Vol. 4 No. 1
IT’S WHAT I SUSPECTED…
On Two Very Unrelated Events –
1) The Daily Rental Numbers were Way Down for GM & Ford Last Year;
2) Guys Never Forget Their First Cars
So the year end numbers are in and it’s no surprise that Detroit is down in sales and market share significantly. What is also clear is that this is due, in no small part, to the reduction in daily rental sales that so plagued the industry for so long. Likened by Bob Lutz, GM Vice Chairman and product Czar, and others, as drug withdrawal, longer term this is good for the industry, but creates short and intermediate term horrors (plant closings, layoffs, share reduction, supplier bankruptcies, in short, what we see now and continue to see).
In fact, just today I saw Bob Lutz in an interview at the Detroit Auto Show, where, despite the blockbuster sales of some major product lines, like the Cadillac CTS and the new Malibu, the reporter emphasized the 2007 reduction in North American sales. Lutz’s response was to remind everyone that a lot of the reduction was, indeed, the result of cutting back sales to daily rental companies. Clearly, GM was the first to bight the bullet, and consequently, they look like they are in the best shape starting out 2008 (with 2007 market share down .9 of a percentage point), Ford followed soon after but had almost double a market share reduction (1.6% points), and Chrysler last year was the only one of the big three who did not significantly cut out unprofitable daily rental program cars and thus only suffered a minimal market share decline (.1 of a percentage point). But, as they say, look at them now: Chrysler just announced a 20% reduction in daily rental sales to start off 2008, along with major employee cuts, plant closings, and product contractions. The US UAW seems okay with it, but the Canadian CAW seems up a bit upset, and their contract talks start next fall, as I recall. At any rate, unlike GM & Ford, it certainly looks like Chrysler’s major drug withdrawal pain is yet to come.
…And Speaking of Pain
I think for the major daily rental car companies the major financial pain of the reduction of program buy-back vehicles has yet to be felt. It’s been delayed or massaged by the “temporary fixes” of running vehicles in the fleet longer (which is becoming obvious to daily rental car customers), and using the Internet and the latest technologies to squeeze out efficiencies in the wholesale remarketing disposal process. However, these tactics can reduce but not delay the inevitable, which is a
severe increase in daily rental car operating costs. If these folks can’t significantly raise daily rental prices, over the long haul (and that looks like a hard thing to do in this current economic downturn) to absorb these cost increases (that heretofore the Detroit Manufacturers absorbed in hundreds of millions of dollars in annual write downs when these units were returned and resold), a major day of financial reckoning, I think, will be at hand.
I think there may be one more wrinkle that may exacerbate the upcoming major daily rental companies’ financial troubles, in addition to their increase in operating costs. As most of these companies’ fleets are entirely financed with big bank loans, and the bank lending crises catastrophe makes money scarce for even good credit risks, the large daily rental companies that depend on easy money may feel a double whammy coming…just my observations on the industry, we shall see what develops. One thing I think is a sure bet, that given the current credit situation, GM & Ford are glad they got rid of their daily rental companies when they did a few years ago to private equity buyers when those folks had the cash to buy, because those deals would be a lot tougher to pull of in the finance crunch we have today.
On the Lighter Side – Guys Call Ex-Girlfriends…to Reconnect with their Old Cars!
I read an article a little while ago in the Wall Street Journal, by my favorite writer, Jennifer Saranow, “The Car That Got Away,” which confirmed to me what I long suspected, that a lot of men, particularly those in the first generation that “came of age” with their own cars, will go to almost any lengths to find and reclaim the actual vehicles they first owned.
Really, it’s true, as documented in the article, men will search online classifieds, cold call junk yards, call ex-girlfriends, hire lost-car detectives (bet most folks didn’t even know such a profession existed), and when desperate, will even beg friends in law enforcement to run serial numbers in pursuit of their old cars. To help this sincerest form of auto “love sickness” lots of lost-car discussion boards and search sites have been created on the Web (see The Lost Car Registry, or the much more specialized, 428CobraJet.org, dedicated to searching for 1968-1970 Ford Mustangs with the 428 Cobra Jet engine option). It isn’t easy though, as the government didn’t standardize the VIN (Vehicle Identification Code) system until 1981, so large database vehicle history sites, like Carfax generally don’t have data for cars built before that date. Believe it or not, it’s reported that some people resort to hiring international trackers, car “private eyes,” to scour the globe, at upwards of $440 an hour, to “find the ones that got away” (really, I’d consider that a waste if, of course, it wasn’t a car we are talking about).
