Rental King

[Flybrian]

Rental King
Nearly half of Chrysler's sales are to fleets
By BRADFORD WERNLE | Link to Original Article @ AutoWeek | Updated: 04/26/07, 9:53 am et

DETROIT -- With fleet sales accounting for nearly half its total sales, Chrysler is gaining an identity as DaimlerChrysler's rent-a-car brand.

Soft retail sales led the Chrysler brand to rely on fleet sales in a big way last fall and early this year. According to an Automotive News analysis of industry fleet sales by brand, Chrysler was the industry's top fleet-sales brand from November through February.

For the six-month period through February - the most recent month for which brand data are available - fleet sales accounted for 48.5 percent of the Chrysler brand's total sales.

The Chrysler group has been working hard to clear a backlog of vehicles caused by the company's much publicized overbuild of 2006, which caused grief for so many dealers. It has been a huge problem for the Chrysler brand, which had to clear out inventories of minivans and Sebrings.

Dodge also has had relatively high fleet sales, while Jeep's fleet sales mirror the industry average. Among other brands, Pontiac was the top fleet-sales brand in August and September. For a brand-by-brand list of fleet sales, see www.autonews.com/fleet.

From September through February, the Chrysler group's fleet sales accounted for 34.3 percent of its total sales. For the same period, fleet sales generated 32.8 percent of Ford Motor Co.'s domestic brand sales, and 26.6 percent of General Motors' total sales.

Estimates of fleet sales were generated by the Automotive News Data Center, which compared its own overall sales data to retail vehicle registrations provided by R.L. Polk. Fleet sales involve the purchase of 10 or more vehicles at a time.

Rent-a-cars

Fleet sales to corporate customers such as Wal-Mart or the Post Office can be profitable. But automakers risk losing money on sales to daily rental fleets such as Hertz or Avis.

In recent months, Ford and General Motors have tried to scale back sales to daily rental fleets. But the Chrysler group's sales to daily rental fleets appear to remain high.

According to an industry source familiar with the fleet business, daily rental fleets accounted for nearly 80 percent of the Chrysler group's first-quarter fleet sales. By contrast, daily rental companies accounted for half the first-quarter fleet sales of GM and Ford.

Last week, Chrysler group spokesman Markus Mainka noted that the volume of the company's overall fleet sales had actually declined in the first quarter, compared with the same period a year earlier. Likewise, Mainka added, the volume of the Chrysler group's sales to daily rental fleets also declined.

But fleet sales still account for a big proportion of the Chrysler group's total sales because its retail sales are so soft. In February, the most recent month for which R.L. Polk data are available, the Chrysler brand's retail registrations slumped 36.2 percent compared with the year-ago period.

"Chrysler is incentivizing the fleet business a lot more than the consumer side because they need the volume to look halfway decent," says Art Spinella, principal of CNW Marketing Research in Bandon, Ore.

The second half of 2006 was a tough period for the Chrysler brand. The division was clearing out minivans in preparation for a redesigned Town & Country, which arrives in fall. And it had to trim Sebring inventories to make way for the redesigned 2008 model, which debuted last fall. "It's clearly an inventory clearout for them," Spinella says.

The Chrysler group has continued to draw down its inventory of unsold vehicles. But the residual values of its cars and trucks could take a hit when all those rental vehicles enter the used-car auctions this summer, Spinella predicts. Because of production cuts this year, Chrysler probably won't face the same problem in 2008, he adds.

New ad blitz

To revive the brand, Chrysler is launching an advertising campaign this spring that will emphasize the brand's premium position. Featured will be several vehicles, including the Sebring hardtop convertible.

The ad campaign should help vehicles such as the formerly hot-selling 300 sedan, whose sales have been slow. Likewise, dealers say customers are unfamiliar with the new Aspen SUV because there has been little advertising for it.

The new 2007 Sebring sedan, launched in the fourth quarter 2006, also has had a slow start. Chrysler recently ran ads showing more of the features and attributes of the vehicle.

The PT Cruiser will die in 2008; it will be replaced by a crossover in 2010. The Pacifica will be discontinued in 2009, according to a forecast by Global Insight.

Dealers fret

Besides the new ad campaign, DaimlerChrysler has taken other steps to help Chrysler brand dealers. The company has worked to bring Chrysler franchises together with Jeep and, in many cases, Dodge.

