David Kilduff
One of the scariest things I've ever had to do in my life was to face a gentleman named Frank A Olson who was the CEO of the Hertz Corporation from 1977 to 1999. I had to go in front of Mr Olson every 30 to 60 days as a divisional vice president for the Hertz Corporation in a meeting called a business review. Your business life for the next 30 days was dependent upon how well you performed in that meeting. Mr Olson was very intense and went through everything with a microscope. He demanded the best performance from everyone and when you were in the room with him you had better know your business.
Everything he did was to be number one and remain number one. He also pushed very hard at being profitable in every account; that meant taking price increases which we did and that was not an easy task. It is hard to take a price increase and keep your business when you have the largest market share in the corporate rent-a-car market because all competitors all want a piece of your pie. Hertz was successful at it because it had the best service in the business, Hertz was number one.
Car rental is a capital intensive business and profitability in this business is highly related to fleet related cost. Fleets are changed annually. When you are spending billions on fleet your cost of money is also a major factor in whether a company is profitable or not.
The newly appointed CEO John P Tague has his hands full. Mark Frissora, the outgoing CEO, has left Hertz in a difficult position. Pricing in the corporate segment has been declining during Mr Frissora's tenure as has Hertz's market share. The fleet, which consists of hundreds of thousands of vehicles, has been mismanaged and now Hertz's fleet is aged and needs to be replaced and unfortunately the used car market is soft which will have a negative financial impact when disposing of the old fleet.
Mr Tague was the right choice over Thifty's CEO Scott Thompson who did a great job at Thrifty, but it is not a player in the corporate market and that experience is vital to successfully leading Hertz out of its current predicament. Mr Tague has a very tall mountain to climb; the financials have not been correctly reported and — let's be honest - once correctly reported the numbers will not be positive. The employee morale is questionable as Hertz has gone through many lay-offs and difficult times.
From what I hear Mr Tague has the right stuff for this task. However, it has been almost a decade since corporate pricing has trended upward across the board and does anyone at Hertz remember or know how to raise prices? There is no other way out of this and on top of that service has been poor which makes that task even harder. Knowing Mr Tague's reputation, I am sure service will improve. It has to. Unfortunately the turnaround will depend more on how the fastest growing corporate player EHI reacts to what Mr Tague does with pricing.
Mr Tague has been left with a monumental task and may want to call Mr Olson to get a few pointers. Frank had a talent for motivating his team to deliver the best service in the business and at the same time raise prices. Hertz being number one is in jeopardy and Mr Tague in his defence has the most difficult job as CEO since Hertz began in Chicago in 1932.
- David Kilduff is senior vice president, global development, at DK Consulting Group and Flyte Tyme Worldwide Transportation. He is a Business Travel iQ Expert.