Properly Managed, Fleet Business Profitable, Ford Says - WardsAuto
Byron Pope - Mar. 28, 2012 9:30am
Last year, 31% of the auto maker’s total sales went to fleets, a percentage Kevin Koswick contends represents “a balanced portfolio.”
DETROIT – Common perceptions about the automotive fleet business are that it is unprofitable, guaranteed to hurt residual values and destined to blemish a brand’s image.
Penton Media - Wards Auto, Click Here!
But none of that is necessarily so, Ford’s fleet manager says.
“The fleet business is a profitable business, otherwise we wouldn’t be in it,” Kevin Koswick, director-North American Fleet, Lease and Remarketing Operations, tells WardsAuto at an Automotive Press Assn. meeting here.
Whether “commercial, government (or) rental, we like all parts of it and it’s all profitable.”
The key to profitability, especially in the daily-rental business, is discipline, Koswick says. Flooding the rental market with excess production drives down residual values and hurts retail customers.
“The market governs residual prices, and Ford does well because of the quality of the brand and its appeal,” he says. “We model (our fleet business) so we can protect our residuals.”...
...Last year, 31% of Ford’s total sales went to fleets, a percentage Koswick contends represents “a balanced portfolio.” Rental sales accounted for 40.6% of the total, while commercial equaled 43.4% and government 16.0%.
Industry-wide, fleets accounted for 19.7% of U.S. vehicle sales last year.
While the Detroit Three long have been fleet-market leaders, they aren’t alone, the Ford official points out. Foreign auto makers, including Toyota and Nissan, compete in the sector as well.
In fact, the Nissan Altima sedan has held the No.2 top rental nameplate for the past decade, Koswick says, while the E-Series van is the only Ford vehicle to crack the top 10 spots.
“Everybody tries to participate to a level they’re comfortable with,” he says...
...Ford also dominates the commercial-fleet sector, with the F-Series, Fusion sedan and E-Series among the top five in sales.
“The commercial business took a hit in 2008,” Koswick says. “But we’re seeing a quick recovery in cars and seeing growth in trucks, too.”...
- - - - - - - - - - - - - - - - -
Ford Defends Fleet Sales, Boosts Market Share of Bulk Business - BusinessWeek/Bloomberg
By Keith Naughton on March 27, 2012
Ford Motor Co., which sells more than three out of every 10 vehicles to fleet buyers, has boosted its share of U.S. fleet market to 27 percent, from 22 percent five years ago.
“It’s a very productive and profitable business,” Kevin Koswick, director of Ford’s North American fleet, lease and remarketing operations, said today in Detroit in a speech to the Automotive Press Association. “It’s something that’s good for our business.”
Ford sold 675,901 cars and trucks to fleet buyers last year, according to Koswick. About 41 percent of those vehicles went to daily rental companies, which buy in bulk and typically pay less than individual customers. Ford depends less on sales to rental companies than General Motors Co. (GM) (GM) and Chrysler Group, LLC and attempts to take a “balanced” approach to protect resale values, Koswick said.
“We’re very disciplined about what we want to do,” Koswick said in response to a question about the stigma of the rental lot hurting resale values of Ford models. “I don’t see it as an issue as long as you manage your fleet and you’re balanced in what you do.”
Koswick valued the industrywide U.S. fleet business, including government and commercial sales, at $57 billion last year. Ford and other U.S. automakers have attempted to back away from rental-car sales, which generate lower profit margins...
...The second-largest U.S. automaker sold 15 percent of its vehicles to rental companies in February and 17 percent to commercial and government fleets, according to Erich Merkle, the company’s sales analyst. Last year, 13 percent of Ford’s U.S. sales went to rental-car companies, Koswick said.
So far this year, Ford’s fleet deliveries have accounted for 31 percent of its total U.S. vehicle sales, down from 33 percent a year earlier, Merkle said....
...Automakers sold 3.3 million vehicles to U.S. fleet buyers in 2007, with Ford accounting for 725,351, or 22 percent, of those sales. Last year, Ford had 27 percent of the U.S. fleet market, which totaled 2.5 million vehicles, according to Koswick.
Ford’s fleet sales rose 10 percent last year, while its total U.S. sales gained 11 percent. Ford’s market share rose to 16.8 percent last year, from 16.7 percent in 2010. That was the third consecutive annual U.S. market share gain for Ford, which hadn’t happened since the early 1970s, the company said...