GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

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Thread: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

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    GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    GM sees more room to cut rental sales

    DETROIT — General Motors plans to keep reducing the flow of vehicles from its plants to U.S. rental lots at least through 2018, continuing a strategy that has helped the automaker's North American operations pile up more than $26 billion in profits under CEO Mary Barra even as its overall market share keeps sliding.

    Alan Batey, GM's president of North America, told Automotive News last week that sales to daily-rental fleets would fall by about 50,000 units this year and an unspecified amount in 2018. That would represent four straight years of declines for GM's rental deliveries, which already dropped from 16.1 percent of its total U.S. sales in 2014 to 11.7 percent in 2016, according to R.L. Polk registration data provided by the company. The additional reductions Batey discussed likely would drop that proportion into single digits.

    "We like the rent-a-car business from a seats-in-seats perspective, because it's great test drives and it's a great opportunity to expose new people to our products," Batey said. "We don't like it when it's bringing too many nearly new vehicles back into the market to compete with our new business and compress our resale values."

    Such discipline represents a major philosophical shift for a company that used to rely on money-losing fleet sales to keep its assembly lines running because its union contracts made cutting production extremely costly — and often because executives' bonuses and bragging rights hung in the balance.

    Barra has moved GM away from prioritizing size at the expense of its bottom line, abandoning some large global markets where it was unprofitable in addition to emphasizing retail sales on the domestic front.

    Stronger leasing

    GM isn't shunning all varieties of fleet; its more lucrative commercial and government business is on the rise. It also has funneled 10,000 vehicles into its Maven short-term rental service since its launch in early 2016

    GM's U.S. retail sales are up 0.3 percent this year through May, while total industry sales have slipped 2 percent.

    By selling fewer vehicles to Enterprise and Hertz, GM can boost residual values and improve the economics of its leasing business, Batey said. That, in turn, puts customers in the market for a new vehicle more often.

    "What's different today from seven or eight years ago is we now have a full captive in GM Financial that's really gaining momentum and gaining steam," Batey said. "We're able to really look at this holistically. We want to have a very strong lease portfolio, and we want to manage the back end of that in a very controlled manner."

    Rising inventory

    GM's discipline has been relatively steadfast even as its inventory has climbed to the highest level in nearly a decade. Batey said the build-up is designed to help GM weather a significant amount of production downtime in the coming months to retool for upcoming pickup and SUV models. But if the second half of the year is weaker than GM projected, it will test executives' resolve to avoid the profit-killing relief valves historically used in such situations, including higher incentives and more rental deliveries.

    Batey insists the automaker is well positioned, even with about 44 percent more inventory than it had a year ago.

    "You have to react to what's happening in the market," he said. "We don't control the external environment, but we have to react appropriately once we get clarity. We'll take whatever actions we need to ensure that we keep our discipline in the marketplace."

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    It's a shame Opel never had this North American rental car strategy in place they might have been a profitable concern today, some models rental car number are 5 times higher than the current North American 11%, Opel rents 70% of its cars in places like France in 30%/70% ratio of Private/Avis & Hertz buyers.

    Hertz are struggling themselves at the moment anyway shares have plummeted 39% and they are making big losses. Demand for rental cars, which, for many consumers are as appealing as a visit to the dentist’s chair, is only part of the story, amid the proliferation of car-hailing companies such as Uber and Lyft. Hertz has struggled to get quality resale prices for its old vehicles as U.S. used-car values have fallen it use to sell on. Hertz use to make $1,350 to $1,400 when it sells a vehicle at retail now its close to nothing.
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Did Opel/Vauxhall ever actually categorise rental sales separately from fleet sales - I was never aware of that - the UK fleet business is 60% of new car sales but that includes rental, large fleet, small fleet, individual business purchases, on-line discount retail - no different to any other brand in the UK except ultra-luxury, very high performance and budget basement.

    Fleet sales, including rentals, are how Hyundai/Kia are growing their UK volume as their reliance on retail was too high.

