DETROIT FEELS THE HEAT: Big 3 fleet sales hid Oct. retail collapse

Automotive News ^ | 11/14/05 | By Mary Connelly

[BurbankKarl]

DETROIT -- This may be hard to believe, but the Big 3's October sales collapse was even worse than it looked.

Retail sales -- normally the most profitable automotive sales category -- fell far more than the weak total sales figure that the automakers announced. Fleet sales to businesses, governments and daily car rental companies kept the Big 3 afloat.

"No one is happy with the retail numbers inside these (October) industry numbers," said Chrysler group sales boss Gary Dilts in a conference call. "It is severe. A double-digit (decline) on retail is something we have not had much of."

Overall, sales of the Big 3's domestic brands declined a cumulative 20.7 percent. But retail volume at General Motors, Ford Motor and the Chrysler group collapsed. GM's retail sales fell about 30 percent last month, while Ford Motor reported a 34 percent drop. Chrysler said only that retail sales fell by "a double-digit decline."

Steering clear of showrooms

Retail customers simply steered clear of Big 3 showrooms in October. "The traffic is off all the way around," says Glenn Hartzheim, owner of Hartzheim Dodge in San Jose, Calif.

Fleet sales include vehicles sold to businesses, government agencies and daily car rental companies. Automakers often lose money on sales to daily rental fleets, but other fleet sales can be profitable.

For each of the Big 3, fleet sales accounted for an unusually big chunk of total sales.

GM's fleet sales generated 33.5 percent of its total October volume, up from 25.8 percent for the period a year earlier. Ford Motor's fleets also accounted for 33 percent of October sales, up from 24 percent a year earlier.

The Associated Press reports that Chrysler's fleets shot up to 40 percent of its October sales. Chrysler doesn't report precise figures for monthly fleet unit sales. Dilts acknowledged that commercial sales -- excluding sales to daily rental fleets -- rose 119 percent in October. He did not indicate whether Chrysler increased sales to rental fleets.

Chrysler also notes that fleet sales for the third quarter totaled 17.2 percent of its U.S. sales, up from 13.8 percent in the third quarter of 2004.

For the industry as a whole, fleet sales represented more than 25 percent of the light-vehicle market in October, says Bob Schnorbus, chief economist for J.D. Power and Associates. In the first nine months of the year, fleets accounted for about 22 percent of industry sales, he says.

The Big 3 sell an estimated three out of every four fleet vehicles, Schnorbus says.

Toyota Motor Sales U.S.A. Inc.'s monthly fleet percentage typically remains in the single digits, the company says.

"Our fleet runs between 6 and 7 percent," says Xavier Dominicis, company spokesman. "October was typical."

The Big 3 traditionally have sold a higher percentage of vehicles to the fleets than the imports. And Chrysler's Dilts defends the practice, noting that commercial fleet sales are "good business."

Chrysler did well selling minivans, Jeep Grand Cherokees, Dodge Chargers and Chrysler 300s to commercial fleets last month, he says.

Poor residual values

But heavy fleet sales can hurt a vehicle's residual values. That's why Ford has tried to limit fleet sales of its new Five Hundred sedan.

General Motors also has tried to limit fleet sales. "We have increased our commercial fleet sales -- which are profitable sales and good sales for us to increase -- and we've decreased our daily rental," says GM spokeswoman Deborah Silverman.

Schnorbus says the "strength on the fleet side is partly due to some legitimate strength in the commercial side of the market. But I wouldn't rule out the possibility that they're pushing fleet to smooth out their production and soften any weakness on the retail side."

Art Spinella, president of CNW Marketing Research Inc. in Bandon, Ore., says autumn is a strong season for commercial fleet sales. And Spinella says heavy fleet sales are actually a sign of the economy's strength.

"The fact that fleets are back in the business is good, primarily because they have some confidence that the economy is back," Spinella says.

"In 2001 and 2002, fleets -- whether business or governmental -- were all pretty much out of the market," he says. "In bad times, they will hold on to vehicles for a long time trying to squeeze out every mile."

[Recon Dad]

I was kind of kidding. I shouldn't bitch. In 32 years I haven't bought a car or paid for gas.

[oceanview]

you can't test drive a Solstice - none are available.

why did it take them so long to build it? because Bob Lutz wasn't working there years ago.

the new Miata is not without its problems, the passenger footwell is oddly shaped because of the way the engine sits against the firewall on that side, very uncomfortable.

[motzman]

Yeah, Pontiac didn't make enough of these cars--figures. Meanwhile, their lots are filled to the gills with crap that will never sell.

If the Solstice came in at around 15k, nicely equipped, it would be a real winner.

the new Miata is not without its problems, the passenger footwell is oddly shaped because of the way the engine sits against the firewall on that side, very uncomfortable.

That's not a problem...that's a quirk...;)

I have this month's Road and Track and Motor Trend--both have comparison tests of the MX-5 and the Solstice and neither mention this (not that it isn't true---they usually love to nitpick this kind of stuff). The only MX-5 interior negative is the leg room is a bit tight for over 6 footers. And, they can't understand why the MX-5 has 4 cupholders. And (most importantly) why the He## would Mazda drop the name "Miata"?

Both, however, give the Solstice credit for a good effort--but recognize the Miat...excuse me, MX-5 as the superior vehicle.

[mrmargaritaville]

if the ride is fly you must buy.

[eraser2005]

Fastglock45,

I would recommend against the Ford Expedition - it, and even more so, the Lincoln Navigator, are good examples of the "look at the model, not just the make" mentality that would serve people well.

My Taurus currently is pushing 100k, without problems. Sure, I've replaced the brake pads, but I would never trust a vehicle with that many miles on original pads. The rule I live by is that the brake system must be the best maintained system on the car. The ability to stop is more important than the ability to go (not to diminish its importance)...

The Tahoe I would rate slightly higher on reliability - but none of the big SUVs are really very good (even the Jap ones) reliability-wise.

[oceanview]

how is the HHR doing, I don't see many of them on the road.

[anymouse]

So does GM still have sheet metal keys that easily bend or break in the door locks? ;)

I'm sure you enjoy selling (and test driving) Vettes, but what other GM car is worth a damn 5 years down the road? Vettes are only so appreciative because so few are made and the status symbol value. Every 50-something, bald, divorced businessman wants one to score the trophy blond weekend bimbo. Heck as long as Viagra is on the market, you'll keep selling Vettes. ;)

[hripka]

I am debating a purchase between a Honda Odyssey and a Chrysler Grand Caravan/Town and Country. It seems that the Odyssey is the way to go.

[1FASTGLOCK45]

Hey Guys,

Thanks for the recommendation, i'll definately look at the Chevy/GM line instead of the Ford, (Can you tell you easily talked me out of Ford, i'm not a big ford fan at all), i do own a 63 chevy 2ton truck which still runs after all these years, but i don't drive it much as it's huge and won't fit into any kind of parking garage, its like driving a Semi.
Thanks again!
-1fastglock45

[eraser2005]

No problem at all...

I generally like Fords, but there are some models I just wouldn't recommend, and the Expedition is one of them... Maybe when it gets replaced next year things will improve. Now the new Fusion - that's one sweet car... :)

Best of luck with whatever you get, and remember - proper maintenance is key for any vehicle. :) Of course, if you still have a running 1963 Chevy, I don't that's an issue... :)