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Tuesday, April 11, 2006 

Vol. 2 No. 16

Why I like “Rental Car Guys”

Podcast with Rod Smith, President, Arelco, Inc., on the market for consumers purchasing rental cars

Once in a blue moon, I get invited to a trade association conference I’ve never been to before, like the annual National Car Rental & Alamo Rent-A-Car Licensee Business Conference, and it immediately gets on the “annual” event list. Rod Smith, the president of Arelco, Inc., one of the largest independent National& Alamo Rent-A-Car Licensees with headquarters in Indianapolis, hosted this year’s conference; and he and Jim Dedon, the Executive Director of the NCRLA (National Car Rental Licensee Association), invited me to their annual conference, this year held in St. Petersburg, from March 19-March 22.

After the conference, I was able to snag Rod for a wrap-up
podcast of his observations on the event and industry developments. Not only is he a life-long “car guy” and very successful “rental car guy,” Rod is one of the sharpest “used car guys” in the business, with a unique acumen for buying and selling, retail and wholesale, that matches any of the best car dealers I know (and surpasses most).

Why I was at NCRLA, and Why I Hope To be Invited Back…

We at Driveitaway are expanding our upstream remarketing program and platform to service the specific needs of the car rental industry. This area of fleet is transitioning from “program” vehicles (those units provided by the manufacturers under a guaranteed “buy back” program, in which the rental operator can turn the vehicle back to the manufacturer within a designated time and so has no need to remarket these units) to “risk” vehicles (those rental cars purchased by operators without a buy back provision, where the rental car operator is responsible for turning over the vehicle and reselling it back into the marketplace). So it was only natural to begin to attend the annual car rental licensee meetings that happen around this time of year. I’m fortunate that Rod Smith, one of our first rental clients, invited me to this event, as I enjoyed being there and meeting National/Alamo licensees from all over the United States.

As the first car rental licensee meeting I ever attended, I have to say that it reminded me of the best “dealer 20 groups” I used to belong to, back in my dealership days. I’m not sure where the “20 group” idea began, or when it was first adapted for the retail car business, but no more effective association for the advancement of general business procedure ever existed. Essentially this is a group of dealers, or in the case of NCRLA, rental licensees, of the same franchise/licensee but not competitive in geography. They get together to present and discuss best business practices and introduce new ideas and products into the mix, for the benefit and general advancement of all operator participants. While there were far more than 20 operators here (hundreds more likely), and the “20 group” business focused meetings at this conference were closed to “non-operators” like me, I could tell from the “social” sessions that I did attend, that behind those closed door sessions lots of business was going on and valuable “new idea” discussions were occurring.

Among the new ideas discussed at the receptions I participated in was the upstream remarketing program that Driveitaway has begun to offer car rental licensees, and I was happy to see that the independent entrepreneurial spirit is alive and well in rental car licensees. When confronted with a new but promising business technique, process or product, these guys investigate and research it thoroughly, and then make the decision to try it, all in a short time frame. Timely adaptation and response, not usually found in the corporate side of the fleet business, is the mantra for rental “car guys” and I have to say it’s very refreshing. It brings me back to my car dealer days, and why I’ve always said that the retail car business is one of the last “big business” industries dominated by independent entrepreneurs, the last “cowboy” frontier, in a world that seems to be getting bigger and more bureaucratic every day. I personally think that’s why retailers and rental operators will always adapt and prosper despite Detroit’s well-known “big business” woes.

Why, just the other day I read in the Wall Street Journal…

Speaking of Detroit, an article in the Wall Street Journal April 5, entitled “Car Dealers Win Even as Detroit Sags,” by John D. Stoll, had a call-out sentence from the article that stated, “Despite strong ties to big car companies, few similarities exist between battling it out in the supply chain and making it in the car-sales business, says one analyst.” The title and phrase say it all, even though the article mostly described the success of the public dealer groups (
AutoNation, United Auto Group, etc.), because those are the companies that Wall Street analysts follow.

What should be noted as well, is that most of these groups are led by “car guys” (Michael Jackson at AutoNation, and
Roger Penske at United Auto Group, etc.), and, even more importantly, that many, many private dealer groups and individual dealers are doing just as well as the public groups, and have been doing so through many “boom and bust” manufacturer cycles (I’m not sure there is any other business sector in the U.S. that has as many second, third, and fourth generation owners). So I’ll go out on a limb here, and say something that this article did not. The reason the small automotive retailers always survive and are successful, while the large corporate car companies tend to have problems, is that they are run by independent entrepreneurs – the cowboys – who deliberately keep business decisions adaptive, non-bureaucratic and entrepreneurial, even when they grow into very large organizations (the five top publicly traded dealer conglomerates have a combined $49B in revenue).

The independent licensee rental folks I met at the National & Alamo Licensee Business Conference a few weeks ago, represent the best of this entrepreneurial adaptability and spirit, and I have to say it was very energizing, at least for someone like me. I can’t wait to get more involved and do more business (and socializing) with the rental “car guys;” it’s the atmosphere I enjoy the most.

As Charles Darwin said,
“It is not the Strongest of the Species to Survive,
Nor is it the Most Intelligent, but the
One Most Responsive to Change.”

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