Ed Bobit: Once Upon a Time ...

During current times, nearly every management exec in the auto industry is cognizant of the fleet market. It hasn't always been that way. Most factory people were "wholesale-minded;" success equated to dealer volume and sales. Premiums, incentives, the formation of special groups like "20-Groups." "Master Dealers." and "Dealer Councils." were always related to the retail (factories call it wholesale) end of the business. It was felt that the dealer alone had the key to the financial bottom line and executive bonuses. "Fleet" was always a reluctant stepchild in the factory family. Years ago fleet directors were appointed just prior to "pasture-time" (retirement).

Fleet sales of tens of thousands of new cars were expected to be sold and serviced by a handful of fleet factor) personnel on meager budgets; and never an epaulet or any applause for a job well done. "Fleet" was the faucet to keep the production reservoir (read inventory) from overflowing: fleet was merely the roll that accompanied the full-course dinner; fleet was the marehing band between halves of the championship game; fleet was simply tolerated like an unpopular mother-in-law. Dealers were king, the heart and soul of the car business, and fleet could not cast a visible shadow with dealers' candles glowing ever so brightly.

Slowly the day of reckoning arrived, and in recent years, fleet business began to be recognized in a positive light. No one could ignore it, especially when more than one out of five new cars registered went into fleet. Import penetration at retail became such a serious threat that some domestic makers had difficulty keeping their dealers from dealing retail orders slackened, production plants were deemed inefficient, and union contracts commanded continuous production to avoid staggering losses. Suddenly, the loud and heavy call went out to "turn on the fleet faucet:" capable marketing people were installed in fleet departments: every carmaker vowed to deliver competitive programs; and non-fleet dealers raised hell with the factory's fleet policy, especially after some makers began investing in rental and leasing companies for guaranteed orders and market share.

The new chapter being written right now is initially aimed at the factory/rental relationship. This is precisely where dealers scream of incentive inequities and unfair used-car competition. The solution is now on the drawing table. It may come in steps, but it looks like 100-percent factory buybacks for rental firms will be available this fall putting carmakers in total control of every fleet vehicle. That means there will be no newly-used risk vehicles across the street from the dealer selling in competition (most rental company used-car lots may be gone) and only dealers will have the opportunity to purchase all the low mileage cars (although those under 7,500 miles may go into some sort of "demo" operation so as not to upset the values at auctions). It also means that cars are going to be fully equipped with options that help resale. Reportedly, the plan cuts across all lines and models and will be based on a fixed fee rather than a depreciation schedule which, in turn, might indicate a closer cost relationship between division car lines than the MSRP sticker would show.

And if it works, as projected economically, it keeps the dealers happy, settles the inter-divisional throat-cutting, and makes rental companies happy since they love no-risk cars loaded with options. It may also work for larger commercial fleets who opt for a 12-15 month cycling period. Yes. it is innovative; and every top GM exec is familiar with the plan. They also know how to spell f-l-e-e-t.