Opportunities, challenges, threats, savings 

We asked a few CEO’s from different industries to share with us their opinions on business development in a present economic situation and its future. We asked the question about today’s biggest problems and challenging situation they have to face.

 

JANUSZ KOWALIK, CEO Arval Polska

The economic slowdown will cause reduction of Car Fleet Management market dynamics. Searching for savings, decreased numbers of bank loans, tightening the loan criteria – all of these have a negative impact on the economic growth and demand in our business. But as the industry and Arval Polska itself, we have a few assets, which allow for more effective management of company’s finances and that is why we hope for the market growth in 2009.

First, CFM market offer allows companies to make significant savings. Especially, it considers full operational leasing (long-term rental) with fleet direct management. Therefore, during the process of cutting and optimising costs referring to CFM offer, that is a very good solution.

Second, major group of the CFM industry clients are large corporations with a huge car fleets, which are mainly used by sales representatives. It is hard to imagine that in the time of economic crisis, such companies would search for savings in their sales departments, which operations play the key role in building a financial stability.

Third, the quality of customer’s service is becoming more and more important. And this is a really strong asset of Arval Polska. We have realised our strategy of constant and systematic quality improvement since the very beginning of our being in Poland. We were first to introduce so called “customers teams” that are exclusively dedicated to our clients. Thinking of customer service standards, we created teams that consist of employees from different departments, but dedicated to one client only. In cooperation with TNS OBOP, we run regular customers satisfaction surveys, which help us in precise identifying fields that play the key role in the quality of our services and also ease the process of implementing procedures fixing potential problems.
And the last, clients have started to value a complexity of the services and professional consulting. Our partners can profit from the knowledge and international experience of Arval Polska in the field of optimising car fleet routes and mileages.

Nowadays, when an economic situation is unstable, companies shall invest their own assets in the core business only, much more then ever before. Today, a car fleet outsourcing is the best solution for those enterprises that are willing to manage their assets and sources economically.

DOROTA UBYSZ, CEO Mobiltek S.A.

The economic slowdown has a different impact on various industries. Mobiltek operates on the market that is especially interesting, as Premium text message (SMS) services are relatively young and have not experienced any recession yet. 

Basing on the historical data, we cannot judge, how the industry will react for the current situation. We shall consider two opposite scenarios. The first one assumes that services using Premium text messages are cheap and more attractive for customers even those, who limit their expenses.

Second scenario includes those services using Premium text messages that are not necessary and will be first choice services, when cutting expenses. I can say that even nowadays Mobiltek grows very dynamically and there is no sign of any slowdown in the business environment. We believe that in the large measure it is caused by the fact of fast Internet development, especially Web 2.0, where the growth is still impressive. I suppose that results in the end of second quarter will be more reliable for our industry.

Although, it does not mean that we are not affected by the economic crisis, we can notice that in limited access to sources of financing. Both for operational goals, such as working capital as well as for the prospects of gaining an investment capital. Getting an operational financing for companies like Mobiltek, operating in IT sector and having no „hard” guarantees (such as existing premises or goods), regardless of good results and the growth rate is really hampering and requires a lot of effort and formalities. Of course, there is a need of taking actions to „heal” the situation in the finance sector, so healthy and fast growing companies could get loans easily and focus on their operations – instead of thinking how to finance their business activity with the working capital credit. So far, US government and FED actions did not result in the credit activation for corporate and individual customers. In Poland, good results were attained thanks to the additional financing by Bank of Domestic Economy (BGK), guarantees of which allowed activating corporate credits actions. However, Mobiltek will surely have to reduce its investment plans and postpone them, even they were very ambitious. On the other hand, it does not mean that we resigned from investing at all; we posses our own means, which we are going to invest if only we will see a good opportunity. The economic crisis is often a good period for enterprises that are healthy and have cash they can put in attractive investments.

ŁUKASZ WEJCHERT, Chairman of the Management Board of Onet.pl S.A.

