After weathering the global financial crisis, Hertz started pursuing a costly and drawn-out deal for Dollar Thrifty Automotive Group Inc. It tried buying the company for $1.2 billion in 2010 but ultimately paid $2.6 billion after a two-year bidding war with its rival Avis.

The deal boosted Hertz’s market share by rounding out its business-traveler stronghold with a greater presence in the budget-minded leisure segment. But the acquisition also added to Hertz’s debt pile, which already was substantial thanks to the earlier leveraged buyout. The company ended 2012 with $20.8 billion in total liabilities.

Dollar Short
Problems abounded with integrating the two companies, according to Maryann Keller, a longtime auto-industry consultant who was on Dollar Thrifty’s board at the time of the acquisition.

The two had different computer systems that couldn’t talk to each other. Frissora lost some talented executives by moving the two companies, which had been based in New Jersey and Oklahoma, to a new headquarters in Florida.

Hertz hoped to combine airport lots for the three brands to save money, but wasn’t able to do so at many locations. The company also found that Dollar Thrifty had let the tires on its cars get thinner than Hertz allowed, and many had to be replaced at a cost of $30 million. Neither problem surfaced during due diligence.

In the end, a merger that was supposed to save Hertz about $100 million in the first year ended up costing it another $70 million, two people familiar with the matter said.

Accounting Issues
As expenses related to the acquisition dragged on earnings, Frissora sought other ways to keep profit up.

To tamp down on vehicle depreciation, the biggest source of costs for rental companies, Frissora tried keeping cars longer, some for as many as 50,000 miles, long past the industry norm of about 30,000, former executives told Bloomberg News. His plan was to put older vehicles into the fleets of the company’s budget brands: Dollar, Thrifty and Firefly.

Because cars depreciate most in their first year, holding on to them longer would slow the rate the company had to show on its books. But not enough of the older models made it out of Hertz’s fleet, and business travelers were turned off by the aging selection of rides to choose from, Keller said.

And according to the Securities and Exchange Commission, the company committed fraud. The regulator said that from February 2012 through March 2014, Hertz materially misstated pretax income due to accounting errors. Investors including billionaire Carl Icahn pushed for Frissora’s ouster in September 2014, and the company restated results the following year.