VW Gets Europcar Wheel

Volkswagen - which for eight years jointly has owned Europcar International, the second-largest car rental company in Europe, with Accor, the French travel and hotel company—has bought out Accor's 50 percent share of the car rental company and taken sole ownership. The new CEO, Michael Kern, formerly head of the German division of Europcar, took the helm Jan. 1.

The move was heralded by observers as a positive development. Not only will it result in more efficient management—under joint ownership, Europcar maintained two separate headquarters and was beset by cultural clashes stemming from the differences between separate German and French management teams—but being a wholly owned subsidiary of Volkswagen is expected to make it easier for Europcar to sell off its cars after six months, according to Europcar communications director Eric de Riedmatten, based at the suburban Paris headquarters.

"The issue will be: Will Volkswagen allow Europcar to develop its own business interests as opposed to using Europcar as a dumping ground for its cars," said Neil Abrams, president of Abrams Consulting Group Inc., a car rental consultancy in Purchase, N.Y. Such a scenario occurred in the United States in the late 1980s and early 1990s, when most car rental firms were owned by the auto manufacturers. However, "Volkswagen has the depth and financial legs to support this business," Abrams added.

One problem with the 50 percent ownership stake by Accor was the fact that Accor, through its ownership of Carlson Wagonlit, had preferred relationships with other car rental firms. Europcar now can develop more stable marketing alliances to drive its business at European outlets for inbound U.S. travelers, said Abrams.

De Riedmatten said one incentive for the sale was Accor's need for cash in its bid to become the first international chain of economy hotels. In the United States, the French company purchased Motel Six several years ago and Red Roof Inns last year.

Accor will maintain its involvement with Europcar through a 10-year partnership. Europcar will be included in Accor's partnerships with Air France, Carlson Wagonlit agencies and other travel companies, and share reciprocal reservations. As of April 1, a new service will be offered in which Europcar rentals will be delivered at no extra cost to customers staying at any of Accor's 400 European hotels.

While Europcar lost about $50 million in 1994, it since has become profitable, earning about $77 million in profits in 1998, according to de Riedmatten. With business travel accounting for 60 percent of its business, the company has gone after this market more aggressively in the past few years. It introduced a loyalty program called Euro Points in 1996, recently implemented a new integrated computer automated reservation and fleet management system, called Greenway, and last year unveiled self-service kiosks with automatic key drops. Next year, the company plans to introduce a "sign and drive" program for frequent renters, in which customers go right to the car without having to sign off on the rental agreement.

A top priority is to build a stronger Europcar presence in the United States. Europcar's partnership with Dollar Rent A Car is due to expire in March, and de Riedmatten said the company plans to announce a new partnership, or perhaps even an ownership position, with a U.S. car rental firm within the next few months.