Start a Major Car Rental Company – Accidentally
my good friend dick [first names only] he had a great eye for opportunity and convinced me to join him at a car rental company where he was General Manager. He assured me that the company was in its death throes and that there was an excellent chance that we could trade the assets if it went bankrupt.
That is exactly what happened and on July 1, 1967 we owned Capital Rent A Car, Inc. 1st National Bank of Fort Lauderdale gave us all 88 titled cars plus $20,000 of initial working capital and a moratorium of two months in the payment of the cars. Of course, the cars weren’t worth anywhere near the money they were owed and we didn’t have two cents to spare. But without another chance we jump.
For the next seven years we were only able to make cash decisions, never a business decision. The problem was that we were always short of cash. We grew because we were aggressive and innovative, but always short of cash. To stay alive for the next seven years, we request and receive moratoriums and hand out checks that we always honor.
We were doing business with the major lenders, GMAC, Ford Motor Credit, Chrysler, and about 4-5 local banks. They all cooperated by acknowledging that we were two stupid good guys who were sincere but unfortunately inept. However, there was one company we didn’t play with. That was Harry, who ran a small local car rental business. We thought all of our lenders were in the business of lending money. Harry no, he was in business for a living. Even though Harry had a major partner, 75 or 80% well healed, Harry always got paid from him on time and unknowingly it paid dividends.
1973 came along and brought with it the Yom Kippur Arab/Israeli War, plus higher gas prices and a gasoline embargo the following spring. Our business model was to offer the right size car, which means no subcompacts and heavyweights in midsize and large cars. Consequently, after the 73-74 winter season we were unable to dispose of unnecessary inventory. With higher gas prices and gasoline shortages, auto wholesalers wanted to buy fuel-efficient subcompacts and maybe some compacts. The midsize and large cars were, in essence, test sales. What was offered for the largest cars was not enough to pay off the loans and get the titles. And we didn’t have money to buy the titles, so we ended up looking for unnecessary cars.
In May, surrounded by this rusty fleet, we think about the future, mainly about the 20th of August. In Florida, way back in 1974, all rental cars were required to have next year’s stickers purchased by that date. We were looking at $20,000 and that was all we could do – look. With bankruptcy staring us in the face, we were thinking about our alternatives.
That’s when Harry came to mind. He said that he always wanted to be in the daily car rental business. Leasing cars was fine, but we were in the exciting part of the business. He didn’t say it once, he must have said it a dozen times. Well, we could help you.
Fortunately, Harry never knew about our financial difficulties and that we had more cars than we could rent. So it was not unusual for us to lease 400 Dodge Darts delivered in June for our summer season. In July, after the cars were delivered, we broke the news to Harry. We didn’t have the cash to license the cars and our only alternative was to declare bankruptcy. Unsurprisingly, Harry, a temperamental Hungarian immigrant, blew up. We remind him that he always wanted to be in the car rental business. He needed to talk to his senior partner. Our building leases could be negotiated, utilities would have to be paid, and Southern Bell would let him keep the phone numbers if he paid his bills. And Dick and I would be happy to work for the new corporation and provide our expertise. [?].
And that is exactly what happened. Dick and I have filed for corporate and personal bankruptcy. The new company opened its doors on September 1, 1974 at our five locations, Miami, Ft Lauderdale, Orlando, Tampa, and West Palm. John had his accountant act as president until Mike was hired as president in 1976. Mike had preemptive rights in case John wanted to sell the company.
The name of Harry’s leasing company was Alamo Leasing. Logically, the name of the car rental company became Alamo Rent A Car, a major car rental company. But that’s not the rest of the story. Everything went well, very well for the players.
To finish the story you should know that John’s senior partner was John D. MacArthur of the John D. & Catherine T. MacArthur Trust Foundation.
John passed away in the fall of 1977 and Mike with a group of 8 other people bought the business from the trustees in 1978. I don’t know the price, but I’m sure the trustees didn’t say, “we’ll take a deed-off.” Mike eventually, to my knowledge, was the remaining shareholder and he sold the company for a substantial sum, hundreds of millions, in the late 90’s.
Harry received around $250,000 for his 20-25% stake in the company. Can you believe that he started a car rental company around 1992 and called it Capital Rent A Car? When I questioned the wisdom of that, he said the name was unlucky for me but lucky for him. I’m not so sure, he died a few years later before Capital went to the next level.
As for me, when people asked me what I did when I went bankrupt, I told them I stopped scratching.