3 Oct 18

Troubled Element announces “transformational reset”

Element Fleet Management, Arval’s North American alliance partner, has announced a plan to enhance its customer experience, improve its financial performance, strengthen its balance sheet and position the company for growth. Element CEO Jay Forbes calls the plan “a transformational reset”. 

Headquartered in Toronto, Element is North America's largest commercial vehicle financier. It has a portfolio of more than a million trucks and pieces of industrial equipment.

General Electric
The company grew to its current size following a series of acquisitions, including the takeover in 2015 of General Electric's fleet business in North America (Arval acquired the GE's European fleet business). 

Recently, the company has been experiencing growing pains and is losing clients. Peaking at $15 after its acquisition of GE's fleet business, Element's stock price has since steadily declined, to $6.70 last Monday. 

A former CEO of Manitoba Telecom Services and other formerly struggling companies, Mr Forbes has a reputation as a 'turnaround expert'. He was hired for the top job at Element last June, following a strategic review by the company's board of directors that failed to find a buyer for the company. 

Five points
His turnaround plan for Element consists of the following five points:

  • Improving the customer experience and streamlining the business to boost annual profits by $150 million by the end of 2020;
  • Investing $150 million investment in the business to achieve those improvements, funded in part with a 40-per-cent reduction in Element’s quarterly dividend;
  • Taking full control of 19th Capital Group, a failing truck-leasing joint venture based in Indianapolis. Element will take a $360-million tax charge as it winds down the business over the next 36 months.
  • Strengthening the Company’s balance sheet through a $300 million offering of common shares, in order to remain attractive for investors;
  • A clear accountability plan, including a Transformation Management Office run by a leading global consulting firm.

Nine layers
All parts of the plan build on Element’s strong foundations and aim to strengthen Element’s customer focus, while putting legacy issues behind it.

Since his arrival a mere four months ago, Mr Forbes has launched a total of 80 initiatives to improve operations and profitability at Element, including the simplification of Element's organisational structure – reducing the nine layers of management between CEO and customer-facing employees to five. 

Authored by: Frank Jacobs