I met Fritz Henderson, was very impressed with him
Registered User
Joined: Mar 2001
Posts: 13,713
From: The Golden State
GM (and all other US car makers) were making such large margins on large trucks and SUVs and sold them at such volume, that they took development money away from cars to fund them (putting the most money where it will make the most money).
Which left less money for cars....
Which drove more retail car sales to foreign makes....
Which left less retail sales and lower production numbers....
Which required more fleet sales to fill plant capacity....
Which required more large trucks and SUVs to counter the losses or break even of those fleet sales.
Throw in perma-rebates needed to keep the retail side of car sales from imploding, and the circle is complete.
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Joined: Dec 2005
Posts: 1,502
Car makers reasons for selling to rentals at a loss is it's cheaper to have a factory produce a vehicle at a small loss than to lay off workers and temporarily shut down a factory because of excess stock. All 3 automakers have done it. All 3 automakers have tried to get away from it. Automakers in return have focused on making up the loss by selling large profit SUVs and trucks.
One of the main thrusts of restructuring was to modify these contracts so that the D3 will not have incentive to overproduce and then sell rental cars as at a loss. (Or "perma-rebate" the cars. Great term!)
IMO this practice had devistating affects on GM's brand reputation. It was difficult to describe Pontiac/Saturn/Buick as "upscale" brands when they were always chasing the lowest-end sale.
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