Alamo Parent Seeks Chapter 11 Protection
ANC Rental Corp., the parent of Alamo and National rental car chains, filed for bankruptcy protection Tuesday, citing the drastic decline in travel after the Sept. 11 attacks.
ANC and other rental car companies already were struggling with a drop in business before the terrorist attacks dealt a blow to the industry.
But the Fort Lauderdale, Fla.-based company, the nation’s third-largest rental car chain, was particularly vulnerable because so much of its business--about 90%--comes from airport sales counters, more than most other rental car companies, analysts said.
“The drastic decline in travel after Sept. 11 has taken a tremendous toll on our business,” Michael Egan, the company’s chairman and chief executive, said.
Egan said the firm plans to reorganize under Bankruptcy Court supervision and return to profitability. He and other ANC executives were not available for comment.
The company, which has about 3,000 locations worldwide and 19,000 employees, will continue to provide rentals, honoring all reservations, it said.
Even before the terrorist attacks, industry experts said ANC was being pinched by a downturn in travel, cutting its work force by 700 and hiring Lehman Bros. Inc. to study a possible sale. It also reduced its car rental fleet and hired turnaround specialist Lawrence J. Ramaekers as president.
“They were already having problems financially, already vulnerable, and then the entire industry was knocked out,” said Jon LeSage, vice president of the Long Beach-based Abrams Travel Data Service, which tracks travel industry trends.
Though the industry as a whole enjoyed a brief surge in sales immediately following Sept. 11, as stranded passengers and business travelers snatched up cars to get home and keep moving, business has slumped since.
Car rental companies have suffered with airlines and hotels, with some firms reporting up to a 40% drop in bookings, said Cathy Stephens, executive editor of the Torrance-based Auto Rental News.
ANC and several other rental car companies--including Budget and Dollar--requested a $1.5-billion government bailout after the Sept. 11 attacks.
“They’ve been just as devastated as the airlines,” Stephens said of the rental industry. “But the request for relief hasn’t gone anywhere because the government’s too burned out on travel industry bailouts by now.”
The entire industry wasn’t behind the bailout effort, however. Larger rivals Hertz and Avis, owned by major corporations, did not join the bailout requests, for example. Hertz is owned by Ford Motor Co. and Avis is owned by Cendant Corp.
Privately held Enterprise Rent-A-Car, the largest car-rental chain, also remained on the sidelines. The company hasn’t been hurt as badly by the drop in air travel, catering to drivers who are renting cars at off-airport sites or who have their cars in the shop for repairs.
The next six months will be difficult for ANC and other rental car companies, as the deteriorating economy and drop in consumer confidence continues to restrain demand and hurt sales, said Julia Vance of Economy.com, a consulting firm near Philadelphia.
In the first six months this year, ANC lost nearly $57 million on sales of more than $1.6 billion.
The company, spun off last year by Florida billionaire H. Wayne Huizenga’s AutoNation Inc., listed assets of nearly $6.5 billion and liabilities of $5.95 billion in papers filed Tuesday in U.S. Bankruptcy Court in Wilmington, Del.
Lehman Bros. which is owed $203.5 million, and General Motors Corp., owed $35.7 million, are listed as ANC’s biggest unsecured creditors.
Analysts said the timing of ANC’s filing may work to its advantage, as the industry stabilizes and the company reorganizes itself in the slump.
Some believe business travel, a key source of revenue for rental car chains, will recover by next spring.
A survey by the National Business Travel Assn. found that 68% of corporate travel managers plan to rent more cars next year on short-haul trips.
“If it has to happen, this is the time,” LeSage said of ANC’s bankruptcy filing. “They have a good team of people to get them through this right now. These brands aren’t going away.”
Trading was halted Tuesday on ANC’s stock, which closed Monday at 60 cents a share on Nasdaq. The shares have lost nearly 83% of their value since the beginning of the year.
ESL Investments is the largest ANC shareholder, with a stake of more than 16%. Egan, the chief executive, owns more than 7.6% of the shares, while Huizenga has more than 7.2%, court papers say.
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Times staff writer Marc Ballon contributed to this report.
