GM fleet sales drop at least 60,000 units in '06

[Flybrian]

GM fleet sales to drop at least 60,000 units in 2006

Link to original article @ AutoWeek

By JAMIE LAREAU | AUTOMOTIVE NEWS

AutoWeek | Published 07/17/06, 8:37 am et

DETROIT -- General Motors' fleet sales for 2006 in the United States will be down by 60,000 to 70,000 units compared with last year, says a GM executive.

The automaker is also getting better pricing on units sold to fleets this year and is optimistic about the direction of retail sales.

GM's fleet sales are in "the mid-20" percent range as a portion of total sales through June, Mark LaNeve, GM's vice president of vehicle sales, service and marketing, said in an interview with Automotive News.

GM's fleet sales fell by about 50,000 units in 2005 compared with 2004, LaNeve says. He predicts they will drop by 60,000 to 70,000 this year. GM intends to cut fleet sales by 5 to 10 percent annually going forward, he adds. A GM spokesman said fleets represented 25.9 percent of 2005 U.S. sales.

"I'm not locked into a share target in terms of fleet as a percent of our business," LaNeve says. "But we're going to take it down."

In 2005, GM sold 1.14 million units into fleets, including Saab, Morgan Stanley's auto analyst, Jonathan Steinmetz, says in research notes. A 60,000- to 70,000-unit decrease would mean a drop of 5.3 to 6.1 percent.

GM's first-quarter fleet-to-retail mix was 30 percent, up from 26.9 percent during the same period a year ago, Steinmetz says.

LaNeve says GM's profits from fleets are the best they have been in two years. That's because products are garnering better prices under GM's pricing strategy, which lowers sticker prices in hopes of cutting incentives.

"We really believe the strategy has started to take hold in terms of lower incentives," LaNeve said. "Sales are up from a standpoint of share and running rate over the past three quarters."

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So, that shows fleet sales are not as bad as some would like to claim. I can imagine GM reaching a point where its still likely one of the leaders in overall sales to fleets (by sheer volume), but does so while making a healthy profit from it.

[Northstar]

I think a LARGE chunk of the fleet sales are going to be reduced by switching Oshawa over to Zeta and by getting rid of W-Body. The Impala and Grand Prix are rental queens and the LaCrosse is more common than Buick probably wants. The Monte Carlo is also fleeted relatively often, I believe.

In contrast, the only Zeta I really see having many fleet sales is the Impala in police duty as well as possibly taxis.

[Newbiewar]

I think a LARGE chunk of the fleet sales are going to be reduced by switching Oshawa over to Zeta and by getting rid of W-Body. The Impala and Grand Prix are rental queens and the LaCrosse is more common than Buick probably wants. The Monte Carlo is also fleeted relatively often, I believe.

In contrast, the only Zeta I really see having many fleet sales is the Impala in police duty as well as possibly taxis.

168131[/snapback]

thats the ideal world...

[ZL-1]

When's GM reporting 1st half results?

[Newbiewar]

When's GM reporting 1st half results?

168195[/snapback]

last year i believe they did it on the 23rd... so expect it probably next week...

[ZL-1]

last year i believe they did it on the 23rd... so expect it probably next week...

168257[/snapback]

Thanks. We'll have an 'official' fleet/retail mix by then.

[SimonDavid]

I think alot of it is also driven by the capacity reduction

GM was pumping fleets because it needed to keep all those plants running

now it's going to get smaller but profitable

[prototype66]

I think this COULD be bad in two ways.

1) Without the fleets having our product out there, when will potential customers have a chance to try out the product. Alot of my customers have come in to buy the same car they RENTED on vacation/ business trips because " I had no idea I liked the _______ until I drove it on vacation at disney world" or where ever they were. Perfect test drive in the real daily use world.

2) Without the fleet sales there goes the selection of GM CERTIFIED USED CARS that I also sell along with the new units. Less inventory with the same amount of dealers beating each other up to get a handfull of rentals will (A) drive up the prices and (B) destroy the selection available to the customers. = lost sales for some dealers. Much more so in areas with more GM dealers. just my preception of what will be if they continue to reduce the fleet sales. thats keeping a roof over my familys head. I think it is a gigantic mistake.

Edited July 20, 2006 by prototype66

[Newbiewar]

I think this COULD be bad in two ways.

1) Without the fleets having our product out there, when will potential customers have a chance to try out the product. Alot of my customers have come in to buy the same car they RENTED on vacation/ business trips because " I had no idea I liked the _______ until I drove it on vacation at disney world" or where ever they were. Perfect test drive in the real daily use world.

2) Without the fleet sales there goes the selection of GM CERTIFIED USED CARS that I also sell along with the new units. Less inventory with the same amount of dealers beating each other up to get a handfull of rentals will (A) drive up the prices and (B) destroy the selection available to the customers.  = lost sales for some dealers. Much more so in areas with more GM dealers. just my preception of what will be if they continue to reduce the fleet sales. thats keeping a roof over my familys head.  I think it is a gigantic mistake.

169108[/snapback]

We are still getting a volume of customers saying, hey i drove a G6 the other day, I really want to buy one...

and Used Fleet vehicles are still avalible... we've got plenty on our lot and that has nothing to do with GM reducing fleet sales... Enterprize & others still want GM vehicles... and if the resale value goes up on the Rented vehicles, this means Ideally the rental companys can charge less for GM vehicles... meaning people can test out the nicer vehicles for a cheaper price.

[Drew Dowdell]

2) Without the fleet sales there goes the selection of GM CERTIFIED USED CARS that I also sell along with the new units. Less inventory with the same amount of dealers beating each other up to get a handfull of rentals will (A) drive up the prices and (B) destroy the selection available to the customers.  = lost sales for some dealers. Much more so in areas with more GM dealers. just my preception of what will be if they continue to reduce the fleet sales. thats keeping a roof over my familys head.  I think it is a gigantic mistake.

169108[/snapback]

That will drive up resale value as well which will in turn make it a little easier to sell the new ones closer to sticker.

[Drew Dowdell]

Enterprize & others still want GM vehicles... and if the resale value goes up on the Rented vehicles, this means Ideally the rental companys can charge less for GM vehicles... meaning people can test out the nicer vehicles for a cheaper price.

169115[/snapback]

how much you wanna bet that won't happen..... the rental agencies will just keep the price the same and take the extra profit.

[Newbiewar]

how much you wanna bet that won't happen..... the rental agencies will just keep the price the same and take the extra profit.

169127[/snapback]

they make massive profit as it is...

but if we are making the vehicles more expensive, and less appealing to them, they'll most likely just go toward a company that would prefer to inflate their sales...

GM doesnt care about rental agencies any more... its time to be concerned with the end user... the Consumer...

[Newbiewar]

That will drive up resale value as well which will in turn make it a little easier to sell the new ones closer to sticker.

169125[/snapback]

exactly...

[LTB51]

Hmmm.... so should we take it that GM's fleet sales are actually up so far this year? That's what Steinmetz seems to be hinting at (at least in Q1). And if you actually look at what GM says in the article, they never state that fleet is down, only that they hope it to be down by the end of the year.

What makes it interesting is that GM's sales are off 12% YTD, so even if the retail/fleet mix stayed the same as in 2005, fleet should be down significantly already. If the 25.9% were applied to GM's 2005 and 2006 YTD, they should be down 74,000 fleet already. Instead they may be up, and, if so, they will have to make that up that difference in the remainder of the year to hit their target.

I fear they are still adicted. More evidence that the brass isn't serious about doing what is needed to turn the company around?