DAEWOO has threatened to withdraw from daily rental business unless profitability returns to this sector of the market. The manufacturer claims rental companies are trying to negotiate new fleet deals for 1999 which leave it no profit margin.

Stewart Wright, Daewoo's national fleet and special sales manager, said: 'I want to do proper business with proper profits so everyone gets something out of the deal.' He believes the rental industry is trying to peg next year's contracts at 1998 prices to compensate for its own failure to increase hire rates.

Rental companies have been trying to talk up prices throughout this year - Hertz raised its rates by 15% - but any success in charging more for their services has been wiped out by the desperate decline in nearly-new car prices. Faced by weakening residual values and with no sign of improvement on the horizon, rental companies are now attempting to limit depreciation losses by haggling for greater front-end discounts or higher buy-back terms.