Spain and Italy are potential areas of growth for PHH Corp.'s fleet management business over the next two years, with Mexico a possible growth area later, PHH Chairman Robert D. Kunisch said yesterday.
But Mr. Kunisch, speaking after the company's annual meeting, said the exploration of new markets in Europe and Mexico must await conquest of the difficult -- yet promising -- German market.
On a global scale, PHH manages more than 460,000 vehicles used by corporations. And while analysts consider its U.S. business in this field to be strong, the company is seeking to expand its scope around the globe, said Joachim Diedrich, senior vice president of European vehicle management services.
Mr. Diedrich said PHH has been heavily involved in building its fleet business in the United Kingdom since 1982 and that it now holds a dominant share of the market there. It is now seeking to build the same dominant base in Germany, he said.
Problems with the German market was just one of the issues discussed at the PHH shareholders' meeting, held at the company's headquarters in Hunt Valley. The company also stressed the growth of its mortgage banking business and released a report on its first-quarter earnings, which were up 12.5 percent over last year to $12.6 million.
"Germany offers tremendous opportunity," Mr. Kunisch said. "It's just going to take us a lot longer to get there than we thought."
With the reunification of Germany, German businesses are so involved in opportunities to rebuild the former East Germany that they are now less interested in adding the sort of services provided by PHH, according to Mr. Kunisch. The poor infrastructure in the former East Germany is also holding PHH back, he said.
"We're way behind schedule building our network in Germany," Mr. Kunisch said, though he added that the long-term picture was favorable, since a larger German market means more potential PHH clients.
PHH entered the German market five years ago and is likely to need two years more to complete its network of vendors that provide vehicle fuel and maintenance, he said.
By late 1993 or early 1994, PHH's fleet management business should be ready to enter the Spanish and Italian markets, Mr. Kunisch predicted.
"We think they're going to be the high growth markets," Mr. Kunisch said of Spain and Italy, where, he said, relatively low labor and living costs are favorable for business growth.
The North American Free Trade Agreement with Mexico and Canada, announced by President Bush earlier this month, which would lower tariff barriers within the region, could be a long-term plus for vehicle management services in Mexico, the PHH chairman said.
Assuming the treaty is ratified by Congress, it could expand the Mexican economy -- thereby providing more opportunities for vehicle management services, he predicted.
PHH's mortgage banking service business increased mortgage originations by 63 percent during the company's last fiscal year that ended April 30, the company reported yesterday.
"They're burning up the track on the mortgage side of the business," said Clifford F. Ransom II, an analyst with Ferris, Baker Watts in Baltimore. PHH now services more than $8.5 billion in mortgages," he noted.
Three months ending 7/31/92
.. .. .. ..Revenue .. .. .. Net .. .. .. Share
'92 . .. .513,300,000 . ..12,600,000 ..0.74
'91 . .. .500,000,000 . ..11,200,000 ..0.66
% change .. .. .. +2.7 . .. ... +12.5 . +12.1