• May 19th 2008 at 6:02PM
  • 17

Even after posting a $3.25 billion loss, General Motors won't resort to fleet sales to ease their pain. In the automotive industry, fleet sales typically represent the lightly equipped, and heavily discounted, vehicles sold to rental companies or corporations. The numbers are significant, and fleets sales of a particular model may even exceed the volume sold at retail. Often laden with special financing incentives, the sales are less profitable for the automaker, and they hurt the used-vehicle market when a large number of the same model are dumped into the marketplace simultaneously.

Last year, GM sold about 700,000 units to fleet sales. In 2008, that number is projected to drop to about 575,000 units. By 2009, it will decline even further with a sales projection of just over 500,000 fleet units. GM isn't the only automaker following this path. Ford's sales to rental companies are down 16 percent from the same quarter last year. Chrysler LLC also curbed their sales, but they have declined to offer specifics. Automakers are also taking steps to increase used car values. Instead of selling "stripped" vehicles to rental fleets, the cars are equipped more with consumer-friendly options such as sunroofs and upgraded audio packages.

[Source: Automotive News, subs. req'd]

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    • 1 Second Ago
      • 7 Years Ago
      "The 2008 Malibu already has about the same residual value after 5 years as a Camry according to KBB Residual Value Guide."

      That's funny! Somebody is doing a bit of unauthorised time travel it seems.
      • 7 Years Ago
      I look at GM and Ford's "announcements" this way.

      Having lost many new fleet sales to the up and coming Korean brands they instead want to lay claim to the idea that they are voluntarily leaving this market.

      So, you have these manufacturers under union contracts to pay out X amount per year who suddenly want to take a large number of sales out of the equation. So again we have the major US automakers not looking to increase sales but attempt to more profitable on less sales.

      • 7 Years Ago

      I think this is a bad strategy. A sale is a sale, and I think the more your product is out and about on the streets, the better. My strategy would be to sell as many cars as possible, whether it be fleets or dealers, I don't think it would matter.
        • 7 Years Ago
        Agreed. The key here is that the product needs to be good. I rented a Mazda6 5 door and it was a great car and a positive experience. Ford and GM were hurt by fleet sales because the Taurus, Lumina, etc. were uninspiring vehicles built on aging platforms. I would say that fleet sales are an opportunity to get some of these business travelers into a Fusion or a Malibu. If these cars are any good, it's an opportunity to make a good impression.
      • 7 Years Ago
      The big difference in fleet sales to rental companies is the switch from what's called repurchase sales to risk sales.

      In the past most rental fleets were repurchase sales. This is when the mfgr. sales a fleet of cars for a certain price with the agreement to "repurchase" them at a predetermined price depending on time in service and mileage. This was usually beneficial to the rental companies for various reasons. Also, they "sold" the cars back to the mfgr who would then be responsible for wholesaling the vehicles at auction.

      Now more rental fleet sales are sold as "risk" sales. This is when the rental company buys the vehicle from the mfgr with no guaranteed repurchase from the mfgr at the end of it's service. Basically, the rental company takes the "risk" of the resale loss. These vehicles are usually kept in service much longer in order for the rental company to get the most money out of it before time to retire it and send to auction or sale through other outlets.

      Also, the mfgr are putting more optioned cars into service. This helps residuals not take such a big hit on vehicles with higher rental sales volumes.

      Fleet sales aren't bad sales if managed right. It's a great way to move alot of product and it gets people in the seats of new models. Like someone else said, somebody has to sell to them to the rental companies. And right now it's the Japanese and Koreans (as mentioned in earlier post).
      • 7 Years Ago
      Ok, anyway, GM sells a lot of car for fleet: also citycars, and gas in the future. In Italian: http://www.fleetblog.it/?cat=82
      • 7 Years Ago
      OK, so Ford and GM won't be selling as many fleet vehicles, then who will? It's not like fleet sales will just go away.

      While this is good news for both Ford and GM since they have a reputation of being the primary source of rental cars and the like. But, that business has to go somewhere. other companies will be taking the hit that GM and Ford endured for so long.
      • 7 Years Ago
      That is great news for GM. They should see much better resale value as a result of the reduction of fleet sales. The 2008 Malibu already has about the same residual value after 5 years as a Camry according to KBB Residual Value Guide.
      • 7 Years Ago
      I would think the rental companies would balk when they have to pay much more for their vehicles.

      If the car rental companies are sufficiently independent of the auto manufacturers, shouldn't they still be able to pretty much define the deals? Just tell the manufacturers, "I'll by this big number of cars if you can give me nice cheap stripped-down models."
        • 7 Years Ago
        Having worked for the big green "E" for a long time I can tell you that the rental car companies are getting the shaft in this deal. Most rental companies are now in-fleeting used cars (Enterprise buys a ton from Hertz, Avis/Budget buy from Enterprise, etc). In 10-15 years most rental cars will be Chinese.
        • 7 Years Ago
        been seeing a lot of hyundais, toyotas, kias, and chryslers.

        and with what I've seen in Chryslers and Toyotas, Hyundai is leapfrogging them both.
      • 7 Years Ago
      One of the biggest negatives of buying an American car has been poor resale value. Why should I buy a new one if I can get a one year old model for $10,000 less? If I wanted to do the same for an Accord or Camry, I'd only save 2 - 3,000 -- it wasn't worth it. If this is to restore resale value to American cars, it makes sense. GM can sell generation old cars like the Chevy Classic (old Malibu) to rental companies that aren't available at dealers to protect the resale value of cars like the new Malibu.
      • 7 Years Ago
      You think car manufacturers would make car models specifically for fleet/rental markets (similar to how big name stores sell specially branded tires).
      • 7 Years Ago
      Is this news the least bit surprising? GM's lineup has always consist of boring average everyday appliance like vehicles, basically filler cars. Some people like them while others are just plain sick and tired of them and want something different. Ford and Chrysler are not different from GM when it comes to this.
      • 7 Years Ago

      in reply to..........

      I have learned that it helps to have an idea about whether I understand, before I make my smarty remarks
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