Vegas Gang #118 – February 6th, 2015

This time on the show:

– Loveman Out @ Caesars
– Unwin and McBeath @ Cosmo
– SLS and EB-5
– Riviera Sold?
– Wynn Macau
– Elan and Jennifer Dunne

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** Sure Bets **

Chuckmonster – Catherine Borg’s ‘Scouted’
Dr. Dave – “Benjamin “Bugsy” Siegel”
Hunter – for MacOS X

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One thought on “Vegas Gang #118 – February 6th, 2015

  1. My “brother” has been in the Hertz executive bldg since 1982, and he has given me insights about Frissora since he got there.
    A little Hertz background: Hertz was the Ford affiliated rent car company (GM was National and Chrysler was Dollar/Thrifty). Car makers would own part or all of the rental company in order to give them a captive outlet for production, which also helped smooth out some economic downturn effects.
    By the 2000-2005 period, the car makers had adopted a “Bigger is Better” approach, and the all did silly things like buy “boutique” car makers (GM bought Lotus, Chrysler bought Lamborghini, Ford with Aston-Martin). The head of Ford was Jac Nassar, who had the biggest plans of all: Ford bought Volvo, Land Rover, Jaguar, all of Hertz, AND decided to try and take over the dealer sector by purchasing all brand outlets in a few test cities around the country (Oklahoma City, Salt Lake City and a couple others).
    When that all blew up around 2007ish, Hertz was spun back off as a publicly traded rent car company. They were number one in the on-airport segment (primarily business travelers), weak in off-airport (leisure and budget business travelers) and almost no factor in the insurance replacement segment (your car is in the body shop, or other repair shop. Enterprise was 95% of that segment). Enter Mark Frissora.
    Frissora had previously at auto parts manufacturer Tenneco, was seen as a smart businessman in a bland business, with a persona well suited for a visible company. Not Steve Wynn, but every bit of The Jim Murren type. Did a few outside boards and associated networking, also.
    Hertz was pretty well maxed-out in a mature market, so far as the on-airport segment went, and almost pathologically averse to doing anything that could tarnish their “premium” image. Frissora saw opportunity in the insurance replacement business, but was unsure about the profit potential, because Enterprise is so dominant, and is a closely guarded, privately held company still operated by the founding family. Using the name Hertz Local Edition, or HLE, they became the first competition in the market for a decade. Results are OK.
    Hertz decided to go after off-airport and leisure through the Advantage Rent A Car name: figuring their operational genius and existing systems could get the biggest entry into the market with the least expenditure. It proved to be a less rewarding avenue than originally anticipated. During this same time period, Dollar/Thrifty started to send signals that they might be available. Hertz decided this was a faster avenue into the off airport market, and made a play at $45/share. A protracted bidding war ensued and Hertz wound up making the purchase at a little over $80. This is where Frissora’s troubles bega.
    Hertz saw anti-trust issues, and determined that selling Advantage would let them make the Dollar/Thrifty deal. They sold Advantage with a vehicle valuation that wound up being twice what the new buyer realized when they went through then normal auction of inventory before buying new cars. Advantage buyer sued Hertz for something like $100 million. Forensic accounting related to the suit showed some issues going all the way back to the Ford ownership days. Because Hertz had begun the massive task of changing their entire accounting system about the same time as the Dollar/Thrifty chase, many accurate records will be extremely time consuming and difficult to find. Some look like they can never be computed with total accuracy. With the stock price languishing, suspension of earnings reporting for the most recent year, the task of restating 2 or 3 years prior, and the Dollar/Thrifty acquisition not providing a financial benefit, it was decided new leadership was desired.
    Ironically, the plan Mr. Frissora had negotiated with the state of Florida to move the Hertz headquarters to within a few miles of his home in Boca Raton is too far along to be changed.
    interesting tidbit: Mr. Frissora’s daughter is married to the son of former New York Mayor Michael Bloomberg.

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