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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    When l look at the UK market Rupert the biggest market that both Ford & Opel are the biggest suppliers to Avis/Hertz/Eurocar/Dollar etc rental car companies etc, l have had many vacations in Europe hired Chevy LUV pick-up trucks that are a rare as rocking horse droppings the last 3 times from Fontana Auto at Larnaca Airport where they all the rental car companies share the same rental lot, it was just a vast sea of Corsa's, Astra's, and Ford Focus small cars with a few small Nissans and Kia Picanto all FWD junk garbage.

    When l look at UK sales it all the boring bland small cars that get dumped in fleet rental markets sold in big batches only exception was the Mondeo large car a shocking 96% were fleet/rental dumped probably at a huge loss. Retro small FWD Fiat 500 & Mini are very popular more so with the private both command high prices and not affected by Avis & Hertz fleet/rentals sold in big batches at huge losses losses like Opel's are.

    UK 2016 sales of the most popular small fleet/rental cars Ford/Opel's biggest single market in Europe

    Astra = Total sales 60,719, Private Buyers 11,694, Fleet/Rental dumped sales 49,025.

    Corsa - Total sales 77,110 Private Buyers 32,072, Fleet/Rental dumped sales 45,038

    Focus - Total sale 70,545 Private Buyers 27,505, Fleet/Rental dumped sales 43,040

    GM use to give BSM all their 3,500 Vauxhall Astra/Corsa cars for free and replace them for free, the whole car made a massive huge loss so fleets are huge loss makers as well Rupert its not just rentals that lose huge money at Opel.

    Answer: Opel need to start making small FWD rental cars that appeal to private buyers/rental car companies in equal measures Rupert like the retro Fiat 500 & Mini that can still command premium prices in both small car private/fleet rental markets, and stop making dull boring bland shaped cars that only appeal to Avis & Herts because all they want is huge batches sold on the cheap at a $25 billion costs to Opel in huge losses.
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Some of you guys need to proof read your submissions a little more. Look at that headline: thats and $28 billions, come on.

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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by 1958carnut View Post
    Some of you guys need to proof read your submissions a little more. Look at that headline: thats and $28 billions, come on.
    But that is implying the profits are coming only because they are selling fewer rental cars; ever heard of the phrase "Correlation does not imply causation" GM started selling Bright-Blue cars a few years ago, someone could write a story, be 100% factual, saying that is the reason, at that same time, being 100% BS, unless they are actually selling rental cars at a loss.

    This was something I was thinking before I even read this section; again think about it, what hurt the price of a new car more; a used car lot full of 2 year old 20,000 mile cars in near perfect condition, with "private owner" title history or a rougher-condition 18 month old car with 35,000 miles and "rental car" title history? The guy shopping for a NEW car will look at the 2 year-old private owned off-lease; he won't even consider the latter.

    "We like the rent-a-car business from a seats-in-seats perspective, because it's great test drives and it's a great opportunity to expose new people to our products," Batey said. "We don't like it when it's bringing too many nearly new vehicles back into the market to compete with our new business and compress our resale values."

    What do you think 2-year retail leases do Mr. Batey?

    GM's leasing rate are far higher than the industry average, which "floods" the used car market with near-new used cars. It has been the driver of the retail sales gains; their is a cost, especially when you are the Manufacturer, and leaseholder, or do any of you think that because GM sells fewer cars to Hertz, that my Cruze will be worth the same as a 2 year-old car with 20,000 as it was when new?
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by 1958carnut View Post
    Some of you guys need to proof read your submissions a little more. Look at that headline: thats and $28 billions, come on.
    LOL that the eyesight sorry about, 26 not 28 you are absolutely right, l had just noticed that as well after l posted it not sure how you can change the title. Maybe somebody on GM could change amend the title.

    Glad to be human, not perfect.
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by Ed753 View Post
    But that is implying the profits are coming only because they are selling fewer rental cars; ever heard of the phrase "Correlation does not imply causation" GM started selling Bright-Blue cars a few years ago, someone could write a story, be 100% factual, saying that is the reason, at that same time, being 100% BS, unless they are actually selling rental cars at a loss.

    This was something I was thinking before I even read this section; again think about it, what hurt the price of a new car more; a used car lot full of 2 year old 20,000 mile cars in near perfect condition, with "private owner" title history or a rougher-condition 18 month old car with 35,000 miles and "rental car" title history? The guy shopping for a NEW car will look at the 2 year-old private owned off-lease; he won't even consider the latter.

