By on February 25, 2011

Chrysler just filed its first SEC disclosure in over a decade, providing a peek under the hood of the smallest Detroit automaker. One of the most interesting items: a history of Chrysler’s fleet sales breakouts since 2006. And despite Chrysler’s vows to break its fleet addiction, 2010 saw the firm’s highest fleet percentage since 2006, at 36.1%. Back in the Cerberus days, they held the line at 30%, thank you very much. But then, ChryCo knows how to defend the fleet sales, arguing:

Although our vehicle sales to dealers for sale to retail customers are normally more profitable than our fleet sales, our fleet sales are an important source of revenue and can also be an effective means for marketing our vehicles. Further, fleet orders also help normalize our plant production because they typically involve the delivery of a large, pre-determined quantity of vehicles over several months. Fleet sales are also a source of aftermarket service parts revenue for us and service revenue for our dealers. In recent years, our fleet customers, particularly our commercial and government fleet customers, have tended to order vehicles that are smaller and are more fuel-efficient.

But the best thing about fleet sales? They conceal the steady erosion of consumer demand for your products and brands. After all, at 36.1% fleet mix, Chrysler only sold about 695,000 vehicles to actual retail consumers last year (100k-200k below what the firm’s five-year plan called for).

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25 Comments on “Chrysler Fleet Sales 2006-2010...”


  • avatar
    SVX pearlie

    You know, when Sergio sees it, I’ll bet he wonders why Chysler can’t manage to sell 500,000 rental cars and 150,000 other fleet cars like they did in 2006-2007. If they did that, they’d easily beat their total volume requirements, even if they were over 50% fleet sales.

  • avatar

    The Curse of the Jeep says that FIAT is dead.

  • avatar
    Zackman

    It appears the legacy (big 3) automakers are on ever shakier ground. I don’t like the looks of this. Chrysler is the canary in the cage in the mine, and I’m not sure how well it’s breathing. I hope I’m wrong.

    • 0 avatar
      segfault

      Someone from Government Motors will be along shortly to tell you that the canary isn’t dead, he’s resting. Remarkable bird, the Norwegian Blue, idn’it, ay? Beautiful plumage!

  • avatar
    gslippy

    I happen to agree with Chrysler’s response.  Retail sales would be more desireable from a profits perspective, but fleet sales will do all that they describe.
     
    Those fleet cars don’t just disappear into a black hole; retail customers buy them eventually.

    • 0 avatar
      geozinger

      Two ideas here: First of all, not all fleet sales are brand equity crushing daily rental sales. I know a few folks whose jobs allow them company cars. A number of them have Chargers or Grand Caravans as their company cars. Second, not all daily rentals are bad. I bought a Malibu Maxx after having rented one from Avis; I don’t think I would have otherwise tried the car out. They were good experiences, both the rental and the car I leased.

  • avatar
    jpcavanaugh

    As I read the chart, fleet percentage was steadily declining throughout the year, with 4th quarter fleet percentage at 27%.  With the product the company had to sell, we should be amazed that fleet percentage was not higher.  The test will be as 2011 unfolds.

    • 0 avatar
      MikeAR

      You are right about their product, only the 300, the Charger and the Challenger aren’t fleet material. No other maker is operating under as much of a handicap as Chrysler. I don’t know why, but I’m rooting for them to succeed. Maybe fleet sales now will buy them some time to bring out some new attractive product.

    • 0 avatar
      jaje

      Though it seems the Charger / 300 are not “fleet” material you can rent them at Dollar & Thrifty.  Mustangs and Camaros are available for rental and soon I’d expect Challengers to be also available.

    • 0 avatar
      MikeAR

      I kind of misspoke, it would have been better to say that those cars I named are the only non-generic cars they make. They aren’t mass market cars but appeal to enthusiasts more than the rest of the lineup. The 200 and the rest aren’t competitive among the mass market transportation devices sold by every company. I don’t include most Jeeps and minivans and pickups with their cars either. They are for the most part very competitive.

