Mr. Jones

http://www.wjr.com/AutoNews.asp?nid=449
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 (see story, Page 73). For a brand-by-brand list of fleet sales, see 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." c You may e-mail Bradford Wernle at bwernle@crain.com

baddis es

iTrader: (3)

its the only reason why the big 3 are in businees...rental sales. they would have flopped a long time ago if it werent for them

mmarshall

I won't dispute the figures in this article, but I would have guessed Chevy as the rental king. The Malibu, Cavalier/Cobalt, and Lumina virtually define the rental-car buisness.

tzu911

We rented a PT cruizer. It was spacious, we got to move up to 5 people with no major problem. The power was plenty to shoot onto the freeway. The seats are tall, although my sister in law described it as "feels like sitting on a toilet." The interior design might seem odd to some, but over all it gave out a beach car feeling. Now I smile to every one those bettle-hearse cross breeds on the road; I miss that car.

TRDFantasy

Chevy is not that far behind Chrysler. According to industry numbers, 29-30% of total Chevy sales are fleet sales. Not quite at Chrysler's level, but still a significant amount. Within GM, Pontiac is the "fleet sales king", and competes closely percentage-wise with Chrysler.

SoCalSC4

Good luck finding a Sebring that isn't fleet-owned.

Rented one of these in Hawaii. Overwrought styling (the Valet even made fun of the hood), interior looks better than it feels (thankfully), terrible sound system, rock-cruncher four banger engine... was happy to return this bad boy!

tuan92129

The front end looks odd to me...
Fusion > Sebring

LexFather

Another thread (and this is all over the internet) where Chrysler is blasted for high fleet sales yet, their own brothers at Mercedes do the SAME THING in Germany.

So at this point, I don't even see anything wrong with it, since BMW, Benz and Audi sell tons to fleets as well.