Auto Focus

John Tague and the New Hertz

Today’s conference call was the debutant ball for Hertz’s new CEO, in which he set the company’s direction on regaining market share, fixing Dollar and Thrifty, the threat from Uber, Hertz’s exit from carsharing, prepaid rentals and more.

On the face of it, this morning’s conference call was to elaborate on Hertz’s financial restatements. But if you were looking for reasons as to what really happened to get Hertz into this mess, this wasn’t that forum. You can pour through the filed 10-K for clues, but you still won’t come up with all the answers you’d want. This call was about the future.

It was really John Tague’s debutante ball as the new face of Hertz. He came across as understated, frank, matter-of-fact and candid — where it allowed. Remember those moments when the country looks to the President to take the podium and reassure us “everything’s going to be fine”? That might be overstating the case here, but after the rocky last two years at one of the world’s largest rental companies, it was an imperative.

Folks wondered why the restatement of earnings was taking so long. Was it because the damage was greater than expected? Hertz reported in February that the total impact to pre-tax income for 2011, 2012 and 2013 would be $153 million. The total ended up being $235 million. That’s not chump change, but less than feared.

Whatever reasoning behind the timing of today’s conference call, it gave the new management team the necessary time to get up to speed on the business of car rental. (Remember, Tague and others on his team or United Airlines expats.) Tague not only came across as a guy who knew the business — he’s got ideas.

It was after the prepared statements, during questioning, when the good stuff came out.

Tague was candid that Hertz had indeed lost market share in the last 18 months, “some of it self-inflicted.” He had the right answer when asked how Hertz would get it back: “I don’t believe the way to earn back market share is to put [out] the cars and the rentals will come,” he said. “We need to improve the quality of service across the brands. We’re not going to win it back by over-fleeting.”

Indeed, Hertz announced yesterday that it will fleet under original projections. That’s good news, and it brings a promise to help buoy rates industry-wide.

One of Hertz’s new missions is to get back to what it does best — rent cars. In addition to details on the equipment rental business spin off, Tague dropped a bombshell on questioning, saying Hertz is getting out of the carsharing business in the U.S. He admitted Hertz wasn’t successful in building scale, and that the return on investment wasn’t promising.

Regarding a question on the future of Donlen, Hertz’s commercial fleet management division, Tague dodged that bullet.

Tague addressed prepaid reservations, a longtime thorn in the industry’s side. He said “getting the credit card upfront” is vital to segmenting reservations and product offerings. “We’re the only product online where you can take the car off the shelf by giving us [just] your name and an email,” he said. “That’s not logical going forward.”

Tague was also upfront on the notion that Dollar and Thrifty haven’t found their traction. “I don’t particularly like where Dollar and Thrifty have gotten,” he said. “You can have very strong value brands that have extremely high customer satisfaction [but] value doesn’t have to mean cheap.”

“We don’t have the right store format in front of our customers,” he said. “The quality, look and feel needs to change. Those brands need to speak more strongly to their core audiences than they do today.”

Tague even had insights into how transportation network companies (TNCs) such as Uber would affect car rental. He said the biggest threat would be one-day rentals — not a very profitable segment — though he didn’t rule out travelers who would use multiple ride shares in place of multi-day rentals. Acknowledging the TNC explosion, he challenged the profitability of the business model without having to raise rates while keeping drivers’ earnings equal.

Hertz has a long road ahead of it. The company is talking about 2015 as a transition year, essentially telling investors to look to late 2016 and 2017 for these initiatives to pay off with a normalized run-rate of earnings.

In short, Tague not only knew what he was talking about, he provided very specific direction and insights, and it was off the cuff. It’s only talk; we’ll judge results two years from now. But it was a very good start.

Comments

  1. Sharon Faulkner [ July 24, 2015 @ 09:03AM ]

    I, too, think that it will be sometime before Hertz can see returns on their changes. The good news is, it can be accomplished and I agree that prepaid reservations would strengthen the car rental industry, stabilize pricing, guarantee the customer a vehicle, and improve service overall. It will be a defining step forward in travel when (and it will happen) it becomes a reality.

  2. Barbara Blake [ July 25, 2015 @ 05:04AM ]

    As a frontline employee for Dtag Inc I can honestly say that there is now a sense of commitment from Hertz toward the Brand names that was not there before Mr. Tague took over as CEO. I also see in little things that there is more emphasis on resolving issues at all locations and that we are not forgotten. This should pay back big dividends in customer satisfaction which in turn will pay out in higher returns.

  3. Leslie Saunders [ August 5, 2015 @ 07:05AM ]

    I would like to see Hertz make a commitment to Supplier Diversity and meet their Airport goals. I was a supplier to Dollar Thrifty for 30 years, and helped them with their International customers.and customer service. We are leaders in Car rental Insurance but no one at Hertz will return our calls. That speaks volumes.

  4. Leslie Saunders [ August 5, 2015 @ 07:06AM ]

    I would like to see Hertz make a commitment to Supplier Diversity and meet their Airport goals. I was a supplier to Dollar Thrifty for 30 years, and helped them with their International customers.and customer service. We are leaders in Car rental Insurance but no one at Hertz will return our calls. That speaks volumes.

  5. Leslie Saunders [ August 5, 2015 @ 07:06AM ]

    I would like to see Hertz make a commitment to Supplier Diversity and meet their Airport goals. I was a supplier to Dollar Thrifty for 30 years, and helped them with their International customers.and customer service. We are leaders in Car rental Insurance but no one at Hertz will return our calls. That speaks volumes.

  6. Leslie Saunders [ August 5, 2015 @ 07:06AM ]

    I would like to see Hertz make a commitment to Supplier Diversity and meet their Airport goals. I was a supplier to Dollar Thrifty for 30 years, and helped them with their International customers.and customer service. We are leaders in Car rental Insurance but no one at Hertz will return our calls. That speaks volumes.

  7. Leslie Saunders [ August 5, 2015 @ 07:06AM ]

    I would like to see Hertz make a commitment to Supplier Diversity and meet their Airport goals. I was a supplier to Dollar Thrifty for 30 years, and helped them with their International customers.and customer service. We are leaders in Car rental Insurance but no one at Hertz will return our calls. That speaks volumes.

  8. Rafael Santos [ August 12, 2015 @ 12:44PM ]

    Hertz is over to me. In my country, Hertz continually disapoint its costumers. The services were better in past. I think Hertz need to change a lot of things to be at least the same rental company that it was in past.

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Author Bio

Chris Brown

Executive Editor

Chris is the executive editor of Business Fleet Magazine and Auto Rental News. He covers all aspects of the fleet world.

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