Low fleet demand gets '09 auto sales to slow start

A steep drop in sales to rental car companies and other fleet buyers is expected to weigh heavily on carmakers when they report their January sales results Tuesday. It remains to be seen whether injecting government cash into automakers' financing arms helped consumers make up the difference.

"It is an automotive hurricane moving through this industry," said Jim Farley, Ford Motor Co.'s marketing chief, at last weekend's National Automotive Dealers Association convention. Farley predicted a big drop in business from fleet buyers, which are keeping their current vehicles longer to pare costs.

General Motors Corp. said earlier this month it is planning for the entire industry to sell 10.5 million new vehicles in the U.S. this year, while Chrysler LLC has said it's planning on 11.1 million units. But few people are expecting the automakers to start 2009 at that pace.

Fleet sales - big-volume sales to customers like rental car companies and municipalities - typically account for about 20 percent of industrywide sales, but analysts expect that to be down sharply in January. Rental car companies have taken a big hit as consumers and businesses slash their travel budgets in the economic downturn, and the companies are holding onto their old cars rather than buying new ones.

"Our demand is down double-digits," said Richard Broome, spokesman for rental car company Hertz Global Holdings Inc. "So the need for new cars is less now than it would be in most years."

Compounding that downturn have been the production cuts and factory idlings across the auto industry. Many fleet customers get their deliveries right after cars roll off the assembly line, so when factories suspend production, those deliveries come to a halt.

Many U.S. auto plants have been closed all month, with some shut down as long as eight weeks, said Jesse Toprak, executive director of industry analysis for the auto Web site Edmunds.com. He predicted industrywide fleet business fell 50 percent from January 2007.