Ford plans to cut rental sales again in 2008
Speaking with Automotive News, George Pipas, a Ford sales analyst, explained that the automaker will continue to cut its sales to rental fleets in 2008, but not to the extent that it did this year. In 2007, FoMoCo decreased the amount of vehicles offloaded to rental lots by 30-percent, or 135,000 units.The cuts next year will be spread evenly across Ford's lineup, rather than focusing on one or two specific models. However, the automaker still plans to pursue fleet sales to government and commercial entities, as it provides a substantial source of income.
Pipas goes on to say that although Ford wants to reduce the Blue Oval's rental car saturation, those programs provide the automaker a place for consumers to interact with its vehicles first hand, and it may compel some to head to their local dealer to pursue a more long-term relationship.
[Source: Automotive News – Sub. Req.]
Reader Comments (Page 1 of 1)
Mal Fuller 2:51PM (8/18/2007)
If Ford doesn't want these sales, there's got to be a flaw in their rental sales program. Sales should be profitable and if they're not, charge more, reduce costs, but do something besides abandoning product sales. That would be a bad strategy.
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Barney 3:02PM (8/18/2007)
Granted, rental companies pay less by the gross but the more cars on the roads, the more they get noticed. Perhaps Ford feels that there is a better source of advertising.
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Bryan 3:04PM (8/18/2007)
I think it is a great idea. They will still have fleet for every model, just not as much. You still get the press without destroying resale values.
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David 3:13PM (8/18/2007)
The rental program also provides a first hand interaction for those customers that will never consider Ford because the rental was so bad. The Taurus rentals do not match up with the Fusion, the Fusion is way behind the Hyundai Sonata. Althought I will never buy these cars in my personal life, I would only recommend the Sonata based on my rental experience for friends and family that might buy one. If I was Alan Mullaly, I'd cancel the rental program until Ford start making good cars they don't have to continually recall.
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david 5:55PM (8/18/2007)
Where have you been for the last year or two? In a time warp? The Sonata? Surely your kidding. Refer to J.D. Powers. What and how is the Fusion behind the Hyundai?
Bad drugs maybe?
That One Person 3:46PM (8/18/2007)
David...continually recall? How many times was the Fusion recalled? How about the Five Hundred/Taurus? Or what about the Edge? Or how about the Freestyle/Taurus X? And how long has it been since the Focus has had a major recall? If you are talking about the F-150, that was the last generation.
If people base a whole lineup of vehicles because of one base model Fusion or whatever, then they have something wrong with them.
I don't blame Ford for wanting to kill these sales. It ruins their resale values.
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olddavid 5:07PM (8/18/2007)
This is a segment that requires a tightrope walker- not too many to destroy residuals- not so little as to affect production quotas. The arguments on both sides can be compelling in their own right. What I do not get is why they don't manipulate the numbers for the in-house companies? I am probably mistaken, but doesn't Ford own most of Hertz and GM most of one of the others? They could juggle the residuals, force the used market upside with their closed auctions, and everyone but the consumer and the IRS come out ahead. Maybe even the consumer, since his used car will be worth more, too. If they are using their in-house finance arms, it amounts to nothing more than putting money from the front pocket into the back one. Right? ..........or I could be wrong. My wife tells me that isn't uncommon.
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Drewboy 6:08PM (8/18/2007)
Heh, I got a used Focus, one of the best cars I've ever had. Its a 2003, and how many repairs have had to be done on it? Not a single one. But, I understand why Ford is wanting to do this. The car was "used" for 3 months, and I bought it for less than half of the "new" cost.
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Robert 8:12PM (8/18/2007)
I would bet that Ford is targeting around 10% for their rental mix next year (so 220-250k), that would knock them down another 65-95k from this year (20-25% or so).
The problem with the rental car market is not what price you get for your vehicles, per se, it's what those vehicles do to resale values when they leave the rental lots. Effectively, Ford has cut sales by 1) some sort of maximum quota and 2) raising prices so that they are less likely to get Hertz and Avis knocking on their door. So, I doubt the problem at this point is a pricing problem like it was with the old Taurus. My guess is that Ford breaks even on most rental sales (maybe not on Focus right now) these days now that the old Taurus is killed off, but has positive cash flow because of tool amortization and such. And even if every rental sale were profitable, it would not pay to place 20-25% of your sales into rental fleets because of the effect on residuals.
It's interesting because you have other players going the other way right now, increasing their rental fleet mix. Toyota has been on the upswing because they've found that they can sell more to fleets yet not affect residuals too much up to a certain point - hence the Camry going 7-8% to rental fleets, which is historically high for Toyota, but right in the ballpark for safe residuals. And in Toyota's case, it's actually good business because they are running over capacity, so they can sell at a lower price and actually have profit (in a manner of speaking - as if the two groups, retail and fleet, were completely separate).
I would bet that when the dust settles, Ford and Toyota will have similar rental fleet mixes - 8-10% overall (although Ford's commercial and government might be larger - mostly due to their F-series).
And just for the record, the Fusion is definitely better than the Sonata.
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Joe 6:47PM (8/19/2007)
It will be interesting to see how the 2008 Focus does and whether or not it will sell. The whole car itself is a step back from the current design. Maybe they will have to re-evaluate fleet sales at that point. I have driven the Focus a couple different times (as rentals) and I have to say, the car itself drives really well. But, they should of not done something so dramatic with the car, particularly with the dash. Also, I think they had to get rid of the Focus hatch because of poor test crash results, the reason for the two door coupe.
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