GM Sales Set To Tumble As Automaker Shuns U.S. Rental-Car Market

General Motors Co. will probably report a U.S. sales decline of more than 10 percent as it intensifies the strategy of shunning low-margin fleet deals with rental-car companies.

GM said it’s reducing deliveries to rental fleets by 20,000, the most yet this year and the equivalent of about seven percent of last May’s 293,000 vehicle sales. The largest U.S. automaker’s performance underscores its mission to put fewer of its vehicles in rental-car fleets and more into the hands of retail consumers, who tend to buy better-equipped cars that sell at fatter profits. The Detroit-based company is also trying to limit the availability of used cars that get dumped onto dealer lots six or twelve months after rental firms buy them. Those models can drag down prices people will pay for new ones.

Retail sales bring in about much more profit than those to rental-car companies, which have the lowest margins of anything GM sells because those customers negotiate a volume discount. In the past, the company would send almost thirty percent of its production to rental-car companies to sustain market share and keep factories running close to full production. GM plans to cut rental-fleet sales by 90,000 vehicles this year in total.

With a stronger market and its retail sales growing, GM doesn’t need to rely on fleet customers as much. The company’s share of rental-car sales is 13.6 percent through March, down from 22.5 percent during the same period last year, according to data compiled by R.L. Polk, a research firm in Southfield, Michigan. Fiat Chrysler Automobiles NV had 22.5 percent of the first-quarter rental-fleet market, and Ford Motor Co. had 19.2 percent. Ford has said that it will sell fewer cars to rental fleets in the second half.