A “Men Only” Affliction, Sorry CarsDiva
While apparently marketing researchers have determined that people tend to form preferences for things like music and clothing during adolescence and early adulthood and these preferences stick throughout their lives, when it comes to cars, this tendency has only been found to be statistically significant among men. And it’s most prevalent among war babies and baby boomers born in the US between 1936
and 1964, men beginning to drive around the time Detroit manufacturers first began building models aimed at young people – pony cars like the Mustang and muscles cars like the Pontiac GTO.
This nostalgia thing now gives an explanation to something that has confused me. I have to tell you that I never understood the appeal of the retro cars like the Chrysler PT Cruiser or the Chevrolet HHR, but in view of this cultural phenomena, it make sense, as does the increased popularity and sales of the current Ford Mustang (one of the few bright spots in the Ford car sales stats today), or the push for the resurgence of the Chevy Camaro and the Dodge Charger.
The statistics presented in the article are very well put together and paint a very clear picture. Last year for instance, 6.8% of self-described auto collectors said they were searching for a vehicle they once owned, compared to just 1.6% in 1985, according to CNW Market Research, Inc. And on the market price index side, it’s clear that demand is clearly outstripping supply, as the collector car industry is up 60% since 2002, and is now a $25 billion dollar a year niche – that’s no small piece of change.
Alas though, one statistic proves that the odds of finding “loves labor lost” is very, very slim. In a nation with more than 244 million vehicles currently registered, and cars from 35+ years ago neither as durable nor as technologically advanced as current models, chances are most of these “object of desire” vehicles were scrapped a long time ago. The Lost Car Registry Web site has been up over five years and has 700 postings, but Keith Ingersoll, the founder, knows of only five reunions between the original vehicles and their original owners. Still, long odds would never keep a real “car guy” from continuing the search, at least the way I see it.
IT’S WHAT I SUSPECTED…
On Two Very Unrelated Events –
1) The Daily Rental Numbers were Way Down for GM & Ford Last Year;
2) Guys Never Forget Their First Cars
So the year end numbers are in and it’s no surprise that Detroit is down in sales and market share significantly. What is also clear is that this is due, in no small part, to the reduction in daily rental sales that so plagued the industry for so long. Likened by Bob Lutz, GM Vice Chairman and product Czar, and others, as drug withdrawal, longer term this is good for the industry, but creates short and intermediate term horrors (plant closings, layoffs, share reduction, supplier bankruptcies, in short, what we see now and continue to see).
In fact, just today I saw Bob Lutz in an interview at the Detroit Auto Show, where, despite the blockbuster sales of some major product lines, like the Cadillac CTS and the new Malibu, the reporter emphasized the 2007 reduction in North American sales. Lutz’s response was to remind everyone that a lot of the reduction was, indeed, the result of cutting back sales to daily rental companies. Clearly, GM was the first to bight the bullet, and consequently, they look like they are in the best shape starting out 2008 (with 2007 market share down .9 of a percentage point), Ford followed soon after but had almost double a market share reduction (1.6% points), and Chrysler last year was the only one of the big three who did not significantly cut out unprofitable daily rental program cars and thus only suffered a minimal market share decline (.1 of a percentage point). But, as they say, look at them now: Chrysler just announced a 20% reduction in daily rental sales to start off 2008, along with major employee cuts, plant closings, and product contractions. The US UAW seems okay with it, but the Canadian CAW seems up a bit upset, and their contract talks start next fall, as I recall. At any rate, unlike GM & Ford, it certainly looks like Chrysler’s major drug withdrawal pain is yet to come.…And Speaking of Pain
I think for the major daily rental car companies the major financial pain of the reduction of program buy-back vehicles has yet to be felt. It’s been delayed or massaged by the “temporary fixes” of running vehicles in the fleet longer (which is becoming obvious to daily rental car customers), and using the Internet and the latest technologies to squeeze out efficiencies in the wholesale remarketing disposal process. However, these tactics can reduce but not delay the inevitable, which is a
severe increase in daily rental car operating costs. If these folks can’t significantly raise daily rental prices, over the long haul (and that looks like a hard thing to do in this current economic downturn) to absorb these cost increases (that heretofore the Detroit Manufacturers absorbed in hundreds of millions of dollars in annual write downs when these units were returned and resold), a major day of financial reckoning, I think, will be at hand.I think there may be one more wrinkle that may exacerbate the upcoming major daily rental companies’ financial troubles, in addition to their increase in operating costs. As most of these companies’ fleets are entirely financed with big bank loans, and the bank lending crises catastrophe makes money scarce for even good credit risks, the large daily rental companies that depend on easy money may feel a double whammy coming…just my observations on the industry, we shall see what develops. One thing I think is a sure bet, that given the current credit situation, GM & Ford are glad they got rid of their daily rental companies when they did a few years ago to private equity buyers when those folks had the cash to buy, because those deals would be a lot tougher to pull of in the finance crunch we have today.
