By Mike Antich
As a student of fleet management history, I can’t recall a year as tumultuous as 2008. The year started with the Jan. 1 termination of the $1.8 billion merger between GE and PHH and ended with the near bankruptcy of GM and Chrysler.
In between, we witnessed record gasoline prices, which hit $4.11 on July 17, and then we watched prices go into a spectacular freefall, with the nationwide average fuel price hitting $1.61 on Dec. 29. No one has seen this degree of volatility in fuel prices — ever. This battering was accompanied by a one-two punch in the used-vehicle market. High fuel prices caused used-vehicle values to tank for larger, low-fuel economy vehicles. Then the bottom fell out of the construction market, which depressed the sale of used fleet pickups to the secondary market comprised of independent tradesmen. Next, we were hit with a jaw-jarring upper cut as credit became restrictive, making it difficult to fund many used-vehicle buyers, in particular those requiring subprime financing. The lack of credit to both dealers and retail buyers is the key reason for the ongoing downturn in the wholesale market.
By September 2008, the credit gridlock made it more difficult (and expensive) to issue commercial paper and asset-backed commercial paper. Some commercial fleets were unable to order cars in the fourth quarter because their fleet management company was not accepting new-vehicle orders. Layoffs occurred at many corporate fleets and several fleet management companies. Long-time fleet managers had their positions eliminated. Many dealers went out of business due to their inability to get credit for floorplanning and to fund retail buyers, compounded by the decision of some OEMs to reduce the size of their dealer bodies. In October, the Federal Reserve Board invoked emergency powers to create a special fund to support the U.S. commercial paper market by purchasing three-month dollar-denominated commercial paper from eligible issuers.
On top of all this, we had fleet deliveries disrupted by a UAW strike against a Tier One supplier (that went on far longer than anyone anticipated) and a great flood in the Midwest that submerged strategic rail lines, further disrupting fleet deliveries.
If someone had predicted in December 2007 all this would occur in the next 12 months, this sequence of events would have been dismissed as sensationalist fiction. But happen it did. In a few days, 2008 will be behind us, to which I say — good riddance!
Stay tuned for next week’s Market Trends Blog for my prognosis as to what lies ahead in 2009.
Let me know what you think.