Collateral Damage: Auto Recalls Miss Retail Sales, Hit Rental Car Industry

Bruce Kennedy, Staff Writer, Benzinga:

The historic round of vehicle recalls this year by General Motors as well as similar events at Ford and Chrysler – a division of Fiat – don’t appear to have negatively impacted the public’s growing demand for new cars. But all those recalls are taking their toll on the rental car industry.

In its second quarter report earlier this month, the Avis Budget Group reported strong results – with a 10 percent increase in revenue compared to the same time period in 2013 – but its executives note the automakers’ recalls have also hurt the company’s bottom line, costing it tens of millions of dollars.

And Avis CEO Ron Nelson told Forbes the recalls are forcing the company to hold on to more thousands more cars than expected – which in turn is “playing havoc” with its operational logistics. “It is a constantly evolving issue,” Nelson told the magazine, “and some cars have been grounded for literally months because of an inability to get parts and some cars we can fix overnight because it is just a flash to the car computer.”

Shares of Hertz Global Holdings, meanwhile, took a beating last week after the rental car company withdrew its full-year financial forecast – due in part to a recall-linked shortage of cars. In an SEC filing, Hertz noted its transaction days for this year’s second quarter “were tempered by already tight fleets in the face of rising OEM [Original Equipment Manufacturer] recall activity, which limited the Company’s ability to convert demand into transaction days.”

“(Hertz) weren’t able to get the benefit of a strengthening market because they simply didn’t have the cars,” Michael Millman, of Millman Research Associates, told Reuters.

One possible bright side to all this, according to Jack Nerad, executive editor for Kelley Blue Book’s KBB.com, could be for consumers looking to buy cars out of the rental companies’ fleets.

“The interesting thing here is that the rental companies are obviously intent on getting the recalled vehicles serviced,” he said in an email to Benzinga, “which distinguishes them from many consumers who don’t respond to recall notices.” He added,

“Potentially cars being sold out of daily rental fleets could be safer than consumer-owned cars,” he added, “at least in terms of getting recall-involved items fixed.” Bruce Kennedy, Staff Writer, Benzinga

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  1 comment for “Collateral Damage: Auto Recalls Miss Retail Sales, Hit Rental Car Industry

  1. Aug 28, 2014 at 6:22 pm

    Remember the old joke? What if your car was like Microsoft Operating System. This was the best one and is coming true:

    “Occasionally your car would die on the freeway for no reason. You would have to pull to the side of the road, close all of the windows, shut off the car, restart it, and reopen the windows before you could continue.”

    Thanks to auto exhaust emissions controls getting so complicated your car is RUN by software and computers. And I don’t think that is a good thing.

    Read the rest of the lines and see if we aren’t already halfway there:
    http://www.hcs.harvard.edu/pnw/microsoftjoke.htm

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