Volkswagen Financial Services: In the fast lane: keep up with the evolving fleet - Knut Kroesche

Five years after taking up a role as head of international fleet at Volkswagen Financial Services (VWFS), Knut Kroesche is stepping down. Finance Director Europe asks him how the industry changed during his time, and how VWFS transformed into a major player on the international fleet stage.

When Knut Kroesche began working as head of international fleet at Volkswagen Financial Services (VWFS) in 2011, his team, he says, consisted of "just five people in a subdepartment in a small office". Five years on, as Kroesche steps down to take up new role in Germany, things couldn't look more different.

"We're now in a new building, over a number of floors with various different departments," he says. "Over the years, we've increased the number of people to 45, and we've managed to double our volume of international contracts from 50,000 to more than 100,000. In terms of tenders, we started with roughly 30 a year; by the end of 2015, it was 128 and by August this year, we were already at around 130. We can also now offer fleet in more than 30 different countries."

Of course, expanding at such a rapid pace in so many different places wasn't easy. Every day, Kroesche says, he had to wake up and try to convince people at the company that the business case for fleet made sense.

"For some countries, it was a brand-new business," he says. "In South Africa, Mexico, Brazil, even some countries in Europe, they had a fleet business, but it was a small one. Our task was to go to the country bosses, to the managing directors, and explain the value-add of the fleet business and how it works. Of course, it's high-volume and complex, but you have to convince them to invest and be prepared for the future."

Key to expansion

To aid this expansion, over a five-year period, Kroesche and his team introduced a dizzying array of new processes and products in order to create a department that could compete on the international fleet stage.

"There wasn't much in place, so we introduced an international master agreement, a fleet department with an international key account management in our headquarter and local key account managers in the respective countries. In addition, we created all the reportings, so that now we have a system where all the fleet communities in all of the countries can share tender information and contracts," he says. "We also have a tender management tool that we agreed to harmonise. Now, whenever there is a new country coming on board - in the past few years, we opened Australia, China, South Africa, Mexico and Brazil - we have a kind of blueprint that we can use."

The expansion also meant big internal changes, with new divisions and personnel introduced. "When we started, we had only the little tender team," Kroesche says. "Now, we have the key account management team acting globally, an implementation and consulting team, a sales support team, our after-sales guys who take care of the products and we have the used-car guys who act as internal re-engineering department, helping the countries bring the product up to live."

A brand apart

Perhaps the biggest change Kroesche's department underwent, however, is working with brands outside of the Volkswagen Group. "When we started, we were acting as a pure captive but now we are a multibrand captive," he says. "We agreed with our brands that we have to offer others too. When you are on an international stage, this is essential, and I think this is the biggest accomplishment we've had."

Put together with the new products and processes, Kroesche says this means his team is now in a position where it can genuinely call itself one of the world's biggest international leasing companies. "When you have a tender, the first questions they ask are: do you have a configuration tool? Do you have a reporting tool? Are you multibrand capable?" he says. "If one of these three questions is answered with a 'no' in the international fleet business, you are out of the race. This is what we installed and can properly implement, report and manage with a core product, and core processes that are reliable and stable. It means we are now really accepted as one of the big five."

While five years might not sound like a particularly long period of time, Kroesche says attitudes have changed significantly during his period, particularly among FDs. With the economic crisis affecting the bottom line of many companies, finance directors have become increasingly interested in fleet management, the costs of which are high and often difficult to gauge.

"People can underestimate how big the company cost of fleet is," Kroesche says. "Usually, it's the second-biggest cost next to HR. A 10,000-car fleet, for example, can cost $120 million a year. I think this is definitely a subject that has grown in the view and responsibility of the CFO. It's certainly a lot more present than it was a few years ago."

Lean and green

Another major change Kroesche has seen is the increased emphasis on environmental sustainability. This year, for example, Norway announced that new vehicles with combustion engines will be forbidden by 2025. Only new cars with an electric engine will be allowed. "The big towns want to solve these problems around commuting and pollution," he says. "The world is changing in this perspective, and I think we need new solutions for that. It's certainly bringing us to new electric cars. Going forward, there will be more providers, more OEMs for electric vehicles on the market. Google is talking about it, for example, and Tesla is on the market."

On top of environmental factors, Kroesche says increased urbanisation and digitisation is turning the industry from pure fleet managers into mobility providers. "Take the new generation of employees," he says. "They come to their employer and say 'I'm not keen on having a company car, just keep me mobile and give me a budget to travel'. More than ever, young people want more than just a car; they want to have this mobility chain in which a car is just one part. This need is brought by the employees to the employer, and they need someone like us to support them so that they can offer a convenient life and benefits for their staff."

All in good time

While recognising these future trends is essential, Kroesche cautions people not to get too carried away. "One thing that is sometimes forgotten is that this will not all happen at the same time, at the same place and to the same extent," he says. "Some people seem to think next year we will all have electric cars or everyone will be car sharing in every town in the world. This won't happen. If you are 25 years old and living in Berlin, it might be nice to take part in car sharing. But if you are 40 years old and have two children, and live in the countryside, you're not going to have the same priorities. In ten years, people will still be leasing cars with diesel engines even with electric cars arriving in cities. That is important for me. Companies need to take into account people's personal lives, their age, needs and the nature of the region."

At the same time, while that subtlety is important, Kroesche says as he steps down as head of international fleet, everything is in place to take VWFS fleet management into the future. "We think we've done a good job over the past five years to make sure we are up and running on the international fleet stage," he says. "Without having that knowledge and history in fleet, introducing intermodal mobility would be much more difficult. Now we are ready and prepared for the next step - developing ourselves into a mobility provider."

Knut Kroesche.
A view into the automotive tower at Volkswagen’s Autostadt in Wolfsburg, Germany.