Car rental company takeovers are taking customers for a ride | Lindsay Mackie

Hertz buying Dollar Thrifty may be a great financial move, but what of the business of car hire companies improving service?

The news this week that Hertz has finally got its hands on Dollar Thrifty (which used to be plain Thrifty), so that 95% of the US car rental market is now in the hands of just three companies raises questions about value and the role the paying customer plays in the corporate world.

This summer I stood in line to pick up my hire car at an Italian airport. It was an Avis queue and it looked pretty much like the same high-season queue would have looked 30 years ago. Harassed queue, harassed if efficient staff. An hour’s wait for a car which had been pre-booked online for an eye-watering sum six weeks before.

It doesn’t take long to work it out. As the great Michael Kinsley put it in a deadly little piece on Avis Rent a Car a couple of years back: “Since 1946, Avis has been sold or reorganized 17 or 18 times, depending on how you count. Each time Avis changed hands or structure, there have been fees for bankers and fees for lawyers, bonuses for the top executives and theories about why this was exactly what the company needed.”

The business of car renting, Kinsley pointed out, is separate from the finance of it. Finance is what you get when a chief executive (Scott Thompson of Dollar Thrifty) says “after three years of merger-related activity and speculation I am pleased that we have reached a win-win transaction for both Hertz and Dollar Thrifty.”

It is win-win for Scott. His stock and options would be worth $59.4m at the takeover price and if he loses his job because of the deal, he’s also entitled to benefits including about $10.4m in severance, $6.5m in performance shares and a $5.8m tax “gross up.”

In the UK there are 2.5m rental vehicles and the short-term car rental market employs around 46,000 people. The industry buys nearly half of the new vehicles sold annually in the UK, to a value of around £16bn. So it matters economically too. But, using the finance vs business definition, it’s questionable how much of the eye-watering sums involved in this week’s takeover will find their way into our real economy through the Hertz and Dollar Thrifty outlets.

Hertz brings in around $2.2bn a year revenue. It has around $12bn debt. A lot of debt to service on top of the $2.6bn price for Dollar Thrifty.

And so how will this latest deal affect the standard of the other service (customers) of Dollar Thrifty and new parent Hertz? Search in vain, sweaty and irritable tourist, for any mention of improved service for you!

I used to use the then Thrifty car rental at Edinburgh. Though the UK market has a much greater spread of ownership than the US, and Dollar Thrifty is franchised to a British limited company, I guess UK locations are not going to be enlarged, snappier, full of innovative ways of making car rental cheaper, easier, with more choice and fun options as a result of this takeover. I’m guessing staff will be harder worked and queues will remain exactly the same. And that the costs we renters will be paying – let’s bet the farm here – will go up appreciably. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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