Pioneer in Fleet Sales : Gascard Puts Fuel in Computer Age
Gascard Club Inc.’s idea is simple enough: Build a computerized network that can monitor sales of gasoline and diesel fuel to drivers of the nation’s estimated 16.6 million corporate and government fleet vehicles.
Past fleet fuel-management programs have utilized cumbersome paper records. Industry observers credit Gascard with pioneering the use of an advanced computer system to forge a national, on-line system.
With a computerized system in place, “ . . . theft is gone,” said James Utasi, vice president of marketing for Abilene, Texas-based Autogas Systems Inc., which sells computerized sales equipment for service stations. “If your truck driver makes a delivery in Stockton, he can only buy No. 2 diesel, not cigarettes and a new pair of work gloves,” Utasi said.
Interest on Rise
Interest in fuel-management programs has risen along with fuel bills. Gascard estimates that fleet vehicles consumed 24.2 billion gallons of gasoline and diesel fuel during 1985. Pilferage may account for up to 10% of fleet fuel costs, industry observers say.
Gascard and other companies are marketing their fuel-management programs to operators of local and regional delivery fleets, sales and service companies, food and beverage distributors, overnight package delivery services, taxi fleets, public utilities and governmental agencies.
But unlike cumbersome “paper trail” systems that have been used in the past, Gascard’s 600-station chain in 37 states is tied together by a state-of-the-art computer that instantly records transactions.
Building that nationwide chain has been expensive. The still-growing company generated $13.5 million in net losses from its inception in 1984 through through Sept. 30, 1986, the most recent quarter for which figures are available.
But Gascard’s inability to turn a profit didn’t scare away a handful of venture capital groups that includes Citicorp Venture Capital Ltd., Sears Pension Trust, Hutton Venture Investment Partners and the San Diego-based Ventana Growth Fund. Those investors, along with four other groups, have poured about $14 million into the company.
Public Offering
Those eight companies and Gascard’s officers and directors retained control of 61% of the company’s stock after a successful February public offering that generated $5 million in proceeds.
Competitors tend to agree that Gascard is in the lead in the developing fleet-management business, but Gascard President and Chief Executive Thomas Cannon acknowledged that the La Jolla-based company faces a “horse race” during coming years.
“A lot of people may have the product in the future, but they’re not able to deliver volume right now,” said Cannon, who noted that Gascard is servicing about 60,000 fleet vehicles around the country. “Getting into the business right now is not just a matter of going out and buying a computer,” Cannon said. “We had to spend $15 million (to build Gascard’s system).”
Gascard took a major step toward expanding that system last week, according to industry observers who said that Arco has agreed to accept Gascard’s fleet-management card at about 600 Arco stations in the West. The companies declined to comment on the agreement.
That agreement would keep Gascard at the top of a growing list of competitors that includes:
- Oil wholesalers in various parts of the country who are diversifying into fleet-fueling programs. Pacific Pride, a Salem, Oregon-based company, hopes to open fleet-fueling franchises in San Diego County later this year.
- Sears, Roebuck’s Dean Witter Financial Services Group, which operates a credit card processing unit, has been quietly testing the waters with an experimental fleet-fueling program.
“We’re looking at (an expanded) project during 1987,” a Dean Witter spokesman said. “It’s a very efficient management tool for (fleet operators). It takes them out of the paper processing business and lets them control (credit card) usage.”
Hot Business Idea
A fuel-management program would help Dean Witter’s Sears Payment System credit-processing operation become more profitable by boosting its transaction rate.
- The fleet fuel-management business also has attracted interest from computer network operators such as Atlanta-based Buypass The System Inc., which provides a computer link for retailers, credit card companies and financial institutions.
Despite that competition, “Gascard has got a leg up,” according to Utasi. “They’ve got a very sophisticated, state-of-the-art operation. And it’s an idea whose time has come.”
“Fleet fuel management is really a hot topic now,” said Charles P. Smith, marketing director for Buypass The System, which is negotiating with “several major oil companies” that want to create fuel-management services that would use Buypass computer terminals already in place at 3,000 service stations around the country.
Fleet-fueling programs “represent a growing and very popular trend in the industry,” said a spokesman for the Petroleum Marketers Association of America, a Washington-based federation that represents 11,000 petroleum retailers and wholesalers.
That popularity prompted Gascard to acknowledge in its prospectus that it faces competition from “substantially better capitalized” companies--including major oil companies, credit card companies and financial institutions--with “better sales forces.”
Observers said Gascard will fare well in the race to dominate the fledgling fuel-management industry if it can significantly expand its franchise base and bolster the number of transactions being handled by its La Jolla-based, state-of-the-art computer system.
Gascard has generated most of its revenues through franchise sales, but Cannon believes profitability--which he predicted will be reached during the coming year--is tied to increased transaction fees.
Founded in 1981
Cannon expects Gascard’s proprietary gas charge card to be accepted at 1,250 locations by mid-summer and 2,500 stations by next spring. That kind of growth will occur as the company signs agreements with “large independent wholesalers . . . (and) major oil companies.”
The company has 91 employees, including 35 in product development, communications design, support and engineering. More than 30 are in marketing and sales.
Gascard, which moved to La Jolla in 1985, was founded in 1981 in New Mexico by a family that was “relieved of management control by the board of directors” in 1986, Cannon said.
The founders resigned from Gascard’s board and since then have threatened to sue the company for breach of fiduciary responsibility.
Additionally, five disgruntled licensees and former licensees have brought suit against Gascard, but Cannon described those suits as “without merit.” He blamed the old management team for the lawsuits.
Gascard began trading in February over the counter at 5 and closed at 7 1/2 on Monday.
