Fleet sales are generally considered to undermine auto company profits. Rental fleet sales fall into the same category. Individual buyers generally pay more money than corporate ones. In light of all this, General Motors Co. (NYSE: GM) showed another sign of inventory struggles in December. And it is a decision the car company likely had to make as its bloated car lots eat into its ability to make money. The problem almost certainly extended into this year.
December fleet sales among GM brands rose 43% to 69,125. Sales to rental car fleets doubled to 42,716. GM’s share of the daily rental market in December was 42%. Its share of the nation car market is about 18%.
GM has slashed production due to bloated inventory, particularly for passenger sedans and coupes. At the end of November, GM had 874,000 vehicles in inventory, an eight-year high. The situation has caused GM to shutter portions of plants and lay off workers.
On November 9, the company announced:
General Motors today announced initiatives to strengthen and align its production output at key U.S. manufacturing operations. The plans include investing more than $900 million in three facilities — Toledo Transmission Operations in Ohio, Lansing Grand River in Michigan and Bedford Casting Operations in Indiana — to prepare the facilities for future product programs.
GM also announced plans to align production output with demand for cars built at the Lordstown, Ohio, and Lansing Grand River, Michigan, assembly plants. As the customer shift from cars to crossovers and trucks is projected to continue, GM will suspend the third shift of production at both facilities in the first quarter of 2017.
The trouble has to be acute for GM dealers as well. In many cases they have cars on their lots much longer than the industry average of about 70 days. The fleet car and rental news is one more sign that GM’s disaster in the United States will not go away soon.