DTG’s Battle-Tested Business Strategy

When Joseph Cappy stepped to the speaker’s podium at the Car Rental Show, he had just recently announced plans to retire from his post as chairman and CEO of Dollar Thrifty Automotive Group. After 46 years in the automotive and car rental industries, he had earned a little down time. After all, under Cappy’s leadership DTG became the industry leader in pre-tax profit margin in 2000, and maintained that position the next two years when much of the car rental industry was gasping for life.

Unlike some of its competitors, DTG had adopted a business strategy that made the company less vulnerable to a crisis of 9/11’s scale. In his speech, Cappy recounted the company’s post-IPO growth from 1998 to 2000 as well as DTG’s strategic response to 9/11.

In 1998, 1999 and 2000, DTG concentrated on three primary goals, Cappy explained: focusing on the growing leisure travel market, being the industry’s low-cost operator, and maintaining liquidity and a strong balance sheet.

“When we came out as a public company [in 1997], we attempted to pattern our balance sheet after the strongest competitor in the industry — Hertz,” Cappy said. “Our balance sheet is still very similar to Hertz’s. We have no non-vehicle debt, and our vehicle debt-to-equity ratio is comparable to Hertz.”

During DTG’s first three years as a public company, operating results were “nothing short of spectacular,” Cappy said. He also credited the company’s growth to its ability to execute strategies. But, he stressed, this emphasis on execution didn’t mean he ran DTG like a tyrant. Rather, he welcomed and valued the opinions and suggestions of other employees — and not just those in upper management positions. Without open communication, no company can fully address its weaknesses, Cappy suggested.

“Are all of you here today realists about your weak spots? About your priorities?” he asked the audience. “Are you confusing execution with dictatorship? How many firms go belly-up with a ham-fisted boss? You can’t have an execution culture without input and effort from all of your employees.”

After 9/11, DTG management responded swiftly. By Sept. 30, the company’s fleet was cut by 16%. By Oct. 5, management had implemented a 20% reduction in workforce at Tulsa headquarters. By Dec. 1, employees were advised of additional cost-cutting measures for 2002, including a salary freeze. The company also suspended its 401(k) match as well as its profit-sharing and incentive compensation under a revised 2002 profit plan. DTG’s top 45 executives took salary cuts of 16% to 22%.

CONTINUED:  DTG’s Battle-Tested Business Strategy
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