By on April 27, 2010

Fleet sales were up 47 percent in the first quarter of this year, driving sales at a number of automakers. Ford, in particular, is targeting fleet sales unapologetically by touting a recovery in resale values for the Blue Oval Brand. Ford’s Mark Fields tells the Freep:

We love fleets at Ford…Ford remains focused on our disciplined approach to daily rental, making sure we help keep growing residual values

At Chrysler, which suffers from some of the lowest resale values in the business thanks in part to a longtime addiction to fleet sales, the response seems a bit more… conflicted.

Chrysler’s Peter Grady tells Automotive News [sub] that Auburn Hills is serious to getting fleet business to 25 percent of its sales mix, and that it will cap sales to rental fleets. He explains:

Our growth will come from large commercial and government markets

Of course he doesn’t mention that 58 percent of Chrysler’s February sales went to fleets (though AN [sub] does), nor does he specify details about the rental sales cap. But some kind of rental fleet sales reduction shouldn’t be too hard. Chrysler’s previous rental-fleet dumping grounds, Dollar-Thrifty, has been bought by Hertz, drying up the most loyal renter of Mopars. And the sale is no coincidence: according to Forbes, Dollar-Thrifty was vulnerable to takeover at least in part because of its exposure to Chrysler, and its plummeting resale values. Besides, as Automotive News [sub] has reported, Dollar-Thrifty dumped Chrysler before Chrysler dumped it. But then, Chrysler has been here before with the whole “capping fleet sales thing.” It hasn’t worked yet.

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31 Comments on “With Fleet Sales Booming,Chrysler Vows To Limit Sales To Rental Firms...”


  • avatar
    thornmark

    Ford’s Mark Fields tells the Freep:

    We love fleets at Ford…Ford remains focused on our disciplined approach to daily rental, making sure we help keep growing residual values

    No matter the gloss, they “love” them because they need fleets at Ford. If they could sell product all retail, they would.

    It’s better than filling fields with unsold Tauri. Still, the best way to buy a Ford continues to be used because of comparatively poor resale values.

    Further, I wonder if “growing residual values” merely reflects rising prices or a more valid measure, i.e., retaining a greater % of sale price.

  • avatar
    Ion

    I wouldn’t mind a 300c or Taurus as a company car and withouth fleets where else is Ford going to sell fleet nichce vehicles like the Transit Connect? *Ignores that his neighbor has bought 2 Transit Connects*

  • avatar
    jaje

    Ford owned Hertz at one point (and may still hold some sway there) so it might turn out that Dollar / Thrifty will only buy Fords too leading them to have higher monthly sales.

    Unfortunately you can’t have your cake and eat it too. Selling higher volumes to fleets does the exact opposite to increase the residual value of vehicles.

  • avatar
    golden2husky

    Some of the fleet sales could have a positive effect by exposing potential customers to the vastly improved product line up that Ford has. Many people have, for valid reasons or not, crossed Ford off their shopping list. A good rental experience could help change the minds of some of them, at least those who have an open mind.

    • 0 avatar
      daga

      That’s been tried (with the tweak of limiting the vehicles to higher spec vehicles) with poor results. There’s just no getting past the resale impact if an automaker goes more than about 10% rental in a given model. The correlations are impressively tight on that and that has a direct impact on new competitiveness. That easily overwhelms the few positive impacts to consideration and awareness. And remember, these are rentals to they are often beaten up badly and have not had the minor issues addressed like they would if a day-in-day-out owner had to live with a squeek or trim piece rattle, so I’ll see your positive influence with a boatload of “What a poor quality car” experiences that are more a fault of maintenance and rental usage.

      Sorry Charlie, but you can’t “make it up on volume” when other competitors are gauging the demand better and rationally planning capacity at 80%.

  • avatar
    Robert Schwartz

    The last time I rented cars from $/Thrifty (in January), they were Kias. Much nicer than the Chryslers.

  • avatar

    Given the large pile of crap that I received from the Alamo counter in Oahu 2 weeks ago, you know the one that was shaped roughly to represent a Chrysler Sebring? Yeah, mushy brakes with no feeling, numb, heavy steering, stiff unsupportive seats, a perpetually confused automatic and a stench of old dead asparagas.

    Luckily the A/C worked fairly well and the radio played the appropriately reggae heavy radio station there. With some effort it swallowed our two large luggage bags and carry-ons.

    The fact that the convertible version of the same POS was $50.00 more PER DAY! astonished me to no end. If I hadn’t of gotten such a good deal on the car thanks to Hotwire and if it hadn’t been the last car on the lot, I might have made a stink about it (I’d have to outstink the car, which may have proved difficult to do)

    I made the reservation because it said Mazda 6 or similar and I thought that I’d get a 6 or maybe a Taurus or Camry. The fact that the Sebring is supposed to compete with a Mazda 6 makes me shake my head in disbelief.

