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Ford takes broad aim at fleet market

April 23, 2010
Ford Motor Co. is revving up its fleet-sales effort to take advantage of a modest second-half recovery it expects in the housing and construction markets as well as the nation’s expanding interest in alternative fuels and the general need for businesses to replace aging equipment

Ford Motor Co. is revving up its fleet-sales effort to take advantage of a modest second-half recovery it expects in the housing and construction markets as well as the nation’s expanding interest in alternative fuels and the general need for businesses to replace aging equipment.

“’Fleet’ is not a bad word at Ford,” Mark Fields, executive vp & president of the OEM’s Americas Div., said in an online news conference this week. “We believe fleet sales can be a healthy and profitable part of our business. In fact, one out of every five vehicles sold in the U.S. is a fleet vehicle.”

Fields said that three out of every 10 Ford vehicles is sold as a fleet vehicle. “The key to benefiting from this market segment is to embrace a disciplined and strategic approach,” he added.

Such discipline is necessary because the total fleet market – which includes commercial, government, and rental vehicle sales – contracted significantly last year to 1.9 million units, Field noted. That’s down 29% from 2008.

In 2010, commercial fleets – especially in the housing and construction markets – faced continued cutbacks, Field said. Government fleets faced expenditure freezes and reductions in capital spending due to efforts to close state and local budget deficits. Meanwhile, rental fleets are still finding the credit needed to fund vehicle purchases hard to secure.

p>Ford believes there will be a modest revival in the housing and construction markets in the second half that will help generate enough cash flow to replace aging equipment. And though government fleet spending will stay flat or fall, the interest in hybrid and alternative fuel vehicles is increasing rapidly as a way to reduce operating costs.

“When you start looking at the advantages of more efficient internal combustion engines, combined with efficient transmissions, to improve fuel economy, and other alternatives-- battery electric, natural gas-- the savings are significant to the customer,” noted Kevin Koswick, director of Ford’s North American fleet, leasing and remarketing operations.

“Companies and the government are greening their fleets,” added Fields. “We’re offering a full line of vehicles featuring alternative fuel powertrains and advanced sustainable technologies aimed at improving fuel economy, reducing CO2 [carbon dioxide] emissions and significantly reducing the cost of owning our vehicles for fleet customers nationwide.”

George Pipas, Ford Motor Co. sales analyst, added that the OEM is also focused on keeping the “right balance” when it comes to fleet offerings.

“We're not overloaded in one product line and this means two things,” Pipas said. “We have a broad range of products to fit fleet customers needs, depending on what they might be, and what kind of business they're in, and it means we're not flooding the market with a particular product or a particular channel. That could have an adverse affect on resale values if that's what we did.”

In 2009, Pipas said Ford’s share of the U.S. commercial and government fleet sales hovered at 32% and 44%, respectively, while daily rental business sales are now down to 12% of Ford's total sales.

“Five years ago about 16% or 17% of our business was in daily rentals, so we have reduced that, but in its place, we've increased our presence in the commercial and government fleet sectors,” he stressed. “Five years ago, we didn't have cars with strong resale values and class leading fuel economy and quality that we have today, so many commercial customers did not turn to Ford for their needs.”

He noted that resale value of the automaker’s three brands – Ford, Lincoln, and Mercury – rose 23% at auction from a year ago to outpace the industry, which saw resale values increase by 19%, according to the latest National Automobile Dealers Association auction data.

Additionally, Kelley Blue Book recognized the 2010 Ford Taurus and 2010 Ford Super Duty with its Best Resale Value Awards, singling out the full-size car and full-size pickup as vehicles expected to hold the greatest proportion of their value after five years of ownership.

“Rising resale values means more money in fleet customers’ pockets when it is time to sell or trade in for new vehicles,” said Charles Pecoraro, Ford’s residual forecast manager. “Combine these savings with lower repair and maintenance costs and lower fuel costs, thanks to our improved fuel economy fleetwide, and the cost to own a Ford product drops dramatically during the life of the vehicle, providing tremendous cost savings for large fleet buyers.”

“Today, customers have so many different needs, there is no ‘one product fits all’ solution,” said Len Deluca, director of Ford Commercial Trucks. “Ford’s plan is to continue offering a complete range of high-quality fuel-efficient vehicles designed and engineered to help our fleet customers significantly reduce their vehicle ownership costs.”

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