Chrysler is exiting the car leasing business and GM (GM) and Ford (F) have a foot out the door. All of those SUVs that come back off lease sit on dealer lots because no one wants them. People leasing cars are also being hit by the economic downturn, so they often become deadbeats, forcing the car companies to send " the repo man" to get the vehicles back in the middle of the night. Defaults don’t do much for car finance unit earnings.

According to The Wall Street Journal, "Ford on Tuesday began telling dealers that it is essentially ending leasing deals on most trucks and sport-utility vehicles."

The move is probably short-sighted, but Detroit car companies are so strapped for cash that they cannot support money losing leasing units. A firm like Toyota (TM),  on the other hand, can stay the course if it wants to.

And, there may be good reasons to stay the course. While leasing can be a bad business, especially the leasing of trucks which are not fuel-efficient, it does keep vehicles moving out the door. More sales mean more market share. Customer loyalty is hard to come by in the automotive industry. There are simply too many alternative options for the typical buyer.

Even with its manufacturing prowess, it will take Toyota several quarters to convert its SUV and pick-up plants to small car facilities. The process may take Detroit even longer.

In the meantime, companies that are not willing to underwrite sales through leases are simply going to lose more customers. In the short-run, there may be some sense to that. In the long run, those customers may never come back.

Detroit’s major disadvantage over the last year has been its over-reliance on light trucks. It biggest problems going forward is a weak balance sheet.

Douglas A. McIntyre

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