Properly Managed, Fleet Business Profitable, Ford Says

DETROIT – Common perceptions about the automotive fleet business are that it is unprofitable, guaranteed to hurt residual values and destined to blemish a brand’s image.

But none of that is necessarily so, Ford’s fleet manager says.

“The fleet business is a profitable business, otherwise we wouldn’t be in it,” Kevin Koswick, director-North American Fleet, Lease and Remarketing Operations, tells WardsAuto at an Automotive Press Assn. meeting here.

Whether “commercial, government (or) rental, we like all parts of it and it’s all profitable.”

The key to profitability, especially in the daily-rental business, is discipline, Koswick says. Flooding the rental market with excess production drives down residual values and hurts retail customers.

“The market governs residual prices, and Ford does well because of the quality of the brand and its appeal,” he says. “We model (our fleet business) so we can protect our residuals.”

Ford has been in the fleet business since the early 1900s, and it would be unwise to exit a sector that accounted for $57 billion in sales last year, the executive says. “This is a huge industry and a good opportunity.”

Last year, 31% of Ford’s total sales went to fleets, a percentage Koswick contends represents “a balanced portfolio.” Rental sales accounted for 40.6% of the total, while commercial equaled 43.4% and government 16.0%.

Industry-wide, fleets accounted for 19.7% of U.S. vehicle sales last year.

While the Detroit Three long have been fleet-market leaders, they aren’t alone, the Ford official points out. Foreign auto makers, including Toyota and Nissan, compete in the sector as well.

In fact, the Nissan Altima sedan has held the No.2 top rental nameplate for the past decade, Koswick says, while the E-Series van is the only Ford vehicle to crack the top 10 spots.

“Everybody tries to participate to a level they’re comfortable with,” he says.

In the more profitable government-fleet business, Ford is the leader, with the F-Series pickup, E-Series van and Crown Victoria sedan the top three selling nameplates over the past decade. Industry sales have stalled on the state and local level as a result of budget constraints, but Koswick expects demand to pick up.

Ford also dominates the commercial-fleet sector, with the F-Series, Fusion sedan and E-Series among the top five in sales.

“The commercial business took a hit in 2008,” Koswick says. “But we’re seeing a quick recovery in cars and seeing growth in trucks, too.”

Ford hopes to get a boost in commercial-fleet sales with the arrival of the Transit fullsize van that will be offered in North America for the first time next year.

The Transit will be offered with a new diesel engine in response to consumer demand, Koswick reveals here. Powertrain details will be disclosed closer to the launch.

The van also will be available with a 3.5L direct-injected turbocharged V-6 gasoline engine, which has garnered an impressive 40.0%-plus take rate in the F-150.

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