Element Fleet Management Corp is restructuring to improve its financial performance, strengthen the balance sheet, and position the business for growth.
The product of a four-month strategic review, the plan will simplify the organizational structure by reducing the nine existing layers of the organization to five, and will streamline operations through initiatives such as automating manual processes to reduce errors and improve cycle times.
The changes are projected to generate an estimated $150 million in run-rate pre-tax operating income improvements in the fleet management business by the end of 2020. The company will invest $150 million investment in the business to achieve those improvements, which will be funded in part by capital retained after reducing the quarterly dividend, and the introduction of a dividend reinvestment plan. It will also buy the remaining assets of 19th Capital and wind the business down.
The changes will be managed in three phases, beginning immediately, with $40 million in savings to be realized by the end of 2018 from the implementation of over 50 initiatives including organizational redesign, supplier management, revenue assurance and cost cutting. In 2019, another 25 projects will add $100 million of pre-tax profitability. These projects will include improving customer service delivery, optimizing the go-to-market strategy and pricing model, improving customer acquisition and retention, better managing rebates and procurement, and increased automation and organizational simplification. A final five to 10 projects will come on stream in 2020.
Leadership changes have been made to support the restructuring: In recent weeks, the company added Jacqui McGillivray as Chief Human Resources Officer and Scott Davidson as Executive Vice President, Corporate Development. This is in addition to the previously announced appointments of Jay Forbes, effective June 1st, and new Chief Financial Officer Vito Culmone, effective July 16th. This also includes naming Jim Halliday as Chief Operating Officer.