in short supply.
Weiger contends that more fleets are considering outsourcing some, if not all, of their maintenance because they simply can't afford to spend precious capital on facilities, parts and personnel when it's needed to pay drivers and buy equipment. “That's why truck sales are almost an afterthought for us; the maintenance service capability behind the truck is what's critical to selling it,” he says.
Many truckstops echo Weiger's view, although some point out that maintenance outsourcing is still a trend that's developing slowly.
“The fixed costs of building and staffing a maintenance center for trucks are pretty big. And it's even bigger for trailers, which outnumber tractors 2-to-1 or 3-to-1 at most fleets,” says Randy Graham, vp-shop marketing for Travel Centers of America (TA), a Westlake, OH-based chain of 152 truckstops and travel plazas.
“Many fleets are now trying to focus that maintenance expense on major repairs such as engine overhauls and chassis and body work, for example, while outsourcing easier PM tasks like oil changes to networks like ours,” Graham says. “But despite a strong push for outsourcing that started five years ago, we've only seen some increase — not the groundswell that was predicted,” he adds.
However, offering maintenance — especially now that some truckstops have partnered with OEMs to offer warranty-covered service — has proved critical to making truckstops true “one stop shops” for everything a trucker might need: food, fuel, maintenance, showers, etc.
Dave Latimer, vp-operations for the Petro Lube division of the Petro Stopping Centers, believes “outsourcing will still grow, especially because the new EGR engines are putting more pressure on fleet maintenance organizations.”
Dealerships and truckstops also think they are in a good position to win maintenance business from fleets because fleets still prefer to buy equipment rather than lease it. According to Havill & Co., a transportation and consulting firm, 88% of commercial vehicles are owned, while only 12% are leased.
For the 2,000 franchised medium- and heavy-duty truck dealers in the U.S., gaining more maintenance business from fleets relies on two strategies. The first is better and bigger facilities, designed to accommodate a wider variety customer needs at a faster pace. For example, in recent years Palm Peterbilt has invested heavily in truck service equipment. The company's Ft. Lauderdale location has 58 service bays and its Ft. Pierce facility has 20 bays, with its Ft. Meyer's operation just south of Tampa soon to be upgraded to a full-service location. Palm also has its own 24-hour emergency roadside service and mobile lube technician teams to serve fleet customers.
The dealership has Heliarch welding equipment to boost repair and custom fabrication capabilities, as well as front-end machines to expand its warranty repair options on Peterbilt and General Motors trucks.
“The trucking industry is a business where the vehicle has to be on the road for the customer to make money,” says Steve Keate, president of International Truck & Engine Corp.'s truck division. “If the vehicle is down for even a short period of time, it is devastating to that customer's business. So the customer is now looking to the dealer for support to help keep it running.”
Dealers must now be ready to go well beyond merely selling trucks to being an “insurance policy” for the customer in case problems develop, says Keate. That means not only handling the initial purchase decision, but helping the customer spec' the right truck for their application and being a point of contact for emergency service, he adds.
To help customers minimize downtime, Keate believes dealers must also move beyond merely being a local service and parts provider. They must fill the gaps in the customer's maintenance network and become more of a business partner for the customer over the life cycle of their vehicles.
That means dealers must work more closely together within national networks, providing support to each other's customers. Keate says the number of service locations, not the number of dealers per se, will become the critical measuring stick in the future.
International also plans to shift from 400 dealers and 1,000 retail outlets today to 200 dealers and 1,500 retail outlets in the future.
That's because scale and technical skills will be the key ingredients for future success, says Keate. “They'll need to make investments to retain skilled technicians and other personnel so they can have the resource capability the customer will need.”
The second strategy involves linking independent dealers into a quasi-national network guided by an OEM-sponsored maintenance program. In Palm's case, Peterbilt Motor Co.'s TruckCare program provides that vital connection to Peterbilt's 205 other U.S. and Canadian dealers, as well as customers.
“Most of the PM business we do is local, but we are now getting a growing percentage of national business coming through TruckCare,” explains Weiger. “It also allows the customer to track maintenance records via the Internet and calculate maintenance costs at the click of a mouse.”
In addition, TruckCare offers 24/7 emergency roadside service, as well as standard pricing for maintenance services across Peterbilt's dealership network.
Peterbilt's sister company, Kenworth Truck Co., set up the PremierCare Managed Maintenance Program for its 296 dealers for the same reasons, says Paul Skoog, director of dealer support. “PremierCare is an all-makes service, as well,” he adds. “We have several fleets that are PremierCare customers that don't own Kenworth trucks.
“But then we don't just sell trucks. A salesperson may sell a customer their first Kenworth truck, but we believe that our service and support sell the rest of them.”
