Big 3 Production Cuts Impact Rental Fleets

As the nation’s Big Three automakers remake themselves into smaller, leaner companies, the rental car business is suffering collateral damage, The Associated Press reports.

All three have cut production in 2006 to bring supply in line with lower demand for their products, and further cuts are inevitable next year. They’re also trying to wean themselves from rebates and other incentives to bring sales prices closer to the sticker, according to The Associated Press.

That means fewer cars available for low-profit bulk sales to rental companies, and some industry analysts and rental company officials say that has led to price increases at the airport service counter.

General Motors Corp., the nation’s largest automaker, said recently its sales to rental car companies and other fleet buyers in October were down by 10,000 vehicles compared with the same month last year. Company officials have predicted a reduction of 80,000 to 90,000 for the year.

Ford Motor Co. won’t give specific fleet sales numbers until later in the year, but said they are up mainly because of the Taurus, which in its final year of production was sold primarily to rental companies. Ford expects fleet sales to drop next year without the Taurus on the market.

At Dollar Thrifty Automotive Group Inc., President and Chief Executive Gary Paxton said the company has finished negotiations on its 2007 purchases and likely will need per-day rental price increases of 7 percent next year to cover increased costs. The Big Three’s production cuts likely will force every rental company to raise prices, he said.

To handle the higher prices, most rental companies will hold onto their fleets a little longer, meaning that you’re likely to see slightly older rental cars in the coming year, said Michael Gallo, an analyst who tracks rental companies for C.L. King & Associates in New York.

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