Fleet demand may boost U.S. auto sales, output

U.S. auto sales probably will rise to an annual rate of more than 10 million in this year's second half as fleet operators finally replace their aging vehicles, helping to revive production, analysts said.

"There will be a more normal replacement cycle that is going to allow commercial fleets, government and rental-car companies to swap out existing fleets," said Maryann Keller, an auto-industry consultant and a director of Dollar Thrifty Automotive Group Inc., in a July 14 interview. "Purchases in the first half were abnormally low by historical standards."

Fleet purchases, along with the federal government's "cash for clunkers" program to encourage people to replace older, less fuel-efficient vehicles, may push the annual rate to more than 9.9 million, the highest in any month so far this year. Sales of cars and light trucks in 2008 totaled 13.2 million, and averaged more than 16 million a year during this decade.

General Motors Co. and Chrysler Group LCC, which both exited bankruptcy in the past five weeks, need a 10 million annual pace to break even, according to the U.S. government.

Fleet sales can account for as many as 3 million vehicles annually, said Keller, who is based in Stamford, Connecticut. They probably won't reach that level this year, as corporate buyers and rental-car companies keep vehicles longer, she said.

Automakers, shippers, metal producers and economists all anticipate vehicle production will rise in 2009's second half, That would be the first time that more vehicles were built in the second half of a year than in the first six months since 1991, when the U.S. economy was in a recession, according to data from IHS Global Insight Inc. in Lexington, Massachusetts.

Keeping Vehicles

Rental-car companies such as Hertz Global Holdings Inc. and Dollar Thrifty have been keeping vehicles longer. Most of them shifted from "program" vehicles that they buy, keep for six months and resell to manufacturers to "risk" vehicles that are purchased outright, used for at least 15 months and sold to auto dealers, Keller said.

That contributed to a drop in fleet sales and now those cars and trucks need to be replaced, she said.