The fleet management program that Daniel H. Kugler has implemented at Snap-on Inc. is designed not only to trim auto damage and third-party claim costs but also to slash other fleet-related costs by hundreds of thousands of dollars annually.

The STEER program-or Striving Towards Employee Excellence on the Road-keeps tabs on how safely corporate employees in the United States are driving and beefs up the company's subrogation efforts in physical damage claims.

In a move designed to further cut auto-related costs in an area that previously had been outside its purview, risk management also has taken charge of vehicle leasing. It has consolidated leasing through a single source and has standardized the vehicle features that Snap-on will pay for when entering into leases.

The program also keeps a tight rein on the vehicle-related charges that employees may expense and ensures that vehicles undergo routine maintenance.

Mr. Kugler, corporate director of risk management, estimates that Snap-on will save $280,000 annually in the first three years of the program. In each year, about one-third of Snap-on's fleet of 650 vehicles will be replaced.

"And, we may exceed (those savings) dramatically," because the estimate does not account for additional subrogation recoveries, noted Mr. Kugler, who rolled out the STEER program in October 2001.

Mr. Kugler said he expects eventually to introduce the STEER program to Snap-on's non-U.S. operations.

The need for a program to help Snap-on better control its auto physical damage and third-party liability costs became evident last year as Mr. Kugler prepared his cost-of-risk report for senior management.

Retained losses were too high for Snap-on, which self-insures auto physical damage and retains $250,000 per third-party liability loss. Several third-party losses exceeded the company's self-insured retention.

Snap-on's auto risks mushroomed during the past decade as the company's fleet size grew. Snap-on's U.S. fleet has increased more than tenfold since 1990.

But it was the company's Equiserv division, which services the equipment that Snap-on sells to auto shops, that "really needed correction," Mr. Kugler said.

Equiserv management had begun developing a safe-driving program and was producing a written policy when Mr. Kugler initiated a more comprehensive fleet management program for the entire company.

Equiserv's early efforts greatly assisted corporate risk management in putting together a companywide program, agreed Mr. Kugler and Mike Schmidlkofer, corporate claim manager.

"We really leveraged the knowledge from Equiserv" on the safe-driving program, Mr. Schmidlkofer said.

Snap-on risk management then decided to take the program further. "We decided we needed a fleet program" that standardized how Snap-on leased and maintained vehicles and subrogated physical damage losses, Mr. Kugler explained.

"Risk management got this because no one was taking it on," he said. "Each corporate entity was doing its own thing."

Under the safe driving portion of the STEER program, risk management annually reviews the driving records of employees who drive vehicles that Snap-on leases. Through the company's in-house insurance agency, Snap-on SecureCorp Inc., the risk management department obtains employee motor vehicle reports annually on those employees' anniversary dates.

Before the STEER program, the insurance agency already had contacts with MVR vendors, because of the van insurance program that is available to Snap-on franchised dealers through the dealer insurance program that Mr. Kugler has developed.

Employees with clean driving records begin with zero points and would accumulate points based on their traffic citations and other activities that violate Snap-on policy.

For example, employees convicted of driving without a seat belt or exceeding posted speeds are penalized three points. Those convicted of driving their personal vehicles under the influence of alcohol or driving any vehicle recklessly are penalized six points.

Conviction on any one of several major offenses would result in a suspension of company vehicle privileges and could lead to termination. Those offenses include driving a Snap-on vehicle under the influence of alcohol or drugs, vehicular manslaughter and vehicle theft. Snap-on employees also commit a major offense if they allow an unauthorized person to use a company vehicle.

Anyone who accumulates nine to 11 points over a rolling 24-month period is required to complete a driver training school program run by the National Safety Council's Highway Traffic Safety Division.

For drivers who accumulate between six and eight points over a 24-month period, the risk management department issues an official written warning that additional points will lead to disciplinary action.

Drivers who accumulate 11 or more points may be terminated.

Risk management recently introduced another program to reduce losses by identifying unsafe drivers before the annual MVR audits, which would not identify reckless drivers who manage to avoid police citations. The public now can report unsafe Snap-on drivers by calling a toll-free telephone number printed on bumper stickers affixed to company vehicles.

"Our carrier has asked us to do it," said Mr. Kugler, referring to auto liability insurer Employers Insurance Co. of Wausau, a Wausau, Wis.-based subsidiary of Liberty Mutual Insurance Co.

The program will cost Snap-on $1 per month per vehicle, or about $7,800 annually.

Mr. Kugler said Snap-on will monitor the program's effectiveness. "We've got to see a reduction" in third-party liability losses, he said.

To help reduce physical damage loss costs, Snap-on risk management has retained vehicle management company PHH Arval, a Hunt Valley, Md.-based subsidiary of Cendant Corp., to handle the subrogation of all physical damage losses.

Snap-on previously used Wausau to subrogate physical damage claims, but risk management wanted improved subrogation recoveries, Mr. Kugler explained.

PHH also charges a lower fee for the service, Mr. Schmidlkofer noted.

Subrogation recovery will be only one service PHH will provide Snap-on. The company also has retained PHH to assume vehicle leasing responsibilities, which relieves Snap-on subsidiaries of that administrative duty. Snap-on leases automobiles, light-duty trucks and vans.

To reduce leasing costs by obtaining volume discounts, Snap-on has selected Ford Motor Co. as its sole vehicle provider.

Snap-on also has imposed restrictions on the vehicle features for which it will pay.

Previously, because employees have the opportunity to purchase a Snap-on vehicle after the company's lease expires, employees sometimes ordered costly and unnecessary options at the time the company ordered a vehicle, Mr. Kugler explained.

Now, employees must pay for options, such as moon roofs or heated seats, that are not standard items under Snap-on's contract with PHH.

To control vehicle-related expenses, PHH issues a fuel and maintenance card to each Snap-on employee who is assigned a company vehicle. The card allows an employee to pay only for fuel and some vehicle servicing, such as oil changes.

The card benefits both employees and Snap-on, Mr. Kugler explained. Employees no longer have to pay for fuel and routine maintenance first and then file expense reports. And, because the card is designed to accept only vehicle-related charges, no personal items, such as cigarettes, that are purchased at the same time as fuel can be passed onto Snap-on.

PHH will monitor and contact employees about scheduling their vehicles for routine maintenance. For major repairs, PHH authorization is required.

In addition, Snap-on units will receive reports that identify trends that needlessly boost their fleet costs.

The reports would show, for example, if employees are purchasing premium rather than less costly lower-octane fuel, are failing to bring their vehicles in for routine maintenance or are purchasing new tires shortly before the vehicle lease expires.