L.A. Taxi Co., Initially Highly Touted, in ‘Dire Financial Straits’

Times Staff Writer

L.A. Taxi Co., touted just last year as the savior of Los Angeles’ problem-plagued taxi industry, is in “very dire financial straits” with estimated losses of $1.3 million since beginning operations at the start of the Olympics, company officials said Tuesday.

“It’s highly unlikely that the company will turn a profit (under current conditions),” said Mitchell Rouse, operator of Wilmington Cab Co., a partner in the 247-cab L.A. Taxi fleet.

“We are in very dire financial straits.”

In recent months, Rouse and other company officials said, the taxi company--armed with an initial investment of $4.1 million--got off to a slow start when the Olympics did not generate the expected amount of business, lost a substantial number of drivers it trained, was forced to cut back an ambitious advertising program and had to face intense competition for riders in Los Angeles’ central business districts.


Reports Circulating

Reports that L.A. Taxi was having financial problems had been circulating within industry circles for several months, but Tuesday’s disclosure by Rouse and Ronald Monarch, president of L.A. Taxi, was the first public statement on the extent of the company’s losses since it began operations last July 12.

Rouse and Monarch admitted the losses when they appeared before the city Transportation Commission to argue in favor of a bail-out proposal that would allow the company to reclassify its employee drivers as independent contractors.

Under the proposal, L.A. Taxi would not have to make Social Security and unemployment insurance contributions on behalf of its drivers, thus reducing its expenses. Drivers would then be responsible for those payments, city officials said.


A profit could be realized “in less than 60 days” if the proposal is adopted, Monarch said.

Under the plan, proposed by the Department of Transportation, no city funds would be given to L.A. Taxi, officials said.

The proposal ran into opposition at the commission hearing as several representatives from Los Angeles’ two taxi-owner associations--still miffed that L.A. Taxi was allowed to go into business in the first place--argued that the company had no specific plans how it make its drivers independent contractors.

Frank Filosa, president of the United Independent Taxi Drivers, and Siroos Moatazedi, president of the Independent Taxi Owners Assn., argued that an internal audit of L.A. Taxi financial records should be made to determine if bad management was the cause of the cab company’s problems.

Consideration Delayed

After a nearly two-hour hearing, the commission agreed to delay consideration of the proposal for 30 days.

Hoping to shake up the trouble-plagued taxi industry, city officials last year granted L.A. Taxi a franchise because of its promise to use brand-new Ford LTD cabs, enforce strict regulations to prohibit price-gouging or trip refusals by drivers and ensure that all drivers were neat and courteous.

In addition, an Ohio transportation firm agreed to back the new venture. City transportation officials said the Cincinnati-based ATE Management Co. had wide experience throughout the world and would set a standard in Los Angeles that other cab companies, which were constantly running afoul of city regulations, would have to meet to stay competitive.


City officials pointed out that L.A. Taxi gets much fewer complaints than either of the two driver-owner associations.