Hammer Time: Not Fancy, Just Fleeting

While vacationing in the land of neverending chotchkies and kitsch, I came across Jack Baruth's recent article on Captivas. This second-tier Chevrolet is getting a stiff price premium at the auctions these days for two simple reasons. 1) GM is willing to throw more financing at this vehicle than it's actually worth… at least the first 50 coming through their auctions. 2) There will likely be at least 50 people willing to pay that premium, and then some. Just to have any late model vehicle. The first reason is nothing more than an old trick used by manufacturers for decades on end at the auctions. Limit supply. Finance aggressively. Hope that the ever larger loads of off-lease and rental vehicles that follow can hit a similar price premium. Other than a few early victories, the manufacturer has to bow down to the limits of their dealer network and financing arm. Then the independent dealers enter the fray and the price finds an equilibrum that may yield profits for everyone. From the bean counters, to the shareholders, to the consumers. Everyone wins! Except, in GM's unique case, the Captiva has been a fleet-only vehicle. Which brings on the question. Do fleet-only models make sense? On the "Pro" side you have three big dollar signs. $: Fleet only vehicles allow you to amortize the costs of an old model so that it still pays for you to produce it. This can be a blessing for loyalists (Town Cars, old style F150′s, ), federalists (Crown Vic Police Interceptors and government issued Impalas), frugalists (overproduced Metros and Escorts from the Y2K era), and mediocrit-ists (Chevy Malibu Classic circa 2004 & 2005) $$: The 'new' model can receive a healthier retail price and resale value. Since the old model is focused on those who value price and ownership costs. The retail vehicle is given more features and a higher MSRP. While the fleet model is decontented to meet the transport needs of rental car companies, government agencies, transport and courier firms, and limo operators. Cannibalization between the two models is virtually eliminated if this is done right. The retail model gets profits from the higher end of the market while the fleet vehicle fulfills the more pedestrian needs of the lower end. $$$: Social equity of the brand improves to the point where each model is now seen as a market leader. Equinox/Terrain + Capitva = Market leader! Ford Taurus + Crown Vic/Grand Marquis = Not Great… But Okay… New Malibu/Aura/G6 + Oprah Giveaway + Chevy Malibu 'Classic' = New Ownership! Clean Balance Sheet! $$$$$$$$!!! This brings us to the Achilles Heel of this theory. Reputation. Can any automaker build and sustain a two-tiered retail and fleet strategy, using two different models, without it eventually harming their overall reputation in the long run? This is not an easy question to answer. But hopefully the Best & Brightest can shed some light into the darkest of possibilities. from The Truth About Cars http://www.thetruthaboutcars.com

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