The Chrysler brand now has just 126 exclusive outlets among its 2,836 franchises. But the brand's weakness is increasingly difficult to mitigate. Excluding fleet sales, the Chrysler brand generated just seven retail sales per franchise in February. By contrast, Honda division's retail sales averaged 92 vehicles per franchise.

So Chrysler-brand dealers who don't have other brands to fall back on are struggling. "They don't have a broad enough product line," says Doug Alley, whose family owns a Chrysler stand-alone store and a Dodge store in rural Kingsport, Tenn. "All you've got to sell is PT Cruiser, 300 and Town & Country."

Alley says the new Aspen SUV has been a flop since it was introduced late last year. "We concentrate on the used-car business in that store. A stand-alone Chrysler (franchise) in any market is just not viable."

Dan Hughes, owner of Trice Hughes Chrysler-Dodge-Jeep in Princeton, Ky., praises the Chrysler vehicle lineup but says it's often difficult for him to get the cars he needs.

Some Chrysler models are delivered to his lot for courtesy delivery to local rental car companies before he gets any to sell to retail customers. Says Hughes: "If I want to drive one, I have to rent one before I can get one on my lot."

[Satty]

So much for the tools who say that Toyota is picking up GM's fleet sales.

[SuperSport623]

Featured will be several vehicles, including the Sebring hardtop convertible.

i havent heard a word about that before

[ehaase]

I do not understand why the Canadian parts supplier or a private equity group or even Kirk Kerkorian would want to purchase this mess. The 300C or Charger R/T are the only products that remotely interest me.

[BrewSwillis]

Well, if you just single out the Chrysler brand. You have have the ancient Sebring, PT Cruiser, T&C, and then the newer Pacifica, 300 and Aspen. I don't think the Aspen was even a factor because it just came out recently.....so you had all those old cars and then the 300. Rental companies like Chrysler Group minivans, Sebrings/Sebring Convertibles, and PT Cruisers.....so when you have an aging lineup with high rental desirability, of course the percentage to fleet is high. The percentage will go down when the new Sebring, T&C, and PT replacement come into full production....but it will probably remain near the top of the industry average because they still have overcapacity issues.

[turbo200]

Pontiac has 44% fleet sales according to an artice over at autoblog, where's the headline for that one?

[Intrepidation]

Chrysler had better hope their vans are a hit so they can bring the fleet sales down on them. Give the Durango the Aspen's interior is then get rid of it. If you're gonna make an attempt at advertising "premium" your interiors had better start representing that "premium" image.

[Northstar]

Pontiac has 44% fleet sales according to an artice over at autoblog, where's the headline for that one?

No one is preventing you from posting it...

I'm guessing Pontiac's fleet numbers will drop by about 15% when the G8 comes. No more GPs will be going to fleet (75% of which go to fleet) and the G8 will sell more retail sales than the GP (assuming they import 40k).

As for Chrysler... it's not that surprising. They don't have a whole lot of appealing products, and even their most appealing products, 300 and Charger, have 27.5% and 34% of their sales to fleets. Even the Magnum, which was supposedly so hot, sells 49% to fleets. I believe that ~50% of the LX cars are said to be Hemis, and I doubt many Hemis go to fleets, so very few non-Hemi Magnums go to retail.

[Cory Wolfe]

Pontiac has 44% fleet sales according to an artice over at autoblog, where's the headline for that one?

No one writes about the second most rented brand... and it's mentioned right in the above article anyways. "Among other brands, Pontiac was the top fleet-sales brand in August and September. For a brand-by-brand list of fleet sales, see www.autonews.com/fleet."

[Flybrian]

Pontiac has 44% fleet sales according to an artice over at autoblog, where's the headline for that one?

AutoWeek thought this was more relevant and I cannot really disagree with their analysis. While Pontiac's fleet percentage is mainly the result of the heavy rental bias of one outgoing model (Grand Prix), Chrysler's is spread across the entire lineup. Consider Chrysler has more volume and the average age of a Chrysler car is less than a Pontiac, their strong reliance on rental sales is far more disconcerting.

[Intrepidation]

It's ashame because when the 300 debuted Chrysler was on the right track to long-term profitability. It had "gotta-have-it" styling, great interior and for the most part good powertrain options...if only they kept it up.

[CARBIZ]

I still like the 300, but then I liked the first generation Intrepid when they came out! I had an old geezer (sadly, it is only old geezers I've seen driving these things around here) drop of his leased 300 and pay cash for a 2006 LTZ Impala from me. He said he liked the 300 okay, but was unimpressed with the gas mileage and his wife almost had a coronary when they saw the trunk of the Impala. I think they keep their grandkids in there!

