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Why Avis Europe is grabbing hold of the euro with both hands.

Car rental is a competitive business. When it’s cheaper to hire a car for a day than a dinner jacket, you know it’s true. In Europe, the race is on to win that extra bit of market share and the man steering Avis Europe towards the checkered flag is Scotsman David Maloney.

In his ten years with the company, Maloney has experienced Avis Europe’s many transformations – from quoted company to US subsidiary and back again – but as the driver of the company’s second flotation last year, he has truly earned his place at the wheel of senior management.

Avis Europe (not to be confused with its former parent, the US-based Avis Inc) owns companies in 11 countries and has a presence through licensees in 111 countries around the world – just about everywhere except North and South America, Australia and New Zealand. But even with this global reach, the UK, France, Germany, Italy and Spain account for about 86% of the #480m total revenues generated in the 11 months to 31 January 1997.

In September, Avis Europe showed its Euro-colours by becoming the only company on the London Stock Exchange to report its results in European currency units (ecus) as well as sterling. “Ecu is a good way of saying what’s really happening to business because, although we’re a UK-based company, only 20% of our business is here in this country. The rest is outside,” says Maloney.

Operating in so many currencies has left the holding company vulnerable to currency fluctuations. By reporting in ecus, the current strength of sterling shows. In the six months to 31 August 1997, pre-tax profits rose by 33% to #40.9m and revenue fell by 3% to #267.5m. However, when measured in ecus, profits increased by 57% and revenue by 14%.

In fact, Avis Europe has been doing its accounts in ecus for nearly a decade, ever since they negotiated a new lending facility in 1989. “We knew how much we needed in total, but we didn’t know in which currencies, so we had it denominated in ecus with the banks. At the time that was very new,” Maloney explains.

Based on this experience, Maloney has formed his own views on the UK’s position on Emu. “It would be more acceptable to have a common economic system before you have a common currency,” he says. “In our industry, for example, when we buy a car in let’s say Italy, we can’t rent that car in France. Because when you buy a car in one country in the EU you pay local taxes and the tax on the cars you purchase vary enormously between countries. For example, in Denmark it’s 133% and in Belgium it’s 1%.

“I think the objectives to have political and economic union are right as a long-term objective. But to put in the common currency before the economies have truly reached the same point in the economic cycle or are following the same policies is clearly more political than economic.

“I don’t think the UK should go into Emu now. We wouldn’t have anything to gain from it – we should wait and see. But we should co-operate with our French and German partners to make sure our voice is heard and our influence is felt,” he concludes.

Whatever is decided, Avis Europe is set to take the lead in adopting the single currency and Maloney is confident that the business will operate in euros from 1 January 1999. One reason for the confidence is found in the consolidated reservations and financial system, Wizard, which already handles dual currency transactions. “In fact, the system has to be ready before January 1999 for people making reservations over that period. Because we have a lot of international business, our system has been doing everything in two currencies for many years. So when we move to the euro, it will be straightforward for us and will require no leap in thinking internally,” he explains.

“During the transition period we will say to our large repeat customers, such as Siemens, ‘You can be invoiced in euro or in your local currency, whichever you prefer.’ Presumably Siemens will insist on euros. So we will send them all their invoices in euros.”

The transition period is going to be difficult, says Maloney, because businesses will have to operate in what is effectively a system of fixed exchange rates during that time. “We consulted our major customers, our major suppliers, government authorities, banks, credit card companies and so on. The common theme that runs through all of it is that no one’s quite sure what to do. Worryingly, people like governments are not sure what they’re going to do. They should be giving a lead. So, the idea of Britain waiting to see what happens is sound, as long as we don’t alienate our partners in the EU,” says Maloney.

However, he sees the problem as a temporary one. When you get through the transition period and out the other side, there’s no difference in having the Euro as your currency and having the DM as your currency, he says. “It’s just got a different name and your prices change.”

Maloney is above all a realist and he admits that reporting in Euros is different from trading in Euros. One problem he and the company will have to cope with is price transparency. “It’s difficult to say what will happen. We’ve debated the issue internally and we assume that our pricing will become more transparent internationally, but we don’t assume that all pricing will go to the lowest common denominator.

“Our two major costs are people and cars,” he continues. “So, if someone challenged me to explain why the price of car rental is lower in that country compared with this country, then I could clearly point out the relationship between the price of cars and people and the price of car rental in different counties.”

