Big 2.8 Fleet Cuts: The Big Lie

Robert Farago
by Robert Farago

Like any Big Lie, this one's based on fact. Automotive News [sub] reports "Through April, Chrysler reduced fleet sales by about 45,000 units, or 17 percent, from a year earlier. GM cut fleet sales by nearly 40,000 units, or 14 percent. And Ford Motor's fleet sales fell 25,000 units, or 9 percent." Both AN and our good friends at Autoblog are happy to parrot the "admirable restraint" explanation. In other words, Detroit could dump sales into fleets, but chooses not to to protect vehicle residuals. AN: "GM is not going to reconsider its decision to reduce fleet sales, said Brian McVeigh, GM's general manager of fleet and commercial operations. Residual values have been rising since GM started cutting daily rental fleet sales three years ago." Autoblog: "Showing great discipline amid declining sales, the Detroit 3 have held back on the temptation to dump vehicles on fleet customers in order to boost numbers." Bullshit. First, the rental car business is in the crapper; they're buying less cars. Second, ALL fleets are holding onto their vehicles longer. Third, they're not buying Detroit gas hogs (or even their relatively thirsty cars). Fourth, reflecting U.S. sales trends, fleet buyers are switching to more fuel-miserly transplant products (ToMoCo sold 100k units into the fleets in the first four months of '08). Fifth, if you think WE'RE nervous about Detroit's prospects, how would YOU like to be a finance company that gets stiffed with a hundred thousand cars made by a bankrupt automaker? And sixth, how gullible IS the U.S. automotive press anyway?

Robert Farago
Robert Farago

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  • Geeber Geeber on Jun 17, 2008

    There needs to be a distinction between fleet sales to rental car companies, and fleet sales to governments or corporate fleets. Dumping the most of a vehicle's production (for example, the old Taurus) on rental car companies is considerably different than, say, selling F-150s to utilities or Crown Victorias to police departments and taxi cab companies. The former destroys resale value and brand identity. The latter doesn't - the vehicles are used until they are worthless, and often their use is a testament to their durability (Crown Victorias as taxi cabs, for example). It's also entirely plausible that a company can be cutting sales to rental car companies while aggressively maintaining sales to government and corporate fleet customers, because the latter are profitable and don't destroy brand image (at least, not as much). As for Honda - I've noticed that most car-sharing companies buy Civic sedans. That would count as a sale to a rental car company, but somehow it garners a more upscale, "green" patina to the rented vehicle.

  • RobertSD RobertSD on Jun 17, 2008

    Pch101 - Sorry, had to jump back in here because so many of your "stats" are off. GM is no longer 25% of sales to rental fleets. Ford and GM both have total fleets around 35% but most of that for both companies is to commerical buyers buying trucks for work or cutaway and vans for work - not cars for rental companies. Those sales are TARGETED. Ford designs and builds the E-series so that 150,000 fleet buyers come and buy one every year for work. Ford will be about 10% rental this year. GM may be about 12-15% (it's not exactly clear). Toyota will be 8-10% rental (11-12% or so overall, likely). Nissan will be 8-10% and slightly more overall. How are they out of whack? GM maybe a little, but Ford? Just answer that question. Their *total* fleet, yes, is high, but Hertz isn't taking delivery of 400,000 F-150s, Super Duty's and E-series every year. This is the point I want to clarify. Ford and GM sell a lot of "fleet," but they have vehicles that are designed with fleet operators (contractors, construction, delivery, ambulance, etc) in mind. Their rental car break-down is drastically smaller than just 2 years ago. Neither is anywhere near 20% right now. And they have accomplished this new mix not by hiding fleet sales or failing to dump vehicles in a shrinking rental market but by raising the price of cars sold to rental fleets to levels that keep demand in check. I can't speak for Chrysler as I have not seen good stats on them, but for Ford and GM, all of your contentions that somehow they are still dumping in great quantities (I'm sure they do controlled sales to stablize production from time to time) are just off.

  • Pch101 Pch101 on Jun 17, 2008
    GM is no longer 25% of sales to rental fleets. Well, that would explain why they are losing market share like it's going out of style. If they won't sell them to Hertz, then they end up without customers at all. A desire to cut fleet sales does not make the product any more compelling than it used to be. The problem with the domestics is that they have largely failed to replace their rental car designs (G6, anyone?) with desirable vehicles that the public would like to buy using their own hard earned money. It isn't enough to make bold proclamations about what they intend not to sell. To stay in business, they actually need to also sell something. In any case, I have no doubt that as the data becomes available, you're going to find that those fleet numbers will end up being much higher than you think. Detroit still builds an abundance of dead weight. If they don't sell that dead weight to fleets, then they're going to be collecting rust in parking lots in the Midwest. They will have no choice but to send them to fleet. Ford and GM in particular will try to hide the figures because they know that the stock analysts are watching them. But selling to fleets is preferable to selling nothing at all.
  • Beelzebubba Beelzebubba on Jun 18, 2008

    I recently rented a car from Avis while I was in Arizona on a business trip. I had my pick of a Cobalt, G6 or Grand Prix. My initial thought was, "Skip the blindfold and cigarette and just shoot me now!" I ended up with the G6 for a week and would do anything possible to avoid driving it. It's really sad that anyone would choose to buy that car and saddle themselves to payments for five years. I had the same feelings about Tauruses (or Tauri) back when I used to travel more and get stuck with those. Drive a few of the gems that make it into fleets from Detroit and it's blatantly clear why they're in such deep sh*t!