Many automakers are slamming the brakes on any increases in fleet ad spending, as sales to rental and commercial customers plummet amid the general bottoming out of the automobile business.
U.S. auto sales overall dropped 18% in 2008 to 13.24 million vehicles, with Chrysler down 30%, General Motors Corp. down 23%, Ford Motor Co. down 21% and Toyota Motor Corp.'s U.S. sales down 15%, according to figures compiled by Autodata Corp.
Fleet-specific data mirror those numbers. According to JATO Dynamic U.S.' Model Mix data, GM's fleet sales were down 31% to 436,672 year-to-date through September; Ford's fell 15% to 347,511, and Chrysler's declined 25% to 294,615. The anomaly, Toyota, saw its fleet sales increase 13% to 200,680.
The reining in of spending is especially hurting publications that cover the fleet sector. “2008 was a record year for us up till September, and then we limped across the finish line,” said Sherb Brown, group publisher of Bobit Business Media's Automotive Group, whose titles include Automotive Fleet and Business Fleet.
But the picture may not be so bleak after all, now that the federal bailout package for the auto industry has been approved. Before it was green-lighted, the Big Three automakers were “slashing their budgets,” Brown said. “Now we're at least talking about budgets and ad programs for 2009. Now there's going to be a 2009 for all of them,” he said.
Fleet sales have suffered across the board, from the corporate and government sectors to the daily rental market. Many credit-strapped businesses and government entities are putting off new-car orders and letting the odometer run a little longer on current vehicles. Business Fleet News recently reported that the recession caused nearly 800 trucking companies to fold during the third quarter of 2008.
Auto Rental News reported that rental car companies purchased 1.5 million new vehicles in 2008, down 21% from 2007. According to Automotive News, Enterprise Rent-A-Car, the nation's largest rental company, plans to buy 400,000 new vehicles in the 2009 model year, about half as many as it bought in the previous year. (Automotive News is a sibling publication of BtoB.)
Automakers will argue that some of the drops in rental sales were planned, as the Big Three vowed to reduce such sales in 2008 to less than 20%. Historically, automakers have unloaded their excess inventory at discounts to the rental fleet market to make up for weak retail sales. But those vehicles ultimately flood back into the market at auction, potentially driving down the brand value of the most recent model year vehicles.
“Fleet sales aren't inherently bad,” said Jesse Toprak, senior analyst for Edmunds.com. “A controlled number of fleet sales are good. How many times have you heard of someone who rented a vehicle and liked it so much, they ended up buying it? Done properly it can control inventory.”
Chrysler, which, along with GM, is participating in the federal government's $17.4 billion bailout of the industry, attributes a sharp drop in December fleet sales to its plan to reduce its reliance on daily rental sales.
“That was planned before the market went into recession,” said Steven Landry, Chrysler's exec VP-North American sales, marketing and Mopar parts and service, who has taken over the VP-CMO responsibilities of Deborah Meyer, who left the company last month.
“Most of [the December decline] was daily rental,” Landry said, adding that Chrysler had wanted to reduce daily-rental sales to 200,000 units and that the final tally for the month was 197,000.
Landry said Chrysler has no intention of changing its ad messaging in light of the economic slump. Current advertising, created by Troy, Mich.-based BBDO Detroit, focuses on the company's fleet vehicles and their capabilities, in particular its truck lines.
And while it's planning at least one launch this year, with a new Dodge Ram Heavy Duty pickup truck expected to be unveiled in September, the company doesn't anticipate increasing its budget in an effort to gain market share, Landry said. “We'll have to adjust our budgets to where the industry will be, which is relatively flat,” he said.
Ford is standing by its fleet ad spending plans despite the downturn. “We haven't diminished our spending levels year over year,” said Gerald Koss, marketing manager, Ford North America Fleet Lease and Remarketing Operations.
This month the company debuted a new fleet ad campaign, created by JWT Team Detroit, Dearborn, Mich., that marks a departure from typical productcentric ads. The campaign focuses on Ford's brand positioning: quality, safe, green and smart, to represent its strides in technology. One ad shows a chalkboard filled with mathematical equations, with the suffix “ER” imposed over them, to show that adding “ER” to each of its brand values enhances them.
“We added "ER' to smart ideas and made them smarter,” reads the copy. It goes on to detail Ford's technological advancements through its Ford Work Solutions, which provides tools to help companies better track their fleets' performance. The call-to-action tagline is in line with its corporate message: “Drive one.”
GM is sticking with its current fleet marketing budget as well and doesn't plan on any major strategy changes. “It's steady Eddie,” said Brian McVeigh, GM fleet and commercial operations general manager. Fleet customers “don't buy on style or trim; they buy function,” he said.
GM's fleet marketing relies mainly on print and Web advertising created by its agency of record, Perich Advertising & Design, Ann Arbor, Mich. Also key to GM's communications strategy, McVeigh said, is its network of 500 fleet-focused dealerships around the U.S. that run co-op advertising in local media.
“We concentrate on growing at the dealership level,” McVeigh said, adding that GM's “Works for you” message has to resonate in all of the dealers' communications. “The message has to be consistent with the one-voice concept,” he said.
McVeigh blames the year's fleet sales decline on a strike by American Axle & Manufacturing, a key supplier, that put GM's production four months behind schedule. He also cited the cooling of the building boom in formerly hot markets, such as Fort Myers, Fla., and New Orleans.
All these factors make GM's participation in trade shows and alliances with organizations such as the American Home Builders more important than ever, McVeigh said. “Most of these folks capitalize their vehicles—they buy them,” he said. “It's a very steady business. It's down particularly because of home building, but it's still pretty solid.” M