GM cuts rental car sales, seeks to raise fleet vehicle prices

[Buick61]

CHARLOTTE, N.C. -- As General Motors cuts its sales to car rental companies, GM's fleet manager says the automaker wants to raise prices on those vehicles.

Brian McVeigh, general manager of GM's fleet and commercial operations, estimated that GM will sell 600,000 to 625,000 cars and light trucks to U.S. rental fleets this year, down from about 800,000 light vehicles two years ago.

McVeigh said GM is negotiating price increases for the vehicles it sells to rental fleets, calling the bargaining "intense."

"We like rental sales," McVeigh told Automotive News this month during GM's annual meeting with business customers here. "These guys buy from us every year."

Fleet sales, including sales to car rental companies, accounted for 29.1 percent of GM's U.S. light-vehicle sales from September 2005 to February 2006.

But that rate dropped to 26.6 percent from September to February of this year.

McVeigh says GM expects to cut sales to rental companies by an additional 2 to 5 percent next year.

McVeigh would not say how many of the cars and light trucks that GM sells to rental companies are program vehicles.

Those are vehicles that automakers agree to buy back after they are retired from rental fleets.

Car companies resell those vehicles, often amid volatile market conditions.

Last year, GM said, about two-thirds of the cars and trucks it sold to rental fleets were program vehicles.

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[mjd1001]

Quite honestly, I don't think that cutting sales to rental companies that much is needed.

Instead, I like the suggestion others have made on here...cut the sales of NEWLY designed vehicles to the rental companies (get some out there, like the new upcoming Malibu for instance, but not many)...BUT....sell as many to them of the outgoing models. Cars like the Current Malibu, the Grand Prix, the Current Cobalt....basically any car that is on the way out...give the rental companies a deal on them. If it means keeping an assembly plant (or two) open a few months longer before it is closed down to produce those cars, I don't think the UAW would mind that.

[Buick61]

Originally Posted by mjd1001

Quite honestly, I don't think that cutting sales to rental companies that much is needed.

Instead, I like the suggestion others have made on here...cut the sales of NEWLY designed vehicles to the rental companies (get some out there, like the new upcoming Malibu for instance, but not many)...BUT....sell as many to them of the outgoing models. Cars like the Current Malibu, the Grand Prix, the Current Cobalt....basically any car that is on the way out...give the rental companies a deal on them. If it means keeping an assembly plant (or two) open a few months longer before it is closed down to produce those cars, I don't think the UAW would mind that.

I don't like that idea at all. The majority of renters would experience the Old GM, which would thereby reinforce all of their negative views of the corporation and its products.

[solman98]

SOme companies would just go to another brand if the price is raised too much. We buy low bid and sell our own. We are the one that keep the plants open for that last coupld of months before the next model year comes out. We actually swapped out our 2003 Taurus for a 2007 Impala this year. I can't say it was a good swap IMO.

The only way to sell the "old" models would be to offer them from inventory. Keeping plants open to just produce them is not smart.

[likearock00]

Off topic, why is this news coming from Charlotte?

[Media!]

GM needs to get fleet sales down to around 15-17% and it is good tha they may be heading under 25% this year, but next year thy need to continue it, and only cuting 2-5% in rental sales next year isn't anything to be proud of.

[FStephenMasek]

GM should also only sell "loaded" vehicles to rental agencies so that people who rent them form their impressions of GM based on their best versions of each vehicle.

[VCDJ]

Well, If gm killed pontiac that would bring fleet sales way down. Pontiac is 50% fleet. Same thing needs to happen to buick. Those two brands are fleet brands. Fleet sales are stil high 25%. When you decide to sell your gm car you get nothing for it. Good job gm. This is why you are loosing so many customers. You want some quick sales, but then you lose your loyal customers. Why cant gm be like honda, with almost no fleet sales. That shows. Look at used hondas, they are very expecive. That is why customers love them so much. Take a look at used cobal or impala and compare that to civic and accord. Why cant gm make a competitive car that people want to drive. Cobalt has no chance agaist civic. Civic kills it in every category. GM needs to learn that people want fuel efficient cars that are high quality, if they can make a car like that then they woudl not need fleet sales. But no it is gm. Profit first, horse power second, quality third, fuel economy fourth.