    I don’t understand how Chrysler is in trouble, really. I can only imagine what will happen to the Chrysler versions of the Fiat car they’ll be importing. I’m sure they’ll not understand how to compete with the MINI, the Soul, XB, TC, etc, instead they’ll get the same throw away treatment that the other rebadged imports Chrysler has had in the past.

  • avatar
    boyphenom666

    I don’t rent cars much, but the last time I rented one was to get to the Dayton Airport to get to New Orleans (Avis lets you do a one-way thing in Ohio). I had a low-end Hyundai, which was okay but nothing to shout out about (I once rented Dodge Neon in Florida that I liked much better). Once I got to my destination in Mobile, AL, I got a free upgrade from a Dodge Caliber (they were out) to a Chrysler Sebring convertible. After driving my Sebring for a few days, I scratch my head as to why people hate them so much–It really wasn’t that bad of a car. I’m a Honda driver so I would probably never buy one (I appreciate the refinement Honda offers), but I can honestly think of worse mid-sized cars on the market than the Sebring.

    • 0 avatar
      Power6

      Hmm, the entirely plastic interior in a 30k convertible didn’t bother you much?

    • 0 avatar
      boyphenom666

      Maybe I didn’t notice so much because I was enjoing the ride with my ragtop down? The car handled well, I didn’t consider it inordinately loud as people say. I thought it was a competent car. I had a Grand Prix (?) as a rental before that was far more annoying.

    • 0 avatar
      windswords

      Hello, I’m Mr. boyphenom666′s psychiatrist and I wanted to apologize for his statement that the Chrysler Sebring was a “competent” car. Mr. boyphenom666 has refused to take his meds recently and that has led to his delusional thinking. After all, we all know, from reading the internet blogs what a horrible car the Sebring is. Why, we don’t even have to drive one, as did Mr. boyphenom666, just like we don’t have to actually drive a Toyota to know what a wonderful car and gift to mankind that it is. I mean EVERYONE knows they are just great, right? So please ignore the ramblings of Mr. boyphenom666. Once he is back on his drugs he will no longer think for himself but be just like the rest of us.

    • 0 avatar
      Power6

      Oh I have driven one, for 6 days in Kauai. It was the cheapest convertible to rent so I had no problem with that part of it, and it was the fancy one with leather and BA stereo. When I got to Hilo a couple days later, I had a lowly G6 which reminded me what a crappy car the Sebring was, other than the loss of the top down motoring of course.

      I’ve always said the Sebring is what you buy when you want a convertible and you don’t care about anything else. Looks like boyphenom666 agrees since that is all he could say about it.

      Nice try windswords, but we all aren’t sitting home surfing the net like you ;-) If it makes you feel better, I have gotten a Solara convertible as a rental and I didn’t think that was very good either. Maybe my standards are just too high, oh well I can live with that.

    • 0 avatar
      windswords

      My “nice try” Power6, was not to defend the Sebring, but to poke fun at the masses who believe what they read on the internet and do not investigate something for themselves and then even disbelieve someone who has, if that person’s conclusion differs from what they have heard on the net. I think I got that point across quite well.

    • 0 avatar
      Patrickj

      The Sebring may not be a horrible car. On the other hand, it is the same rental car Chrysler has been selling for 15 years.

  • avatar
    Power6

    Man these stories are getting old. There is no reason the automakers shouldn’t sell their product to anyone who will buy it.

    The fleet sales hurt the resale values when the cars are dumped for a loss to the rental companies. The rental car companies keep them for a bit and then flood the market with them cheap since they didn’t pay a lot for them and they can replace them inexpensively.

    As long as ChryCo is selling your 25k Charger to Thrifty for 15k the fleet sales will hurt resale.

  • avatar
    lanetru

    Why doesn’t each car company just make a dedicated model for rentals? like the London taxi or Ford’s Panther cars.

    Why didn’t GM just keep Aura/G6 production going to rentals?

    Anyone know?

    • 0 avatar
      Power6

      This has been tried a bit, using the “Chevy Classic” previous gen Malibus and Ford for a while sold the old Escort as fleet only when the Focus came out. I wonder how that worked out, maybe it was still too expensive running a specific line for a fleet model even if the tooling was long paid off?

  • avatar
    thornmark

    >>>I’ve been making that point on here for a few months now. NO ACTION has been taken by any government or any company to truly correct the global oversupply problem.

    Nor should they. Imagine government dictating what gets produced and who produces it. The USSR had that and that certainly made the Zil what it was. We’re not there yet.

    Japan tried that in their way. Decades ago their government told Honda not to go into auto production. Honda didn’t listen and produced brilliant little cars that were years ahead of Toyota and Datsun in design and tech. Today Honda is Japan’s #2 and most profitable producer – and according to some sources it may be the #1 US in retail sales cars last quarter.

    As for industry collusion, there are laws against that.