Everyone talks about the economic crisis. In my opinion, speaking of Internet, there will be a slowdown of the growth dynamics. It shall cause certain consequences for the industry and will force many enterprises to optimise their structures and costs. There also will be fewer investments in the infrastructure. In general, in connection with the slowdown of dynamics, in the near future we will probably witness a number of consolidations and merges on the IT market. If we apply the current market situation to Onet, it is worth to mention that the best remedy for the slowdown in the Internet advertising is the income diversification. In our case, it is, most of all, Zumi, but also Sympatia – businesses, which grow dynamically. For example, since the beginning of the present year Zumi gained 30% more customers in comparison to the previous one. In January, Sympatia recorded the 40% growth of the income. Of course, we have a closer look at the costs. It is also caused by the fact that our planned investments cannot wait for the better times. Changes and necessity of adjusting to the market conditions are immanent attributes of our business. Internet, Onet and other portals users do not care about the crisis. Internet knows no boundaries or barriers and this forces the constant development.

Managing the biggest Internet business in Poland, we face challenges that have positive or negative influence on it. Consumption of Internet content changes continuously and that requires changes and adjustments we have apply to our offer. Let me say about just a few concepts that may explain where are we going: convergence, mobility, Video-Web, One-Web. I will also quote information announced by CEO Sony in one of the interviews. By 2011, almost any devices manufactured in Sony will be Internet accessible. That shows, how fast today’s forecasts and predictions become a reality. Of course, in Poland some processes take place slower. Here we face different barriers, such as investments in infrastructure, which allow creating an offer of public broadband access to the Internet – this is necessary if we want to offer services I mentioned earlier. Present market situation is not a conducive condition for such investments and we see it as a barrier for our business development.

MICHAŁ MACHLEJD, Chairman of Metropolitan Enterprise of Thermal Energetics (SPEC)

I expect that financial aid resources, including the cohesion fund, will be used faster due to uncertain perspectives in the difficult times. Energetic companies expect a clear notification on their investment classification and hastening of use of European funds. The economic crisis is a period, when investments shall not be slowed down. Circumstances are conducive for energetic companies that engage their own money – today, realisation of their investments can be cheaper due to less expensive subcontractors services.

Metropolitan Enterprise of Thermal Energetics will undertake efforts in order to stop the salaries increase. SPEC assets help to preserve the current level of employment, required to normal operations of the company. We have no plans to reduce our staff.

The biggest hindrances we face at the moment are the regulations referring to investments negotiating. Especially those that concern obtaining permissions and environmental protection are not entrepreneurs friendly and slow down the investment period.

Speaking of internal changes, which are needed for the further business development, it is a question of how much the government shall interfere on different markets. In the power industry, the main goal is to introduce the European package on climate. 

Implementation of the mechanism, in which CO2 emission fees (quasi-tax) would go back to energetic companies, would be very profitable. Today, it is uncertain whether the government is in the possession of suitable means and solutions in that field. Government actions shall prevent a reduction of the internal demand; for another time I will appeal to the needs of faster utilisation of European funds, which could effectively help to increase that demand. It is important due to the fact that our internal demand is far beneath what it needs to be.

NOTICABLE PROFITS 

Operational leasing together with management services (Full Service Leasing/Car Fleet Management) allow a financing diversification, „slimming” of the balance sheet, improving profitability indexes, clearing out the uncontrolled risk (e.g. residual value), and in many cases, noticeable savings of the operational costs. – Outsourcing of the fixed assets management, for example, through „sale and lease back”, released working capital can be reinvested in the core business activity and strengthen the company’s market position or to finance expansion on other markets. Car fleets are the perfect example – says Artur Sulewski, Commercial Director of LeasePlan Fleet Management.

Entrepreneurs often see the company’s fleet as an additional cost in the balance sheet. These costs can be easily reduced even by 30% using outsourcing of the car fleet management.

- Most of all, such companies have their ways to negotiate lower prices with subcontractors, for instance, for garage services or fuel. Also, due to the narrow specialisation they can provide the highest operational effectiveness of rendered services. As a result, small and medium companies can focus on their core business activity, instead of fleet management that does not produce any added value, but engage a lot of time and money. In case of the long-term rental from CFM company, clients have no initial cost of the vehicle purchase, and cover for its utilisation only, paying current instalments during the leasing period – explains Marek Ślepowroński, Indirect Sales Manager ALD Automotive Polska. – Nowadays, CFM companies adjust their offer to the needs of clients that search for savings. That is why, it is worth to consider fleet management outsourcing.