    "We like the rent-a-car business from a seats-in-seats perspective, because it's great test drives and it's a great opportunity to expose new people to our products," Batey said. "We don't like it when it's bringing too many nearly new vehicles back into the market to compete with our new business and compress our resale values."

    What do you think 2-year retail leases do Mr. Batey?

    GM's leasing rate are far higher than the industry average, which "floods" the used car market with near-new used cars. It has been the driver of the retail sales gains; their is a cost, especially when you are the Manufacturer, and leaseholder, or do any of you think that because GM sells fewer cars to Hertz, that my Cruze will be worth the same as a 2 year-old car with 20,000 as it was when new?
    LOL thats why Hertz are now losing big money when it comes on to selling on their ex-rental cars when they use to make over $1,000 bucks on selling them on, now its at a loss, the second hand market is getting flooded out oversupplied with cheap cars nobody wants, apart from a few Camaro/Stangs that hold their price are sort after on the second hand market.

    European buyers have a huge choice of Opel's at Avis & Hertz in Europe they lose $25 billions, and no they don't become massive private buyers of Opel's in the future.


    UK 2016 sales of the most popular small fleet/rental cars Ford/Opel's, biggest single market in Europe

    Astra = Total sales 60,719, Private Buyers 11,694, Fleet/Rental dumped sales 49,025.

    Corsa - Total sales 77,110 Private Buyers 32,072, Fleet/Rental dumped sales 45,038

    Focus - Total sale 70,545 Private Buyers 27,505, Fleet/Rental dumped sales 43,040

    GM use to give BSM driving school all their 3,500 Vauxhall Astra/Corsa cars for away for free and replace them for absolute free every 2 years, the whole car made a massive huge loss so fleets are huge loss makers as well, its not just rentals that lose huge money at Opel.

    Yes it is a very good great way of test driving a car that you like Mr Batey, you can't argue with that point. All Opel got out the deal was $25 billion in losses in a oversupplied market, and not to many private car buyers ever come back and by a new Opel after a Hertz test drive..
    Last edited by Oldsmobile stopped; 06-12-2017 at 09:04 AM.
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by Ed753 View Post
    GM's leasing rate are far higher than the industry average, which "floods" the used car market with near-new used cars. It has been the driver of the retail sales gains; their is a cost, especially when you are the Manufacturer, and leaseholder, or do any of you think that because GM sells fewer cars to Hertz, that my Cruze will be worth the same as a 2 year-old car with 20,000 as it was when new?
    If the model sells in huge numbers though Hertz, then sure it will suppress the second hand values for that model on the second hand car buyer market it's a lose lose, but your sales numbers will look good but you could end up doing Chapter 11 if you hit a headwind $148 a barrel oil price spike storm if you are running your operations on a cliff edge at Hertz rentals to make the sales numbers rather than the $ in the bank looking good..

    If you are a private buyer before you go out and buy a new car you should down to the local Hertz rental lot, if there are lot high stock of the model you like are thinking of buying don't buy it, because that will be worthless piece of junk Hertz will be selling flooding the second hand market out with in 2 years time with very poor residual values due to the glut off them being fleet/rental dumped, and so making it a little bit more harder to trade in again for a another if its residual value is made Hertz poor.
    Last edited by Oldsmobile stopped; 06-12-2017 at 09:43 AM.
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Used rental -> one year old with 25k-30k miles in rough shape
    Used lease -> 2-3 years old with 24k-36k miles in good shape

    Neither are going to compete with a NEW car, but one will leave the second owner with a better impression.

    And when's the last time a new car salesman pushed somebody toward a used car? Never. At most dealerships they're completely different buildings and different staff. And most people tend to already know what they're going to buy (new or used) when they head to the dealership. If anything, the great lease deals would work the other way around and push buyers toward a new car. Why buy used when you can lease a new one for similar pricing?
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by Oldsmobile stopped View Post
    If the model sells in huge numbers though Hertz, then sure it will suppress the second hand values for that model on the second hand car buyer market it's a lose lose, but your sales numbers will look good but you could end up doing Chapter 11 if you hit a headwind $148 a barrel oil price spike storm if you are running your operations on a cliff edge at Hertz rentals to make the sales numbers rather than the $ in the bank looking good..

