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Rental Cars - The Ripple Effect, Washington [ in depth ]
Tuesday, October 23, 2001 12:36 PM

The events of September 11th, like a pebble tossed in a pond, produce an ever-widening series of ripples.

The airline industry's problems, following the terror attacks on New York, Washington, and Pennsylvania, were immediate and obvious: a lot of people stopped flying.

When that happened, many other businesses felt the pain. Rental-car companies, for example, have taken a hit.

Rich Broome is Vice President for Governmental Affairs at the largest rental-car company, the Hertz Corporation.

Broome: Ninety-percent of our business is generated at airports, so to the extent that fewer people are traveling by air, that has had an effect on our business, which was most pronounced in the first few days after the attacks when the planes were grounded. But, we have seen steady improvement since then, although we expect to level off in the next few days at a level below where we were on September 10th.

Mr. Broome declined to cite a dollar figure for the losses.

Broome: Let us just say that we are feeling the effects. And, we would say the combination of the effects are attributable to the slow economy and the after-effects of September 11th.

The Hertz executive says there are some bright spots across the nation.

Broome: In some major cities like Manhattan (New York), our business has been quite strong. And in airports that are serviced by Southwest airlines, we seem to be doing better because they seem to be smaller airports. Our biggest issues seem to be at the major metropolitan airports.

General Motors has idled five of its plants in Michigan, Kansas, Wisconsin, Georgia, and Ontario, Canada, at least in part due to the rental car situation.

G-M Executive Director of Market and Industry Analysis, Paul Ballew, says daily rental agencies now account for 10-percent of his company's sales.

Ballew: We have been reducing that amount over the past few years as a part of our business strategies, but it is still about one-in-10. And in some of the car brands, which is where you are seeing us close our facilities, some of those brands can be as high as one-in-five.

Congress has relieved the nation's airlines with a substantial financial bail-out. Hertz Corporation's Rich Broome says his industry does not need such help.

Broome: Our view is that if the government can upgrade airline and airport security, and also help stimulate the economy, that will help solve the problems that our industry faces, not a general bail-out of the rent-a-car business.

But until American consumer confidence rises - and businesses and individuals grow more comfortable with the idea of flying again, companies that rent cars to the traveling public will be tightening their corporate belts.

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