WORLD> America
Hertz rolls out car sharing program
(Agencies)
Updated: 2008-12-18 10:14

NEW YORK – A cherry red Mini Cooper convertible enjoyed center stage at Hertz's launch Tuesday of a car sharing service in New York, London and Paris - the most ambitious step yet into that market by a traditional car rental company.

Like existing car sharing companies, Hertz Global Holdings Inc. will place cars in a variety of locations that members of the sharing program, called "Connect by Hertz," can reserve online. Rentals are charged hourly; the annual membership fee includes insurance, gas, roadside assistance, maintenance and use of a universal key card.

Hertz is entering the car sharing market as the rental industry faces a series of challenges: Airlines have reduced flights, consumers have cut leisure spending and business travel has dropped, all of which have cut sharply into rental revenue and profits.

Even so, Mark Frissora, the company's chairman and chief executive, said in an interview that the company's timing for launching Connect by Hertz could not be better. Starting small, Hertz hopes to capitalize on both consumer demand for alternatives to car ownership and the current weakness of its rivals.

"People can't buy cars today," Frissora said in an interview, referring to the current lack of consumer credit.

Christina Woo, an analyst affiliated with Soleil Securities Group, noted that Hertz finances benefit from its large equipment rental division, which accounts for roughly half its earnings and provides it with more cash flow than pure rental car companies.

Hertz reported having roughly $4.6 billion in liquidity as of Sept. 30.

"They've shown that they are at the head of innovation among the three public companies," said Woo. As an example, she cited Hertz's Simply Wheelz program, which provides vacationers with special rates for using self-serve kiosks to rent their cars.

But Hertz has suspended its financial guidance and said it no longer expects to meet annual earnings targets set in August. Hertz also plans to shrink its 300,000-vehicle fleet due to falling demand.

Rivals Avis Budget Group Inc. and Dollar Thrifty Automotive also are struggling. In recent weeks, Avis has announced a management salary freeze, downsized its planned fleet and cut more than 2,200 jobs as part of a drive to reduce annual costs in the face of dropping demand. Dollar Thrifty, meanwhile, has forecast a hefty fourth-quarter loss.

Other traditional rental companies already have tiptoed into the car sharing market.

Privately owned Enterprise Rent-A-Car expanded its WeCar sharing program, officially launched in St. Louis early this year, to roughly half a dozen universities and businesses. And U-Haul International Inc., also privately held, started a car sharing program in Berkeley, Calif., Madison, Wis., and Portland, Ore., that it now plans to expand into Portland, Maine, and College Station, Texas.

Connect by Hertz is still dwarfed by other car sharing operations. In New York, Hertz is starting with 10 locations in Manhattan, while Zipcar Inc. has 300 locations in greater New York.

Frissora said Park Ridge, N.J.-based Hertz plans to add 20 cities in North America and Europe next year, as well as universities and corporate locations.

"We will grow it as rapidly as demand is there for it," he said. "We have no limits on capacity."

New York users will pay a $50 annual membership fee plus hourly rates starting at $10. Frequent users can choose a monthly rate instead. Zipcar's annual fee in New York is also $50, and hourly rates start at $11. It also has a comparable monthly plan for heavy users.

Frissora said Hertz plans to lure members with accessories generally not available in its other rental cars, such as Bluetooth handsfree cell phone tools, an iPod connection and a handsfree audio kit for requesting customer service.

"You press a button and you're instantly connected to our reservation center," Frissora said.

Hertz is also touting the "greenness" of its sharing fleet, which meets the US Environmental Protection Agency's standard for high-quality environmental performance.