[regfootball]

I still like the 300, but then I liked the first generation Intrepid when they came out! I had an old geezer (sadly, it is only old geezers I've seen driving these things around here) drop of his leased 300 and pay cash for a 2006 LTZ Impala from me. He said he liked the 300 okay, but was unimpressed with the gas mileage and his wife almost had a coronary when they saw the trunk of the Impala. I think they keep their grandkids in there!

oh, how is he gonna survive without RWD?

[Robert Hall]

oh, how is he gonna survive without RWD?

Mainstreamers don't care...the RWD difference only matters to enthusiasts...

[ZL-1]

I do not understand why the Canadian parts supplier or a private equity group or even Kirk Kerkorian would want to purchase this mess. The 300C or Charger R/T are the only products that remotely interest me.

Cleaning up a mess can be fun: someone I know would call it a 'house cleaning party' :AH-HA_wink: Edited April 29, 2007 by ZL-1

[CARBIZ]

I wish I had my camera with me this afternoon. The old Downsview Airport site (former air force landing strip in the center of the city!) has rows and rows of shiny, new Chargers and 300s and wagons. I didn't have time to stop, but their numbers had to be into the several hundreds! Not a good sign for Chrysler!

[regfootball]

the amount of cars at the DCJ dealer by my house I cruised today was STAGGERING. The Ford dealer right by was barren in comparison.

Edited April 30, 2007 by regfootball

[97regalGS]

I wish I had my camera with me this afternoon. The old Downsview Airport site (former air force landing strip in the center of the city!) has rows and rows of shiny, new Chargers and 300s and wagons. I didn't have time to stop, but their numbers had to be into the several hundreds! Not a good sign for Chrysler!

there's always a $h!load of them there. nothing new.

not sure why. perhaps some staging area while they wait for a train to the states?

[Intrepidation]

Tom Manzi Dodge near my house never seems to have much in inventory. They were so barren the last time I was there someone asked if they were going out of business! The salesman said they were just out of stock for most things. They got a shipment a couple weeks ago...but they now only have 2 Chargers 2 Avenger R/Ts, and a base Sebring. They have some Nitros too..and a lot of Caravans (they always do).

Edited April 30, 2007 by Dodgefan

[ToniCipriani]

I just know they're dumping Caravans up here like crazy. You can get a "value package" model for like 16 grand right now, about the same price as a Cobalt.

[turbo200]

AutoWeek thought this was more relevant and I cannot really disagree with their analysis. While Pontiac's fleet percentage is mainly the result of the heavy rental bias of one outgoing model (Grand Prix), Chrysler's is spread across the entire lineup. Consider Chrysler has more volume and the average age of a Chrysler car is less than a Pontiac, their strong reliance on rental sales is far more disconcerting.

Sorry guys I was being a jerk and a bit pissy, but my reason was that I thought the Pontiac stats were relevant to the whole "rejuvenate Pontiac" discussion. you know the whole bring Pontiac back with exciting and beautiful RWD product. However, your analysis of Chrysler's situation is right on.

[turbo200]

It's ashame because when the 300 debuted Chrysler was on the right track to long-term profitability. It had "gotta-have-it" styling, great interior and for the most part good powertrain options...if only they kept it up.

Chrysler powertrain kills a lot of the momentum that Chrysler design works up. Updating the 2.7 and 3.5 with something truly fuel efficient, then of course you have the Hemi that gets like 17 mpg city. The 300 was a stand out design that received a lot of attention, these kinds of cars need stylistic updates to jeep them going; but most importantly word of mouth will entice newer buyers, and with owners complaining the LX cars are gas hogs, why would anyone want them?

Then of course Chrysler approves cars like the Sebring, Compass, Avenger [this one is decent, but screams rental car], and Nitro [what does it offer that's new besides in your face style].

[BrewSwillis]

Chrysler powertrain kills a lot of the momentum that Chrysler design works up. Updating the 2.7 and 3.5 with something truly fuel efficient, then of course you have the Hemi that gets like 17 mpg city.

The Impala SS only gets 18 city mpg with 37 less horsepower than a 300C. The Impala's 3.9L V6 gets 1 more mpg than the 300's 3.5L, with 13 less HP.

I would say that their powertrains are pretty equal to, if not better, then the competition.

[sciguy_0504]

I'd still purchase an LX car...no problem.