Father and Son Give Rent-A-Wreck a Tuneup : Car rental: Ken Blum Sr. is leaving oversight of daily operations to Ken Jr. with the firm on road to recovery.
When the directors of Rent-A-Wreck wanted a handyman to stop the auto rental business from leaking red ink, Ken Blum Sr. climbed under the hood and started tossing out parts.
First went the company’s posh Los Angeles high-rise. Then its chief executive officer and his top managers. And then an honor-based royalty system that had gone out with the Edsel at other companies.
Yet two years later, with the business on its way to its first sustained profit in two decades, there’s another Blum in charge, Ken Blum Jr.
But that’s OK with Blum Sr., 68, who still holds the titles of chairman and chief executive officer. Rent-A-Wreck knew from the start that it was getting two Blums, with Ken Blum Jr., 31, the company’s president, now running day-to-day operations.
“The reason I’m chairman of the board and CEO is because of the public posture,” said Blum Sr. “The board recognizes he runs it, but from the public point of view, they need somebody with gray hairs.”
While the elder Blum spends his winters in Boca Raton, Fla., the younger Blum rarely strays far from the Baltimore Beltway. But together they have restored a troubled company to fiscal health.
Rent-A-Wreck was founded in 1969 by a Los Angeles mechanic who supplied unassuming cars to Hollywood stars traveling incognito. Despite its name, Rent-A-Wreck rents out well-maintained cars that are about five years old.
Even with its market niche, the company consistently lost money, posting a $32,000 loss for the quarter ended Dec. 31, 1993, when Ken Blum Sr. was brought in to turn Rent-A-Wreck around.
The elder Blum’s reputation for cutting fat at Baltimore health insurer United HealthCare Inc.--he cut one client’s annual costs from $10 million to $2 million without reducing coverage--made him a natural choice.
Ken Blum Jr. joined the Blum empire at 13, fixing vans during the summer for United Health Maintenance, once part of the family business portfolio.
“I worked on the Winnebagos, changing oil,” he said. “I never much liked camp anyway.”
The younger Blum is a computer buff who earned a patent for a guitar-teaching aid as a George Washington University engineering student and who launched his own computer consulting company at 23.
At Rent-A-Wreck, the Blums’ first step was to make the headquarters fit the firm’s thrifty image.
The Blums moved the company from a spacious Los Angeles high-rise on Wilshire Boulevard to an Owings Mills storefront where the younger Blum also runs most of the family’s Maryland-based companies: National Computer, a computer programming and consulting firm; American Business Information Systems, a high-volume laser-printing business, and Physician Dispensing Systems, which dispenses some pharmaceuticals from doctors’ offices.
Senior Rent-A-Wreck executives were jettisoned and replaced by a cadre of relatives and longtime employees who ran ventures the Blums already owned.
“The company wasn’t really making any money because they were spending more than they were making,” Ken Blum Jr. said. “I don’t really think it was being run like an entrepreneurial type of business.”
In the quarter ended Dec. 31, the company finally posted a profit, a modest $62,000. The company has 400 locations and sales of about $3.5 million a year. It’s adding franchises at the rate of five to 10 per month and looking for acquisitions, he said.
The operation now reaches into Saudi Arabia, New Zealand and Norway. And the company recently launched an experimental $300,000 advertising deal with the Weather Channel on cable TV.
Rent-A-Wreck recently became the first auto renter to become accessible on the Internet, followed by Alamo.
“One of the reasons they asked me to be president is because of my computer experience,” Blum Jr. said. “Rent-A-Wreck was in the Dark Ages from a computer perspective.”
The franchisees have long shown stronger financial performance than the parent company, in part due to an honor system of reporting that required franchise owners to send in checks for 6% of their total rentals. The system is now computerized to assure more accurate reporting and faster bookings.
The company plans to take the big rental firms on more directly by adding cars owned by the company rather than the franchisees, so cars can be dropped off on one-way trips rather than returned to the original franchise, as is now required.
“We’re getting to the point now where we’ve turned the company around and we’re stable,” Ken Blum Jr. said. “We’re going to be around for a long time now.”