[KingElvis]

In the oligopoly business model, you don't spend four or five years and hundreds of millions developing a model without some idea that roughly 100,000 people will decide to buy it.

I think we need to at least acknowledge that having a guaranteed market for thousands of vehicles helps mass market car companies.

[Geotpf]

Originally Posted by solman98

The only way to sell the "old" models would be to offer them from inventory. Keeping plants open to just produce them is not smart.

Actually, this is a very good idea. If there could be some way where all of last year's models lying around at dealerships across the country could be bundled up and sold off to the rental car agencies, that would be a way to get rid of those cars and also freshen up the inventories of those dealers (if you go to a dealer and half thier stock is last year's models, that's not a good impression-plus you automatically will push for a big discount, not good for GM).

[Cortazzo]

Car costs in the car rental industry are going up pretty dramatically this year, they rental companies will simply carry less fleet and charge higher prices. They only take lots of fleet on because some manufacturers are giving their cars away. The disadvantage of dumping lots of sparsly contented cars on the rental market is that it seriously depresses resale values and residuals. That is why hondas don't depreciate, there aren't any fleet sales. Once GM gets below 20% fleet sales they will be in good shape, and their reduction of fleet sales have already shown themselves in increased residuals.

[CrunkedRL]

Originally Posted by FStephenMasek

GM should also only sell "loaded" vehicles to rental agencies so that people who rent them form their impressions of GM based on their best versions of each vehicle.

I would agree with this notion if but for the fact that GM is currently waging war on fleet sales and this would work against their bottom line. GM as mentioned before is reducing fleet sales while increasing the price per unit sold in effect to help increase the residual values of some of their more noted fleet queens (ie Impala). So far this strategy appears to be working as the Impala's residuals have increased incrementally over the past couple years. However, if they were to only offer fully loaded trimmed level units to every rental company it would force them to raise their prices even higher and perhaps lose customers in the process to other competition. Keeping profitability high should remain GM's focus and IMO if they continue to stay the course they wont have to rely as heavily on fleet sales as they do today.

[mbukukanyau]

Budget has switched to Toyota fleet. I was shocked yestaday to see a lot full of Camry's, corolla's Yaris and Xb's here in San Diego

[ronald mcretard]

Originally Posted by Geotpf

Actually, this is a very good idea. If there could be some way where all of last year's models lying around at dealerships across the country could be bundled up and sold off to the rental car agencies, that would be a way to get rid of those cars and also freshen up the inventories of those dealers (if you go to a dealer and half thier stock is last year's models, that's not a good impression-plus you automatically will push for a big discount, not good for GM).

This seems like a good idea to me too. But it also seems too obvious; there has to be some reason I'm not thinking of that this is a bad idea.

[mcool]

Originally Posted by mjd1001

Quite honestly, I don't think that cutting sales to rental companies that much is needed.

Instead, I like the suggestion others have made on here...cut the sales of NEWLY designed vehicles to the rental companies (get some out there, like the new upcoming Malibu for instance, but not many)...BUT....sell as many to them of the outgoing models. Cars like the Current Malibu, the Grand Prix, the Current Cobalt....basically any car that is on the way out...give the rental companies a deal on them. If it means keeping an assembly plant (or two) open a few months longer before it is closed down to produce those cars, I don't think the UAW would mind that.

This has been GM's approach for some time (where the "Classic" badge is tagged to outgoing product), and I think it ultimately reduces the incentive for GM to get newer, better product out to market ASAP. Also, from a brand perspective, GM needs to shed the rental lot reputation. GM itself as a brand is ubiquitous enough for consumers to realize that a Chevy Classic (former Malibu) is still a GM product on the way out. I associate that with other GM product, no matter how good or retail oriented it is.