It is expected that there will be some crossing of borders to get better car rental deals, in the same way that the British cross the Channel to buy cheaper alcohol. “There are going to be a lot of situations where that will occur because people will be able to compare prices very quickly.

That is, unless governments put things in the way,” Maloney says. “But when you intervene in that way then you’ve got some difficulty. That’s what creates economic imbalances.”

Economics is something Maloney knows a thing or two about. He’s an economics graduate, but he’s not terribly comfortable with being called an economist.

“That was a long time ago,” he says when questioned about his qualifications. “There’s the science called econometrics which always baffled me as a student because I could see the arithmetic, but it seemed a little airy-fairy, shall we say. And the ability to project what an economy was going to grow by … well, you can’t, it’s too complicated. I always find the fact that people are employed as economists amusing.

“Mobil Oil (where Maloney started his career 20 years ago) didn’t have any economists, I was it. What I did was, I read comprehensively, listened and watched the television and took a consensus view. So you don’t actually need an in-house economist. You can buy consensus economic forecasts. That gives you the average and you will be as close as anyone else.”

Maloney gained a firm grasp of business principles at Mobil Oil by changing jobs every nine months or so. “I need to be challenged constantly and get bored if there’s not enough to do. In the end, I ran up against the rules at Mobil, because I never met many decision-makers. So I knew that the culture wasn’t right for me,” he comments.

Then one day he got a phone call and was offered a job as financial controller at Paramount Pictures in Amsterdam. One of his first tasks was to close the Rome office. “This was hugely removed from my experience. Mobil Oil and Paramount Pictures could not be two more different organisations. When you combine the two of them together, it meant I was probably exposed to things that people of my age probably (he was still in his twenties) wouldn’t have had to do.”

One of Maloney’s odd responsibilities was to check the audits on film-making expenses. Once he came across a petty cash expenditure on donkeys for a film being made in Italy. “It appeared that we had bought the donkeys,” he explains. “What happened was they’d rented donkeys from some gypsies. Unfortunately, some of them had fallen over a cliff so we had to reimburse the gypsies. There are hundreds of stories like that.”

Eventually Maloney once again felt blocked from senior management. “At Paramount, I fairly quickly reached the conclusion that the people who were going to make a mark in a movie company were never going to be those with financial training. It’s the sales and marketing people and the lawyers who run these businesses. I was well-paid, leading what my friends thought was a very glamorous lifestyle attending film premiers and so on, but I decided to join Avis Europe for a lower salary because it was international and I liked the people and the culture.”

In 1987, within a year of joining, he was promoted to financial director of Avis Rent-a-Car UK. Then the managing director of Avis Spain retired and senior Avis Europe executives decided that Maloney would benefit from a period of general management. In 1991, Maloney, his wife and young son moved to Spain.

“This was my big opportunity to run my own business. There was a slight problem – I didn’t speak a word of Spanish. Even compared to all the years at university and sitting accountancy exams, learning a foreign language was the most difficult thing and the most frustrating thing I ever did,” he says.

The promotion was unprecedented: it was the first time ever that Avis Europe had given a foreign national a country operations top job. Maloney, who’d always wanted a challenge, got one. He was in charge of a company with 500 staff in 200 locations, buying 50,000 cars a year and an annual turnover of about #60m, all at the age of 35. And that’s only half the story.

“Here I was a foreigner, much younger than the existing managers and the business needed restructuring fairly quickly. Moving into a situation like that is not easy. Then the Gulf War blew up just as I arrived and in my first week, our business was down 30%-40% at some airports. So, not only did I have to restructure, but I had to cut down the size of the business from day one,” recalls Maloney. “There were other difficult moments like the 11-month trade union negotiations with a communist trade union.”

Despite these problems, Maloney set about removing a layer of middle management and introducing more modern business practices. “I had to introduce more discipline without trying to do it the British way – doing it a Spanish way. Combining the Anglo-Saxon way of running a business with a Spanish flair,” he explains. “After two-and-a-half years, we’d increased our profits, reduced the staff by around 20%, increased employee productivity and we increased the utilisation of the fleet.”

Maloney returned to the UK in 1993 as Avis Europe’s group finance director. In the last 18 months he has had the company’s second flotation to look after. “There was a need for additional cash in the business to reduce our sensitivity to interest rates and debt,” he explains. “While we didn’t feel it was holding the business back in a major way, we believed we would be better structured from a capital point-of-view if we moved forward with less debt.”

