COVER STORIES Hunt Valley firm keeps Corporate America, Maryland on the road

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George J. Kilroy refuses to discuss the annual maintenance of his own car, but he’s quick to boast about the services offered by PHH Arval to clients who lease more than 310,000 vehicles from the Hunt Valley-based company.

George J. Kilroy, PHH Arval’s president and chief executive, says, ‘We understand our core business and our core market. We don’t want to go out and buy a food company. We are looking for an opportunity that services the same corporate market.’

Kilroy, 53, who joined the company 25 years ago as an account executive in the truck division and was promoted to president and CEO in March 2001 when Cendant Corp. acquired PHH, is watching over a company with 3,000 clients and just under $1.2 billion in annual revenue.Since Cendant purchased PHH just over a year ago to add to its $8.9 billion conglomerate, PHH has maintained its sure but steady 10 percent annual growth — and also has been given the chance to look at acquisitions — a position foreign to the firm under its own steam and then as a part of Avis Rent-A-Car.“When we were part of Avis, acquisitions were not part of our strategy,” said Kilroy. “Under Cendant, I’m spending more of my time looking for acquisitions.”And in doing so, he’s seeking, what he calls “adjacent” businesses or “exactly like us” entities. “We understand our core business and our core market,” he said. “We don’t want to go out and buy a food company. We are looking for an opportunity that services the same corporate market.”Earlier this year, PHH completed the acquisition of drivershield.com FS Corp., which provides comprehensive collision management services to corporate fleets. As one of the world’s largest providers of collision management, it has more than 260,000 vehicles under accident management.PHH is all about vehicles for corporations — whether it’s a fleet of 50 or 5,000 — and providing ways to save on fleet expenses.Real-timeThe message pops up instantaneously on the monitor: Car ABC was involved in a fatal accident. Damages in excess of $10,000. Cause may be alcohol-related.Not something a fleet manager at a corporation wants to hear, but the sooner he knows the better.It’s just one of the services PHH Arval, which has been a major player in Baltimore’s corporate arena since the mid-1940s, offers its clients.It was in mid-1997 when Mark Miller, newly named CEO of PHH, made his first executive decision. He would fund an interactive site for the clients that would answer all their questions about fleet management in real time.Up until that time, PHH sent stacks of invoices several feet tall for clients to weed through as they assessed the wear and tear on their vehicles. The information, by the time it reached the clients’ desks, was weeks old and required another week for the creation of spreadsheets.But now, within minutes, the client can assess the money being spent on the entire fleet — or a single vehicle. And, he can determine where the money is going.For instance, if marine fuel is being billed to the corporation every Friday and the client isn’t a wildlife and fisheries department, then it’s a sure thing the driver is filling up his motorboat for the weekend.Or if gasoline expenses seem out of line considering the price per gallon hovers near $1.25, it’s possible to check to see if drivers are using the more costly premium gasoline.At the same time, clients can contrast and compare the costs of various vehicles by inputting their specific parameters. Almost instantly, the site gives the cost per mile — including fuel and maintenance — based on the individual client’s use of the vehicle.The same services are offered for the global sourcing executive managing 10,000 vehicles or the fleet manager in charge of 50 to 100 cars.“Our fee-based business is growing faster than our asset-base or leasing part,” said Kilroy.In addition, where once PHH dealt almost exclusively in automobiles, the ratio is now split 50-50 between automobiles and light-duty trucks, which includes SUVs.“It just mirrors the population,” says Kilroy. “More people want to drive SUVs. Plus, we’ve signed up a lot of companies with service requirements so they need to have a place to carry tools.”So when does a company know it needs an outside firm to manage its fleet? Kilroy says it’s really relative to the company’s expenses. If the fleet is 10 percent of SG&A (salaries, general and administrative expenses), then it doesn’t matter if the fleet is 500 or 5,000, it makes sense to check the savings with an outside firm.Also, the bigger the fleet and the more spread out the vehicles, the more a fleet manager can help, he said.The average fleet size of a PHH client is just under 200 vehicles, while two-thirds of the active clients have fewer than 100 vehicles.In March, PHH introduced its latest version of PHH