On the Lighter Side – Guys Call Ex-Girlfriends…to Reconnect with their Old Cars!
I read an article a little while ago in the Wall Street Journal, by my favorite writer, Jennifer Saranow, “The Car That Got Away,” which confirmed to me what I long suspected, that a lot of men, particularly those in the first generation that “came of age” with their own cars, will go to almost any lengths to find and reclaim the actual vehicles they first owned.
Really, it’s true, as documented in the article, men will search online classifieds, cold call junk yards, call ex-girlfriends, hire lost-car detectives (bet most folks didn’t even know such a profession existed), and when desperate, will even beg friends in law enforcement to run serial numbers in pursuit of their old cars. To help this sincerest form of auto “love sickness” lots of lost-car discussion boards and search sites have been created on the Web (see The Lost Car Registry, or the much more specialized, 428CobraJet.org, dedicated to searching for 1968-1970 Ford Mustangs with the 428 Cobra Jet engine option). It isn’t easy though, as the government didn’t standardize the VIN (Vehicle Identification Code) system until 1981, so large database vehicle history sites, like Carfax generally don’t have data for cars built before that date. Believe it or not, it’s reported that some people resort to hiring international trackers, car “private eyes,” to scour the globe, at upwards of $440 an hour, to “find the ones that got away” (really, I’d consider that a waste if, of course, it wasn’t a car we are talking about).
A “Men Only” Affliction, Sorry CarsDiva
While apparently marketing researchers have determined that people tend to form preferences for things like music and clothing during adolescence and early adulthood and these preferences stick throughout their lives, when it comes to cars, this tendency has only been found to be statistically significant among men. And it’s most prevalent among war babies and baby boomers born in the US between 1936
and 1964, men beginning to drive around the time Detroit manufacturers first began building models aimed at young people – pony cars like the Mustang and muscles cars like the Pontiac GTO.This nostalgia thing now gives an explanation to something that has confused me. I have to tell you that I never understood the appeal of the retro cars like the Chrysler PT Cruiser or the Chevrolet HHR, but in view of this cultural phenomena, it make sense, as does the increased popularity and sales of the current Ford Mustang (one of the few bright spots in the Ford car sales stats today), or the push for the resurgence of the Chevy Camaro and the Dodge Charger.
The statistics presented in the article are very well put together and paint a very clear picture. Last year for instance, 6.8% of self-described auto collectors said they were searching for a vehicle they once owned, compared to just 1.6% in 1985, according to CNW Market Research, Inc. And on the market price index side, it’s clear that demand is clearly outstripping supply, as the collector car industry is up 60% since 2002, and is now a $25 billion dollar a year niche – that’s no small piece of change.
Alas though, one statistic proves that the odds of finding “loves labor lost” is very, very slim. In a nation with more than 244 million vehicles currently registered, and cars from 35+ years ago neither as durable nor as technologically advanced as current models, chances are most of these “object of desire” vehicles were scrapped a long time ago. The Lost Car Registry Web site has been up over five years and has 700 postings, but Keith Ingersoll, the founder, knows of only five reunions between the original vehicles and their original owners. Still, long odds would never keep a real “car guy” from continuing the search, at least the way I see it.
Labels: Bob Lutz, Daily Rental Fleet, Jennifer Saranow, Lost Car Registry, Wall Street Journal
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