Full Service Leasing (FSL) is a complex service that consists of many products made to the particular fleet measure. It effects in solving a number of operational and administration problems, caused by the unassisted car fleet management. For instance, the company’s car insurance.

- Due to the specialisation of CFM companies and the range of their operations, full service leasing is also a method for generating significant savings. Full Service Leasing may reduce the total cost of fleet management by 10 to 30 percent through lowering car utilisation component costs – explains Artur Sulewski.

FSL also means tax profits. – The subject of the contract is not put in the client’s books – an amortisation allowance is written in hirer books.

Furthermore, leasing fees are recognised as a tax-deductible cost (Corporate Income Tax Act). Carefleet guarantees the same leasing fees for the whole period of the contract. That allows the client precise estimate of costs and maintain the budget balance.

Risk related to the residual value is also in the Carefleet account – explains Klaudia Kowalczyk. Possibility of the full VAT tax deduction of service instalments with maintaining a legal car value VAT deduction is an additional profit. That lowers the income tax base and fixes the cash flow – instalments are paid from the current income that is „created” by leased cars.

ANALYSIS OF DESTINATION

Fleet management begins much earlier – in the moment when an entrepreneur and CFM company start to talk about their cooperation. Mutual talks about cooperation regulations, selection of vehicles, form of leasing and effectiveness of selected brand help to optimise an offer for the particular company.

- Analysis of recent mileages, when a client managed his fleet by himself, or predicted (new fleet) to optimise maintenance costs is also important element in an appropriate offer configuration – explains Klaudia Kowalczyk. – Outsourcing of fleet management to professional company is a good solution in order to reduce and control the costs of its development and management.

We recommend such solution to those entrepreneurs that despite a difficult economic situation would not like to stop investing and continue to develop their business activities. CFM companies provide their clients with the fleet consulting and offer made to measure. – Basic factors that are always adjusted are: size of the fleet, rental period, segment, brand and model of the vehicle, engine capacity, optional equipment, service options or fleet cards - says Marek Ślepowroński. – A good selection of company’s fleet require to - first of all – an accurate analysis of goals, for which cars will be utilised and answer for the question, who is going to drive them. 

Grzegorz Stech

Entrepreneurs often see the company’s fleet as an additional cost that debit the balance sheet. These costs can be effectively reduced even by 30% thanks outsourcing of fleet management services.

Klaudia Kowalczyk, Marketing Manager Carefleet S.A.

There are significant changes on the automotive and CFM market. In connection with the economic crisis that has influence also on Polish entrepreneurs, companies reduce their investments and expenses on means of transport. The present condition of the economy is quite a challenge for CFM market in the context of internal and external processes. It seems that for the very first time, we may observe a lot of changes on that market, which will be caused by an extensive consolidation pressure related to the problem of the cash flow. In connection with the present situation, CFM market will face deep changes resulting from two main reasons; first, it seems that thesis of a strong slowdown of the sales growth in the sector is justified. The slower pace of company’s development and their investments directly causes that slowdown. Second, only companies that have a solid background of financial stable institutions will survive. CFM sector will continue to develop, but surely not so dynamically as we observed in the previous year. The current market situation will create new directions and standards of the customer service. Right now, we try to pay our business partners’ attention to the effects of the financial crisis. We run the complex information and consulting activity in the field of solutions, which may be helpful in protecting our clients from the side effects of the crisis.

Tempting offer

Paweł Partycki, Arval Polska Sales and Marketing Director

Recent years were very prosperous for the Car Fleet Management market. A number of leased cars was growing by 20% every year, and speaking of the quality point of view I have to say that majority of the companies - market leaders in their sectors – have chosen the full car fleet outsourcing. Of course, in today’s economic situation, we have to assume that such fast growth may be impossible to obtain. However, we have to notice that fleet leaseback in the framework of its outsourcing is for enterprises very attractive possibility of improving their balance and acquiring supplementary financial means, what in times of expensive credits and problems with cash flow is a very tempting offer. Forecasts predict 10% growth of the market. Nonetheless, we think that there will appear new group of clients on the market. Clients that will be able to appreciate positive economic and strategic aspects of the car fleet outsourcing, even in such poor economic conditions. We also believe in the efficacy of constant customers’ service quality improvement strategy realised by Arval from the very first day of its presence on Polish Market.