Rental-car giant rewrites the rules

Times Staff Writer

Avis long ago made its name as the company that would "try harder" to win customers from industry behemoth Hertz in the U.S. car rental business.

But these days it's Enterprise Rent-A-Car Co. that's No. 1, a position it has earned in large part through its continuing growth in California, the company's biggest market.

In 2005 privately held Enterprise registered an industry-leading $9 billion in global revenue, placing it ahead of those iconic competing American brands.

California accounted for 16% of Enterprise's U.S. sales total. The company's 850 California offices bought more than 120,000 new vehicles from dealerships around the state this year, worth about $1.4 billion and representing 20% of Enterprise's total purchases nationally.

The success of his division gives Greg Stubblefield a lot to brag about, and the former UC Berkeley lineman isn't slowing down.

"We see tremendous growth on the horizon for us in California," said Stubblefield, 45, president of Enterprise's California-Hawaii division. It's a job, he said, that earns him lots of jealous glares at wintertime corporate gatherings at Enterprise headquarters in St. Louis.

His plans are defined not by specific goals and timetables, he said, but by a conviction that opportunities exist in Enterprise's main business of renting to local residents and in several only-in-California niches.

"Enterprise is widely regarded as an extremely well-run company," said Michael Gallo, an analyst who follows the rental-car industry for investment firm CL King & Associates Inc. in Albany, N.Y. Strategies such as Stubblefield's are part of the reason.

One priority is to expand Enterprise's entertainment business in California.

"Those cars you see parked on the streets or filling parking lots in movies and TV series? It's not chance, it's all staged," Stubblefield said. "And a lot of the time they are rented from us."

All of the Cadillac Escalade sport utility vehicles in a lengthy downtown Los Angeles chase scene in "Mr. & Mrs. Smith," the 2005 Brad Pitt-Angelina Jolie action comedy, were rented from Enterprise.

The entertainment unit, operating from downtown Los Angeles, also supplies high-end cars, such as Cadillacs, Lincolns and Mercedes-Benzes, to production companies that provide them to executives and actors when they are shooting on location.

That has helped give rise to a fairly new business for Enterprise: a luxury-car rental unit for the rest of us. The group, also headquartered in Los Angeles, offers cars from Mercedes-Benz, Lotus, Porsche, Jaguar and other high-end manufacturers.

Noting that in California "the car you arrive in becomes part of your identity," Stubblefield said he expected a growing business in rentals to drivers who want to make an impression without a huge capital outlay.

Another market for the unit: potential buyers who would like more behind-the-wheel time, beyond the typical dealership test drive, before purchasing an expensive car.

In addition, Stubblefield said, Enterprise plans to add to its conventional fleet in California, increasing the number of local offices and working to boost business at its 20 airport locations.

Enterprise aims to grow even as the struggling U.S.-based automakers vow to slash their heavily discounted sales to rental car firms.

Detroit may be cutting back on fleet sales, "but that just means that the total number of cars available will go to a smaller number of firms, six or seven of the big ones rather than 20 to 30 of all sizes," Stubblefield said. "It's the smaller players who will get a smaller share. We usually get what we need."

That's because Enterprise is the industry's 800-pound gorilla: In 2005 the company bought 3.5% of all new passenger cars and trucks sold in the U.S.

"We buy cars in California from hundreds of individual dealers," said Stubblefield, who joined Enterprise as a management trainee after graduating in 1982 with a social science degree.

Enterprise's fleet is saturated with vehicles from Ford Motor Co., General Motors Corp. and Chrysler Group -- "the domestic companies usually have a lot of extra inventory to sell," Stubblefield said. But Enterprise buys from just about every major manufacturer.

And although many of its competitors survive largely on tourism and business rentals made at airports, Enterprise aggressively courts locals.

"We are the pioneers in locating rental offices in and near residential neighborhoods to provide cars to people who need a short-term replacement after an accident, or who use a rental as a second or third family car when they need one, or who just want to try a new model or two before buying," Stubblefield said.

Such rentals account for about 50% of the industry's business nationally, analyst Gallo said, "and it's now a big part of everyone's growth strategy."

Replacement rentals for drivers whose vehicles are in the shop for accident repairs or lengthy service remain the biggest segment of the local rental business.

But Enterprise, Stubblefield said, also is "pushing the idea of using us as your virtual garage."

Keep a car or two for daily use, he said, "but why buy a pickup truck to drive every day when you can rent one for the 10 times a year you really need it? Or a four-wheel-drive SUV for the half a dozen trips to the snow in the winter?"

Stubblefield's strategy in California calls for Enterprise to buy more alternative-fuel vehicles and aggressively advertise them as they become available.

Enterprise had maintained a large stock of Toyota Prius gasoline-electric hybrids.

But as fuel prices rocketed this summer and shoppers clamored for the high-mileage sedans, many of the dealers that had sold them to Enterprise invoked a give-back clause and the rental company had to return them.

Enterprise buys all of its vehicles and typically sells them after about 15,000 miles to dealers through industry auctions or to the public through company-owned used-car lots.

To help replace the Priuses, Enterprise just bought 500 Saturn Vue Green Line hybrid SUVs from GM, including 160 destined for its California locations.

Enterprise will add other hybrids as they become available, along with diesel vehicles and flex-fuel models that run on gasoline blended with ethanol.

And just as California is the largest market for Enterprise's main business, Stubblefield said, he expects the state where the electric vehicle was born to remain the top market for the company's alternative rentals.

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