    Manufacturing economics dictates a minimal level of production and the product has to go somewhere –
    Ford sells to fleets because of the lack of consumer acceptance of those products necessary to meet that level. Hence the fleet push.

    Fleet cars are rarely desirable cars. They may be fine, just not top drawer. Politics often informs fleet sales, people, spending their own money, usually have other priorities.

    • 0 avatar
      educatordan

      But what should be done about the fact that globally hundreds of thousands of more cars can be produced than what is needed? Governments lately have even been preventing the loss of capacity in car manufacturing by propping up failing industries.

    • 0 avatar
      geeber

      thornmark: Nor should they. Imagine government dictating what gets produced and who produces it. The USSR had that and that certainly made the Zil what it was. We’re not there yet.

      Except that the federal government has taken active steps to ensure that the overcapacity problem continues. Had GM or Chrysler gone through a real bankruptcy – which, more than likely, would have involved much deeper cuts in brands and factories – the overcapacity problem would have either gone away completely, or been greatly diminished.

  • avatar
    Disaster

    One of the reasons residuals are going up is used car sales are going up in comparison to new car sales. I’ve gotten a couple flyers from car dealerships offering to buy my couple year old cars.

    Despite the talk of a rebound in new auto sales, they are still very low in comparison to the their hay day. The rebound is only a rebound when compared to a historically horrible year.

    Part of what kept people out of dealerships was the tight credit market. People couldn’t get loans. Now the credit market is loosening, but many people are choosing to buy slightly used cars vs. new.

    This is what is driving up used car prices and therefore residuals.

  • avatar
    detlump

    How much impact does high fleet sales have nationwide to residual values. I guess that has an impact on lease rates too, but if a buyer is planning to keep the car for 10 years or so what difference does it make? Most any car is fully depreciated at this point.

    I had a rental Taurus SEL a few months ago and liked it a lot, though the center console is huge and the old Taurus/500 felt more spacious inside. I have recommended the car to several people based on my experience. And it had about 20,000 miles on it already, and was solid and quiet. Overall a good car. I’ve also had Toyotas for rentals at Thrifty actually. They tried to offer me a Suzuki XL7 once, I declined.

  • avatar
    njdave

    I have to agree that rental fleet sales can help a car company especially the domestics that many buyers my age have crossed off their shopping lists. We had ruled out any future Ford purchases after an unpleasant experience with a Focus, especially the dealer experience. But recently my wife’s Sonata was in the shop after someone hit her in a parking lot, and she got an ’09 Fusion as a rental. She really liked that car, and enjoyed driving it very much. Ford is now back on her list after the Sonata goes.

  • avatar
    200k-min

    Remember there’s a difference between a rental fleet sale and then fleet sales that end up as corporate company cars to sales staff and such. My father drove company cars for close to 40 years and although always a product of the Det 3, they were always nicer than the stripper rental car. At the end of the corporate lease he had the option to buy the vehicle at current auction prices, and often did. I fondly remember a childhood of riding around in Delta 88′s and the like.

    Where fleet sales hurt a company is the example of my brother, someone working in sales that was given a “fleet” Dodge Caravan. That vehicle was of such poor quality that he has vowed to never buy a Chryco product ever. He and his wife recent voted with their wallet by buying a Ford.

    So, fleet sales are fine providing the product is competent and gives a good impression. Those products do eventually end up in private hands and will be deciding future purchases years down the road.

  • avatar
    t8528sl

    Dollar Thrifty wasn’t too exposed by their choice of Chryco vehicles. As part of the rental fleet sales Chryco also agrees (at the time of sale) the resale value of the vehicle. If the resale value of the vehicle falls below the predetermined amount, Chrysler must make up the difference. Where the use of Chrysler vehicles hurts them is in their customer preference. If frequent renters don’t prefer Chrysler vehicles (and most don’t), they’ll avoid Thrifty and Dollar.

  • avatar
    George B

    The last car I rented was a Toyota Camry LE from Hertz. Had signed up for a Mazda 6, but they tried to give me a Mazda 5 with no hidden storage instead. The Camry had close to 40,000 miles and lots of dings and scratches, but it was a competent freeway cruiser with comfortable seats and a nice looking interior. Maybe the solution to the fleet sales dilemna is for rental car companies to buy fewer cars and put more miles on a car before selling it into the used car market. I preferred the year old Camry with scratches over the other choice offered, a newer Chevy Malibu.

  • avatar
    boyphenom666

    @windswords and @PatrickJ

    That was exactly my point. I’m not saying the Sebring’s a great car, but the way people talked about it you’d think it was as primitive as a Yugo when in reality it’s not a bad car. As mentioned earlier, I am a Honda (actually Acura) driver, so I appreciate the touches of refinement you get in a Honda prodcut (I love the silky-smooth 4 cylinder and the way the wipers work on my dad’s ’10 Accord), my only point was that I don’t think the Sebring was as bad as people were claiming.


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