The world sometimes tries to simplify itself when the going gets
tough. Reducing everything to the core activities and doing them well is
often the way just to survive if prospering is too difficult. Although
the US recession is supposed to be over, there's little sign of it in
the economy. People are staying home and not spending. It's still
thought prudent to pay down the debts. In such circumstances, one of the
most obvious savings is to put off replacing the old with new. With a
little patching and mending, we can all get by with what we have. As
applied to the car rental companies, this means putting off renewing the
fleet. It's cheaper to recruit a few extra maintenance staff to keep
the existing vehicles running smoothly than to sell off each block of
vehicles at fixed dates and replace with new. Indeed, most of the
publicly quoted rental companies have been reporting increased profits
as a result.
The problem now falls on to the manufacturers. For the last few
decades, the US manufacturers have relied on the steady buying of
standard models in volume. Although the prices charged were heavily
discounted, this is money turned over quickly. If sales have to go
through a dealer network and rely on credit from lenders less than
excited by lending, sales are always going to be slow. The latest
figures from the motor manufacturers show a 40% drop in sales to rental
fleet customers.
GM's sales dropped by almost 20% and it's now losing market share to
Ford, Chrysler, Toyota and Honda. That's the case even though Ford's
sales have also fallen slightly. This leaves the labor market in the
manufacturing industry in a worried state. If rental companies do not
resume their volume buying soon, there will be lay-offs. Yet, with those
rental companies maximizing their return on the capital they have
invested in their stock of vehicles, profits are up and, if you are
prepared to accept an older model, cheap car rental is within your grasp. Which is more important. Being seen in a brand new fleet car or paying a cheap car rental rate and driving a tidy older vehicle?