In February 1997, the roadshow of pitching to potential investors started. Maloney and chief executive Alun Cathcart did 104 presentations in three weeks – and survived. “You had to deliver the same presentation with the same enthusiasm every time, no matter if it was the first one or the 104th,” he comments wryly.

In April the company went public again, selling 215 million shares at 124p raising #267m. The proceeds were used to buyout shareholders General Motors and Avis Inc, leaving a balance of #161m to repay debt and finance expansion in central and eastern Europe and Asia. Ten months later Avis Europe’s shares are now trading at around 170p and interim profits are up by 33% to #40.9m.

It was Maloney’s first flotation. “I’d been warned by everyone that this is a very difficult thing to do. But that in the end – I know it sounds odd – it wasn’t as bad as I’d expected it to be,” he says. “There’s one principle reason for that, which was that we said we would get it done by a certain date so it had to be finished by that date. Because of that, decisions were made faster. We had to work extremely hard, but we hit all the targets that we set ourselves.”

At the age of 42, Maloney has still got plenty of mileage left in his career. There are two routes facing him now: he could take the fast lane to be a finance director of a bigger and more complex company or he can go down the motorway of general management. “Both appeal,” he says, “but I would not want to be FD of a bigger company where it is more of a technical job.” Based on his past experience, whatever route he chooses, he’s likely to go for to be a rocky road rather than a smooth ride.


1946: Warren Avis founds Avis Airlines Rent a Car Systems in Detroit, USA.

1965: Avis Europe set up as a division

1986: Avis Europe separates from its former owner Avis Inc and floats on the London Stock Exchange for 240p/share.

1987: US-based Avis Inc becomes employee owned with a $1.75bn Employee Stock Ownership Plan (Esop).

1989: Avis Europe reverts to private ownership with three major shareholders: D’Ieteren, General Motors and Avis Inc.

1997: In April Avis Europe goes public, again, selling 215 million shares at 124p. The move raises #267m, leaving the company with #161m to repay debt and finance expansion after buying out shareholders General Motors and Avis Inc. In September Avis Europe becomes the only company on the London Stock Exchange to produce its results in ecus.


Name: David Maloney

Age: 42

Education: BA (Economics) from Hariot Watt University, Edinburgh, FCMA


1977: Starts career at Mobil Oil, working in a variety of roles including accounting, strategic planning and supply.

1984: Joined Paramount Pictures International as financial controller and was quickly promoted to director of International Liaison.

1987: Joins Avis Europe as director of Financial Planning & Analysis and established systems for planning, forecasting, budgeting and analysis.

1988: Promoted to finance director of Avis Rent-a-Car UK after a year in the company. A traditional FD role, he was responsible for 150 staff, accounting, planning, IT and fleet purchase negotiations.

1991: Packed off to be managing director of Avis Spain, where he revamped outdated company procedures, reduced headcount and increased profitability.

1993: Made group finance director. Led Avis Europe’s flotation with chief executive Alun Cathcart (completed April 1997) and restructured finance facilities twice.

Maloney on Maloney: “I’m not the classic professional accountant. I got into finance quite late (in my late 20s) and I keep getting out of finance and then getting back in again. I’ve always kept my career fairly broad.”

Maloney’s former boss on Maloney: “I remember him as a serious and ambitious young man. He’s a very reserved individual in times of stress or otherwise. When I hired him in 1986, Avis Europe had just become a public company and I needed someone with a good commercial business understanding. I wasn’t looking for a straight chartered accountant, and David had that.”

Financial advisor on Maloney: “He’s in control in a way that few finance directors are and work is clearly a priority. He is direct and incredibly efficient. Where some companies are on the back foot in terms of responding to issues or questions, David prides himself on anticipating that and making sure he’s got the answers.”

Transaction on Maloney: “He’s very tough, bright, decisive and cool lawyer under pressure. That’s particularly important when you’re doing a flotation and there’s a lot of pieces of advice coming at you from all angles. All the advisers involved in the deal were amazed at the quality of the organisation and his ability to produce reliable information to an incredibly tight timetable.

“Also, he has a much broader outlook than many financial directors because of his general manager experience. For example, many finance directors instinctively tend to turn to accountants for advice. David is more open-minded and is happy to come and talk to lawyers about things rather than instinctively always going to the accountants.”

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