    If you are a private buyer before you go out and buy a new car you should down to the local Hertz rental lot, if there are lot high stock of the model you like are thinking of buying don't buy it, because that will be worthless piece of junk Hertz will be selling flooding the second hand market out with in 2 years time with very poor residual values due to the glut off them being fleet/rental dumped, and so making it a little bit more harder to trade in again for a another if its residual value is made Hertz poor.
    Nonsense, go look up the definition, if I'm not being clear enough.



    Quote Originally Posted by TruckMan View Post
    Used rental -> one year old with 25k-30k miles in rough shape
    Used lease -> 2-3 years old with 24k-36k miles in good shape

    Neither are going to compete with a NEW car, but one will leave the second owner with a better impression.

    And when's the last time a new car salesman pushed somebody toward a used car? Never. At most dealerships they're completely different buildings and different staff. And most people tend to already know what they're going to buy (new or used) when they head to the dealership. If anything, the great lease deals would work the other way around and push buyers toward a new car. Why buy used when you can lease a new one for similar pricing?
    Yet I bought a ~2 year old (off-lease) MKX with 15,000 miles for $15,000 off the price of new, with a CPO Warranty instead of a new MKX?

    Most of those "off-rental" cars never make it back to the Dealership, it's a completely different class of used car.

    It doesn't matter how many cars Kia (or whomever sells to the rental companies, in the broader sense) If a new Optima is $30,000 a clean low-mileage 2 year-old off-lease is going to be priced based on that value, not the 100,000 or so that are clapped-out running through the auction.

    The overall (residual) average is going to be higher, but each car is priced individually; GM is filling it own Dealer lots with ~2 year-old low mileage vehicles. (Maybe that is why truck sales are down so bad? Just a thought...............)
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by Ed753 View Post
    Nonsense, go look up the definition, if I'm not being clear enough.





    Yet I bought a ~2 year old (off-lease) MKX with 15,000 miles for $15,000 off the price of new, with a CPO Warranty instead of a new MKX?

    Most of those "off-rental" cars never make it back to the Dealership, it's a completely different class of used car.

    It doesn't matter how many cars Kia (or whomever sells to the rental companies, in the broader sense) If a new Optima is $30,000 a clean low-mileage 2 year-old off-lease is going to be priced based on that value, not the 100,000 or so that are clapped-out running through the auction.

    The overall (residual) average is going to be higher, but each car is priced individually; GM is filling it own Dealer lots with ~2 year-old low mileage vehicles. (Maybe that is why truck sales are down so bad? Just a thought...............)
    For example; let's go back and read this thread; 23 months old..............

    https://www.gminsidenews.com/forums/f...i-take-216433/
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by Ed753 View Post
    For example; let's go back and read this thread; 23 months old..............

    https://www.gminsidenews.com/forums/f...i-take-216433/
    Yes, he bought a NEW vehicle. Never considered a used one.
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    "Yet I bought a ~2 year old (off-lease) MKX with 15,000 miles for $15,000 off the price of new, with a CPO Warranty instead of a new MKX? "

    Why did you not buy a Ford Edge the same car, same running gear but even cheaper Ed, you would have saved yourself a lot more money?
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by Oldsmobile stopped View Post
    LOL thats why Hertz are now losing big money when it comes on to selling on their ex-rental cars when they use to make over $1,000 bucks on selling them on, now its at a loss, the second hand market is getting flooded out oversupplied with cheap cars nobody wants, apart from a few Camaro/Stangs that hold their price are sort after on the second hand market.
    So Hertz rents a car for 18 months, for $40/day and is losing money; yet GM "rents" a car for $129/month and makes money?
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    Re: GM to cutback on rental cars, a strategy thats made $28 billions under Mary Barra

    Quote Originally Posted by TruckMan View Post
    Yes, he bought a NEW vehicle. Never considered a used one.
    But that low lease payment is based on big up-front discounts and a high residual, due to be turned-in next month, along with thousands more.............
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