Rethinking Replacement Strategies
As Canada navigates shifting trade relationships and supply chain challenges, fleet managers may need to reconsider the traditional approach to asset replacement.
The weeks following Canada’s decision to end trade talks with the United States on August 21 have been tumultuous. The former prime minister Jean Chretien turned up the temperature with his speech in Gander, Newfoundland. Prime Minister Mark Carney kept the water boiling at the Canada Investment Summit in Toronto, followed by a well-received presentation to the European Parliament in Strasbourg, France. Then he confirmed France’s sovereign rights in North America by meeting France’s president, Emmanual Macron on the islands of St. Pierre and Miquelon.
It’s been hard to keep up with all the posts on social media praising Canada’s bold actions. There are a few contrary posts, like one showing American visitors in Halifax wearing Lake America shirts. But the determination of Canadians to all be on the ice together instead of in the stands, as Mr. Carney put it, has been inspirational. Shannon Proudfoot wrote in the Globe and Mail that we were viewed as “polite and condescending, basically the world’s stuffed animals.” Turns out we are alive and well, and ready to turn the table to our advantage.
A complex problem for Canadian fleets
Fleet managers are in a tough spot with this. Our fleet equipment is predominantly American-made and the experience of using European gear hasn’t always turned out well. I have purchased specialized vehicles for city maintenance from German, French, British, Irish and Italian companies and haven’t been impressed with after-sales service and parts availability.
Will it get better if we become an associate member of the European Union? I sure hope so. The equipment is well made, but when it breaks, it can be down for weeks waiting for parts. This has a major impact on operations. Buying a spare vehicle to fill in just adds to the overall cost of fleet.
Meanwhile, supply chains across Canada, the U.S., and Mexico remain uncertain. Vendors are reluctant to guarantee prices or delivery dates. CBC News reported that Flavio Volpe, president of the Automotive Parts Manufacturers' Association, said tariffs could crash the U.S. auto sector. Fleets will be left in a difficult spot if that happens.
“Preserving what you have, and know how to maintain, may be a better choice than selling too soon.”
Adding fuel to the fire
Rising diesel prices will strain many fleet budgets. Releasing fuel from national strategic reserves has softened the impact of crude oil shipments blocked at the Strait of Hormuz, but this relief will not last much longer. Conserving fuel and switching to biodiesel or electric vehicles are difficult, time-consuming measures to implement. Building charging stations takes time and money.
The diesel fuel problem looks like it will get worse over the next few months. North America has adequate supply, but the rest of the world will face shortages because of disruptions in the Middle East. I have no way of knowing how bad this will get but the news in this early autumn is not reassuring.
Longer replacement cycles
I think one solution is longer replacement cycles.
Many fleet managers have a goal of maximizing resale value when setting up replacement cycles. The notion that getting back 30% of the original cost of a fleet asset instead of 5% is hard to resist. Remarketing suppliers encourage this as their fees are often a percentage of the selling price.
In uncertain times, preserving what you have, and know how to maintain, may be a better choice than selling too soon and paying more for a replacement.
