DETROIT -- When it comes to fleet and commercial sales, it's all good if you manage it properly, General Motors Co. says.
Right now that means passing up some rental-car sales in favor of retail and small-business fleet customers.
Bill Gibson, GM's director of fleet and commercial sales, said GM just doesn't have the capacity to supply rental-car companies with all the vehicles they want. "Our intent is to manage supply and demand," he told Automotive News. "We're very focused on residual values."
Rental-car companies are stepping up their buying because many have kept their cars in service during the recession longer than usual -- in some cases up to 50,000 miles. But GM isn't selling as many vehicles as the rental companies want to buy, even if that means those rental fleets turn to other automakers.
"That's OK," Gibson said. "They've got to do what they've got to do; we've got to do what we've got to do."
GM held its annual meeting with its commercial customers, including rental companies, here in mid-May.
GM's April fleet and commercial sales rose 54 percent from April 2009. GM's overall U.S. sales rose 7 percent in April.
Brian Small, general manager of GM's fleet and commercial operations, said fleet and commercial sales made up about a quarter of GM's overall sales in 2009. About 60 percent of those fleet sales were to rental-car companies. Those numbers are expected to remain steady in 2010, he said, despite April's surge because of GM's newfound restraint in rental-fleet sales.
In part because of that restraint and because it avoided shoving too many of one vehicle into rental fleets, GM's residuals are 6.2 percentage points higher than a year earlier, Small said.
Fleet sales generally are less profitable than retail sales because fleets get volume discounts. In recent years, the Detroit 3 relied on fleet sales to rental-car companies to maintain production levels, especially of slow-selling vehicles.
Those vehicles often returned to the market in large volumes, depressing used-vehicle prices and undermining residual values. In addition, automakers sometimes took so-called program cars back from rental fleets. The automakers then took large financial hits when they sold the vehicles well below the projected residual values.
GM closed factories during its bankruptcy restructuring last year, easing the pressure to keep excess factories humming.
Gibson said GM makes money on all fleet sales, including those to rental fleets. "It's all good fleet," he said. "It's all in how you manage it."
Brian Bowden, fleet and commercial director of dealer operations, said sales to small business customers -- those who buy one to four vehicles -- were among the hardest hit last year.
But GM's 436 commercial dealers, specialists in small-business sales, see an uptick in business, Bowden said. Deliveries to small businesses rose 34 percent in April, and May sales are up about 20 percent, he said.
"There is demand in the market again," Bowden said. "That is further evidence that they had to defer purchases, and now they feel like they weathered it. There is enough confidence that now they are replacing their fleets."