Bob Post, Kenworth's national service sales manager, says programs like PremierCare are one way a fleet can manage its maintenance service work via a single maintenance agreement. “They can keep track of all the maintenance performed on their trucks, using one of five maintenance options, all of which are customized based on a vehicle's annual mileage, maintenance intervals, level of inspection service and type of payment,” he explains.
According to Post, the options range from pre-packaged preventive maintenance to active maintenance management for a fee. “The dealer knows when you are coming in, what services you need, and any special requirements you might have,” he says. “All of this is designed to minimize waiting time and get your truck back on the road as soon as possible.”
Adding safety inspections to the maintenance service mix also helps discover potential problems that can be fixed while the vehicle is in the shop. “This is far less expensive than ignoring the problem and letting it turn into a breakdown on the road, where you have to deal with unplanned downtime, costly labor bills, and perhaps a large tow fee,” Post notes.
Another key to the dealer maintenance strategy on the OEM side is to offer a menu of PM options, giving fleets a way to choose the exact maintenance program they want, says Erik Binns, TruckCare brand manager at Peterbilt.
“We offer eight different PM programs — five on the Class 8 side and three on the medium-duty side,” he says.
“It gives them a range of options, instead of just choosing between a full-service lease where all maintenance is covered and handling it themselves,” adds Binns. “Yet it also recognizes that as trucks become more complex, the fleet's ability to maintain them all on their own becomes more limited.”
Another outsourcing option for fleets has developed from the partnerships OEMs are forming with national truckstop chains. There are 1,200 travel plazas and truckstops nationwide, generating an estimated $42 billion in revenues a year, and they offer another potential maintenance outsourcing resource fleets can use.
Freightliner LLC took the first step in this direction by joining forces with TA in 1999, linking its now-700 dealer network to TA's U.S. locations. While the agreement stipulated that Freightliner dealers would remain the primary service provider for their nameplates, it allowed TA to offer warranty coverage for several kinds of light repairs on Freightliner models. This increased the number of locations where fleets could have Freightliners serviced, says TA's Graham.
“The Freightliner relationship allows us to file warranty claims for the fleet,” he says. “For warranty-covered work, they just drive away without paying anything — that can be a cash flow savings right there.”
The partnership with Freightliner also helps TA become more attractive as a one-stop shop for fleets as well at the 145 locations where it offers PM services. “Not only are we now a center for both warranty and non-warranty maintenance — oil changes, DOT inspections, etc. — drivers can also get a meal, a shower, watch a movie, and refuel,” says Graham. “Our travel plazas are typically located right off the highway, minimizing the out of route miles a truck has to travel for service.”
Graham notes that each TA maintenance center uses the Internet to provide consolidated PM tracking and reporting, mirroring the same paperless record-keeping service offered by dealers.
Volvo Trucks North America bought a stake in El Paso, TX-based Petro Stopping Centers two years ago, to become Petro's second-largest equity holder after Exxon/Mobil. The deal expanded Volvo's ability to provide customers with additional maintenance services on a 24/7 basis at 57 Petro Lube facilities. Petro Lube complements Volvo's network of full-service dealer facilities and is a preferred vendor for Volvo Action Service, the OEM's round-the-clock customer support center.
Petro also has a partnership with Cummins Engine Co., enabling it to offer limited warranty coverage on Cummins engines. More than 25 Cummins services are offered, including repair of air compressors and support brackets, alternators, belt tensioners, coolant pumps, starters, and fuel lift pumps.
Truckstop organizations see themselves as complementing, rather than competing with, dealers for fleets' outsourced maintenance business. “We view the OEM dealer as the hospital, while we act as the emergency care clinic,” says Dave Latimer, vp-operations at Petro Lube. “We are offering light repair services, oil changes, tire work, some electrical work, brake jobs, DOT inspections — anything we can do in two hours or less. We refer the heavy chassis and engine work to dealers.”
TA's Graham agrees. “Dealers are set up to do heavy work. Sometimes they'll refer light work to us, especially if a customer that needs a 30-minute oil change has to wait behind a six-hour axle repair job.”
WHAT'S IN STORE?
To what extent will fleets outsource maintenance in the future? Will they choose dealers or truckstops to provide it? We don't have definitive answers, but both dealers and truckstops are convinced they have the right mix of services to be the provider of choice.
Kenworth's Post believes more and more fleets are deciding to leave the headaches of truck maintenance to someone else — and that someone else, he hopes, is a truck dealer. “In today's environment it's becoming more difficult to run a shop, especially considering ever-changing environmental regulations, a shortage of truck repair technicians, and the recent introduction of engines with EGR technology,” Post says.
According to Post, those “headaches” have led to more outsourcing. “Our figures show nearly half of all fleets currently outsource some maintenance. That's up significantly from just a few years ago. We expect the trend to continue.”