Selling Safer Trucks Into A Pandemic

John Flynn remembers the horror he felt when a Walmart truck collided with Tracy Morgan's limousine in June 2014, injuring the comedian and killing a friend in the limo. Settlements for more than $90 million three years later were chilling in a different way. 

"We started looking at safety shortly thereafter, and we were one of the first companies to put safety equipment in as, I won't say it's a mandate, but we told our customers we wanted to put safety [equipment] in all of the trucks," said Flynn, CEO of Fleet Advantage, an asset management firm based in Fort Lauderdale, Florida.

So, in addition to a health crisis-inspired buy-lease program in which Fleet Advantage will pay cash to its fleet customers to buy their trucks and lease them back, Flynn is pushing a safer-truck initiative.

Flynn's goal is to sell more trucks in a market that was approaching its cyclical bottom before the COVID-19 pandemic.

Selling safer equipment carries multiple benefits whether the truck new or used, he said. At the end of a new truck lease, the second buyer is often an owner-operator priced out of the new equipment market. 

Swing To Safety

Early in the previous decade, truck manufacturers began offering electronic stability control designed to avoid rollovers and jackknifes. 

From 2018 onward, truck makers have introduced a raft of safety-enhancing equipment, from collision mitigation to automatic emergency braking (AEB), lane-departure warning, lane centering, and even some partial self-driving features built on cameras and radar.

Suppliers like Bendix Commercial Vehicle Systems upgrade their offerings regularly and sell safety suites to most manufacturers.

"We know these types of technology are particularly effective in passenger vehicles, and we've incorporated that into our Top Safety Pick Awards," Eric Teoh, director of statistical services for the Insurance Institute for Highway Safety (IIHS), told FreightWaves. "We expect they could also be helpful for trucks, but we don't have a solid study showing that."

Art Of The Deal

Flynn requires safety offerings beyond manufacturer specification in the 3,000 new trucks Fleet Advantage buys annually from all makers.

By lowering the up-front lease cost and inflating the residual — what the truck is worth at the end of the lease — Flynn is betting a used truck buyer will pay an extra 1.5%-2% that he shaves from the initial lease price to get a one-owner, late-model, low-mileage truck with an extended warranty and up-to-date safety features.

"I don't think anyone is going to see much of a difference on our lease costs with all the new safety equipment in it," he told FreightWaves. "We take some risk with the residual values knowing we can downstream the trucks. The insurance savings alone makes it much more valuable to the second user than the small cost of the residual."

John Flynn, CEO of Fleet Advantage, is taking a financial risk to prove that advanced safety equipment in new heavy-duty trucks is good for everyone from the fleet manager to the driver. (Photos: Fleet Advantage)

The overall fleet size and age don't change as the composition of safer trucks rises.

"What we're trying to do is get the safe truck on the road much quicker than they normally would," Flynn told FreightWaves. Modernization would take four or five years longer without a push, he said.  

As Flynn pitches the buy-lease program and conducts complimentary data-driven fleet studies to show the lower total cost of ownership of newer trucks, he reaches beyond fleet managers. Many C-suite executives authorize an equipment budget with little involvement in how it is spent.

"You've got to get the CFO or the CEO of the company and address it with them," Flynn said. "Once they see the economics, once they see the safety, once they see the [reduced] risk, it is relatively easy."

Chasing Truck Crashes

Flynn also likes to involve a fleet's general counsel because "he's the first guy they look to in litigation."

It is risky, especially for public companies, to run equipment that predates 2017, Flynn said.  A lack of safety equipment makes accident settlements more difficult to reach.

"Regardless of what happens in the court, not having as many crashes means fewer deaths and injuries," said Harry Adler of the nonprofit Institute for Safer Trucking. "If you have a crash- avoidance technology, then maybe [what] might have been a fatal crash is a sprained wrist versus three or four deaths."

Enhanced safety equipment leads to both fewer fatalities and fewer huge verdicts, personal injury attorney Tom D'Amore told FreightWaves.

"It's not just that something bad happens with this driver or this truck," said D'Amore, principal of the D'Amore Law Group in Portland, Oregon. "It's also bad press when you have to deal with those kinds of things."

The number of lawsuits is growing along with the number of truck fatalities, which reached their highest level in 30 years in 2018, according to the National Highway Traffic Safety Administration (NHTSA). The federal agency said 885 large-truck occupants died in 2018, the highest since 1988, when 911 occupants of large trucks died.

"We found an unprecedented amount of legal firms throughout the country that have all of a sudden turned their sights onto these large tractor-trailer accidents," Flynn said. "They were going after car accidents all their life, and they realized these pay better."

Peace Of Mind

The IIHS expects to complete an effectiveness study of heavy-duty truck safety equipment by this fall.

"Large-truck safety is important to us because they are an essential part of our economy, but it's also a big opportunity to reduce harm," Teoh said. "We see promise in these technologies as one of the ways to do that."

Said D'Amore: "It's going to save money in the long run. If technology just saved one life or one serious injury, it's worth it."

Safety equipment should be considered an investment, not a cost, Adler said. 

"It pays for itself," he said. "When you've avoided that crash, it makes you say this is a worthwhile expenditure."

Click for more FreightWaves articles by Alan Adler.