Survival of the fittest?

Date: Tuesday, February 22, 2011

The run up to Christmas was a turbulent period for the struggling van rental sector, but as the dust settled the winners and losers began to emerge, writes James Dallas

The predators were beginning to circle as the recession claimed three victims in the van rental sector at the tail end of 2010.

In quick succession TLS Vehicle Rental announced it was pulling out of the market having failed to find “viable alternatives”, Leaseway succumbed to financial pressure and called in the administrators, and Hitachi Capital swooped on the assets of Newtown Vehicle Rental (NVR) shortly after it fell into administration in December.
Once the dust had settled, Europcar and Northgate looked well-placed to capitalise on the opportunities presented by the demise of their competitors.
Europcar said it was “time to separate the wheat from the chaff”, and Nick Harwood, the company’s marketing and sales director, expects the biggest players to profit from the situation.
“TLS suffered issues around their fleet funding, which may affect other local players but is not an issue for larger, global players” he said.
Europcar has made additional vehicles available to customers it shared with TLS and also offered its fleet to other TLS customers.
“We are fortunate to have a large fleet and supply chain for vans,” said Harwood.  
Van rental giant Northgate claims it has already strengthened its grip on the market as the result of key competitors withdrawing from the sector, with many fleets requiring additional vans to meet the spike in demand during the busy pre-Christmas period. The company said it was in talks with more than 300 TLS customers about taking on their business on an ongoing basis.
Marketing chief Gareth Jones said: “Fleets want stability and sustainability. The upheaval taking place has been predicted for several months, which is why Northgate has ensured it has in place a wide range of vehicles for hire.”
Jones said the business failures would cause disruption in the market but that Northgate was able to offer fleets continuity of supply and service.
Leaseway’s management admitted defeat in its battle to keep afloat just days after it entered into a period of consultation with staff at its London and Birmingham branches, which was thought likely to result in the centres closing when discussions were due to end on 17 December last year. However, on 1 December, administrators Pricewaterhouse- Coopers took over the day-to-day running of the business, which also includes sites in Glasgow, Newcastle, Leeds and Manchester.
Bruce Cartwright, joint administrator and head of business recovery services at PwC in Scotland said: “The company’s directors considered various options to deliver a restructuring solution that would provide a long-term viable business. Unfortunately they concluded that this was not feasible and placed the company in administration to protect the business and assets.”
Cartwright said the immediate priority was to keep Leaseway trading to fulfil customer contracts. He added that PwC would seek to find a buyer for the whole or some parts of the business. In the four years to 2008 when the recession struck, Leaseway quadrupled its annual turnover to more than £60m. PwC said it had a fleet of 13,000 vehicles and 255 staff.

Unable to sustain scale

Upon announcing the closure of TLS, parent company GE Capital said: “TLS experienced a dramatic reduction in business during the general economic downturn and despite extensive efforts over the last two years has been unable to sustain sufficient scale to remain a viable and ongoing concern.”
At its peak in 2005, TLS ran a fleet of 25,000 vans from 26 outlets. The demise of the business resulted in 140 job losses across TLS’ head office in Sale and its four remaining branches in Glasgow, Carrington, Wednesbury and Grays. Customers still running vehicles from TLS’ fleet, which had shrunk to about 5000 units, had the option of either buying the vans or returning them to TLS for sale. A spokesman confirmed the company’s Broadway Motor Vehicle disposal operation would also close. He also stated GE had been attempting to sell TLS for several months but couldn’t find a buyer.
“It will just get the value of the vehicles,” he said.
NVR’s staff and customers were arguably more fortunate than those of TLS. Hitachi Capital Vehicles Solutions promptly acquired the business when it went into administration in December. It took on 33 NVR staff on short-term contracts; the remaining 98 left on agreed terms before the appointment of administrators. NVR ran a fleet of 7000 vans and trucks on a contract hire and rental basis from its head office in Redditch and depots in Rugby, Manchester and Heathrow. Prior to the appointment of joint administrators from Deloitte, it had an annual turnover of £41m. The sale followed unsuccessful attempts by NVR and the 25 lenders who funded its fleet to restructure the business over the previous 21 months.
Joint administrator Dominic Wong said the sale represented a better outcome for stakeholders than if the business had been forced to close.



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