    • 0 avatar
      geozinger

      @MikeAR: It’s OK to root for them. I am too!

    • 0 avatar
      CJinSD

      While fleet sales fell in the 3rd and 4th quarter, private sales didn’t increase. Is it possible that fleet sales in general were greatest in the first two quarters?

    • 0 avatar
      jaje

      The way I saw it is we needed to lose one of the Detroit car makers and unfortunately Chrysler should have succumbed to the market and not been bailed out.  In fact the D3 all needed to go through bankruptcy to properly realign themselves, restructure debt, fire incompetent management, and curb the power of the unions.
       
      The main reason for D3’s reliance on fleet sales was to keep the factories churning and producing more cars than the demand had.  This was b/c they could not shut down factories without still paying full (and outrageous) benefits and almost the workers entire salary.  Where non-union workers had to pay for their own benefits and pension and were subject to being let go when they were not being production – unions guaranteed jobs to those who should have long been fired.  Members were making salaries with benefits akin to those with useful post grad degrees.  D3 weren’t the only ones with this problem.  Other automakers such as Mitsubishi (had a unionized plant in Normal) and Hyundai used the to sell more cars in order to show gains in market share – Toyota is also doing this as of late with large incentives and greater sales to fleets (the Camry / Corolla not counting fleet sales were outsold retail by the Accord / Civic).  Unfortunately with these tactics it then lead to brand dilution, next to sell to retail customers they then had to discount heavily with the largest incentives in the business and also sell to customers with very bad credit – in the end a sale was a sale – but at the expense of the long run.
       
      Chrysler was perfect to be the sacrificial goat and go into Chapter 7.  They made nothing unique and the parts there had value were valuable (Jeep, Viper, Ram).  The leftovers would have mostly gone to the D2 with some going to imports.  GM may never have needed to be bailed out – outright and Ford on the backend (they did take gov’t money but with Mulally running the helm they were managed much better for this crisis).
       
      Years from now we’ll be in the same conundrum as I see them reverting back to a lot of their old tactics (especially at GM as its management that led to its failure is still largely in place) – incentives, fleet sales, lots of promises, and so forth.  Toyota and Honda are also not immune from these problems too – they just seem to be much more nimble to avoid the larger part of the problems (a main reason is their workforce makes union wages but without the union middle man).

  • avatar
    Dimwit

    The big knock against fleet is brand equity. If it’s the difference between saving/not saving the brand then fleet or retail is a moot point.

  • avatar
    mike978

    MikeAR rooting for Chrysler. Wonders will never cease. I thought they were the devil incarnate because they got some help from the Government.

    • 0 avatar
      MikeAR

      Nope, I’ve never really said much about Chrysler because they are a much different story than GM. The incompetents who were at Chrysler are for the most part gone, Nardelli and so on. The even more incompetent people at GM are still there and have been promoted iin some cases. Plus GM has rubbed taxpayers’ nose in it too many times (Whitacre saying the money was all paid back for example). Marchionne is, I think, a good CEO, and will do his best to see Chrysler succeed.

      Plus they make some interesting vehicles that I like. The Charger, Challenger, Grand Cherokee, Wrangler and the Ram are all never dull vehicles.

  • avatar
    John Horner

    If the objective of Chrysler’s fleet sales were to play hide the monkey, wouldn’t they have made this information more, well, hidden?

    Given Chrysler’s 2010 product portfolio, moving the metal into fleets was a better move than simply not building them would have been. Also, the fleets are going to buy something. So, had Chrysler opted out then there would be some other makers we could bag on for selling those units.

    As long as the incremental manufacturing margin per unit was positive on those sales, Chrysler pretty much had to do it. It was the least bad choice.
     

    • 0 avatar
      Educator(of teachers)Dan

      My thoughts exactaly.  Chrysler could have pulled a GM and announced that they wouldn’t be releaseing certain information like the General recently did. 