InterActive, through which clients can access unit notices on fleet vehicles, perform electronic billing functions, and capture, track and update information on drivers, service cards and vehicle units.In addition, PHH FleetSense provides a measurement of fleet costs without the hassle of odometer reporting.With some 10,000 PHH client users having access to the InterActive Web site, the site averages more than 2 million hits per month for an average of 110,000 hits each day. The data warehouse is more than a terabyte and is growing at the rate of 18 gigabytes per month, according to PHH. For those who might be byte-challenged, a terabyte is 1 trillion bytes and growing at 18 billion bytes a month — and that’s pretty big.But then, fleet management is a sizable business. Former CEO Miller, now president and COO of Cendant’s Travel Division, noted that U.S. companies spend more than $150 billion a year in depreciation and operating expenses for fleet-related vehicle needs.A 500-vehicle fleet of sales and service vehicles is valued at $95 million in assets and generates operating costs that can surpass $3.5 million a year, according to the company.At the same time, PHH said, in a typical sales force, the revenue-generative capability of a salesperson is $250 to $500 an hour; therefore, it pays to keep them on the road.In the beginningWhen PHH was founded in 1946, no one was thinking in bytes, let alone terabytes. Duane Peterson, Harley Howell and Dick Heather were having lunch when Howell proposed the idea to form a company that would assist corporations with their fleet management.“I was impatient to go through the pleasantries so I could spring my brainchild on my good friends,” Howell would write after the luncheon. “I counted heavily on their reactions — good or bad — because I knew they were both thoroughly acquainted with salesmen’s car plans and well qualified to judge my management service idea.”During the first years of operation, the drivers recorded daily mileage and other expenses on worksheets that were forwarded to PHH. The data was recorded on strips of paper and hung on a pegboard.From an accumulation of these strips, PHH produced a comprehensive series of reports on the vehicles for each client. It took five months from the time PHH opened its doors April 1, 1946, to sign on the first client, Gibson Art Co. The Big Three automakers, however, were only supplying vehicle to pre-war customers, so PHH — desperate to get its new client a fleet of cars — signed on with the Studebaker Corp. to provide 25 cars a month for Gibson Art.By the end of 1946, PHH also had signed on Johnson & Johnson and Textron Inc.Since its founding when PHH employed only two workers, it has grown to 1,300 in the U.S. and Canada.Eventually, PHH added relocation services and a mortgage company.“We ran that mortgage company and for 10 years wondered why we got into that business,” said Kilroy. “Today it’s the second largest mortgage origination company in the U.S. It does one out of every five closings in the company.”Known as U.S. Mortgage under PHH, it is now Cendant Mortgage, still headquartered in New Jersey. The relocation services arm remains in Connecticut.Only a fleet management companyOn a recent visit to the Hunt Valley headquarters, a flashy black car was parked outside the entrance. It was up for grabs in an employee-of-the-week competition.Kilroy couldn’t emphasize enough the need to retain employees — especially those in the call centers. “Those drivers are on a pay phone or a cell phone. They need an answer immediately. They don’t need someone who says they have to call them back,” Kilroy said.It takes three to six months of training before a call center employee is competent to work the phones alone. “Recruiting is important, retention is important,” he said. “We’re in the service business. Half of the 1,000 employees who work here at PHH talk to clients directly.”Rita Ennis, senior vice president of human resources, looks for employees who can form a partnership with PHH.“We hire for intelligence, listening skills, consultative capability, service orientation, and we give people the authority and latitude to deliver that service.”In retaining employees, she said, “Our statistics are enviable. We hire people we respect.” The voluntary turnover rate is 10 percent while the total annual turnover is about 18 percent. Other call centers can boast annual turnover rates of 60 percent (MBNA) to 400 percent (General Electric), she said. “A really top call center will have a 50 percent turnover rate.”The biggest challenge in hiring and training has been trying to keep up with growth — especially when large clients are signed on who need immediate attention. “What a wonderful problem,” she said.The information is passed on from a pro to a rookie by working side-by-side. A rookie normally gets the call about where to buy new cars before he answers a call for a traffic accident, she said.