    • 0 avatar
      Norma

      Guys, what is next? Investors roadshow, then of course IPO and CEO Sergio will be a rich(er) man! If he can pull it off before the oil price kills Chrysler, or renders it essentially worthless.
      “The company also said its outsized exposure to a jump in fuel prices could sap demand for its lineup and have a “disproportionate effect” on the company compared with its rivals.  Minivans, sport-utility vehicles and pick-up trucks made up nearly three-quarters of Chrysler’s sales in 2010. These vehicles made up just more than half of overall U.S. sales in 2010, Chrysler said in the filing. “

  • avatar
    John Horner

    One more thought. Overall, fleet sales range from 17% to 22% of the total US car market:
    ” For the full year, fleet sales made up 17.1 percent of the U.S. market, down from a peak of 22 percent in 2005, according to Jeff Schuster, J.D. Power’s executive director of automotive forecasting.”

    http://seattletimes.nwsource.com/html/businesstechnology/2011678379_apusautosfleets.html

    Hyundai used fleet sales of the US built Sonata to build up a production base before they had sufficient retail demand to buy all of that output. Now the Sonata is a hot retail product and Hyundai has been able to shift output from fleets to retail customers. This was a very savvy bit of management on Hyundai’s part.

    Fleet sales are not always bad and they are not always good. The full context needs to be considered.
     

  • avatar
    gslippy

    Having recently purchased a Kia Sedona that was a Hertz rental for a year, I have no complaints.  I got a clean vehicle at a good price.  I doubt it took the abuse a Mustang or Camaro rental would have.

  • avatar
    Roberto Esponja

    Is it just me that repeatedly gets the impression that if Chrysler had gone under, the champagne would have been flowing at Edward’s pad…?

    • 0 avatar
      SVX pearlie

      If Chrysler had gone under, I doubt that they would have been missed, except by the UAW – which is why the Dems saved them.

    • 0 avatar
      John Horner

      “If Chrysler had gone under, I doubt that they would have been missed, except by the UAW – which is why the Dems saved them.”
      Have a look at page 27:

      http://www.chryslergroupllc.com/pdf/business/Form_10_Registration_Statement.pdf

      Chrysler has over 10,000 salaried employees who are not represented by the UAW or other unions. Which, in a way, is beside the point. Stoking hatred for unions is part of the Koch brothers and friends plan to continue moving ever more of the wealth of the nation in the hands of fewer and fewer people. Sure, you might think you are one of the chosen few, but …

      Warren Buffett summed it up nicely: “‘There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.’”

      http://www.nytimes.com/2006/11/26/business/yourmoney/26every.html?_r=1
       
       

  • avatar
    mattstairs

    Oooh, the Koch Brothers, scary.  Funny how when Libs make up a conspiracy, it gets gobbled up by the mainstream media, but when Glenn Beck touts one, he’s nuts.

    All this “War on the Middle Class” stuff is silly.  Is there a war?  No.  Is the middle class hurting because some (not all) of it is getting left behind as a result of globalization?  Sure. 

    What can you do?  Make sure you have marketable skills, because there are few high paying, low skill jobs anymore.  Most of the high paying low skill jobs have either disappeared due to automation or have been transferred to low wage countries.  Be flexible, so if your employer dumps you for whatever reason, you can go elsewhere.

    The displacement we are experiencing is similar to the industrial revolution and mass movements from the farms to the cities experienced in the late 1800’s and early 1900’s.  Not saying people aren’t hurting, but it isn’t the result of some idiotic conspiracy of rich men.

    Chrysler’s failings were due to bad management by Daimler and Cerberus, bad union contracts (work rules, job bank, legacy costs), and the actions of millions of car buyers, who bought cars from other makers.

    I think there is something to be said for letting them fail.  It would have made Ford and the new GM (I don’t think politically either party would have let GM fail, too big) more successful.  Perhaps some of the plants/jobs would have been saved, so it wouldn’t have been a total loss.


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