Will Avis employees try hard to sell HFS deal?

Donna Rosato

09/17/1996

USA Today

FINAL

Page 04B

Avis employee Danny McElroy isn't sure HFS' proposal to buy Avis for $763

million is a good deal for the employee-owned car-rental company.

``I have some concerns, mostly about job security and if we're really getting the

best deal for our stock,'' says McElroy, an Avis distribution clerk for seven years.

This week, McElroy and Avis' 14,000 other employee-owners will begin voting

on the HFS offer, which was announced in June.

Avis employees, who own 71% of the company, can make or break this deal.

If it's approved, Avis rank-and-file employees would get $356 million. The

average non-management employee is expected to get $35 a share, or $35,000.

The exact price would be determined at closing. Avis CEO Joseph Vittoria and

other managers would get $157 million. General Motors, which owns 29% of

Avis, would get $250 million. GM has agreed to sell its shares to HFS.

But employees are in control. Another 13.9 million Avis shares are held in a trust

for future distribution to employees. The trustee must vote those shares in the

same proportion that Avis employees vote.

Employees have 30 days to return their ballots. As they consider their decisions,

many wonder how different life would be under HFS, the world's largest

franchiser of hotels and residential real estate brokerages.

In one sense, Avis employees wouldn't be giving up much. Even since Avis

became an employee-owned company in 1987, workers haven't had day-to-day

decision-making power.

But employees did have a voice. Employee participation groups met once a

month to discuss ways to improve Avis and handle problems.

Now some employees are concerned that being swallowed by HFS -- whose

brands includes Days Inn, Howard Johnson, Century 21 and Coldwell Banker --

would muffle that voice.

Molly Mobley, a 17-year Avis veteran from Denver, worries about HFS

changing company medical benefits. ``I have two little boys, and medical

benefits are the No. 1 priority for me. I would hate to see that change,'' says

Mobley, a service agent.

``Any time there's a change in ownership, there's skepticism,'' says Russell

James. But James says HFS has guaranteed there would be no change in

employee benefit plans for at least three years.

Especially worrisome to McElroy is HFS' recent decision to sell Avis stock to the

public instead of spinning it off to HFS shareholders.

``With the company going public, (HFS) will be more interested in getting the

highest return for investors, not in taking care of employees,'' says McElroy, of

Alexandria, Va.

Mirza Temuri, who has worked in Avis security for seven years, says he'll vote

yes. Temuri says he's eager to cash in his 380 shares, worth about $13,000, to

pay for his daughter's wedding. Still, Temuri, a native of Pakistan who wears an

Avis ``We Try Harder'' button on his vest, says he didn't like learning about the

deal from newspapers.

Still, other employees say they're eager to be part of HFS.

``I think HFS will give us a lot of exposure and make us more competitive in the

industry. We'll be able to operate out of all of their hotels. It's just going to make

things better,'' says Nick Martin, at the Avis meeting in Santa Ana, Calif. Martin,

an Avis sales agent for 16 years, says his 2,000 shares would be worth $60,000

to $70,000.

Karen Miller, a bus driver for Avis in Denver, also is pleased with the deal. ``If

there are changes, it will be for the better. It'll mean we can get more cars and

updated equipment.''

Others are just eager to cash in. Under the HFS deal, all employees of Avis

would get something for their stock, no matter how long they've worked for

Avis. Before the HFS offer, employees had to work five years for Avis before

they were vested.

``This is the payoff,'' says Brenda Austin, a training coordinator for Avis the past

five years. Austin would get about $17,000 for her 500 shares.

The biggest question is whether workers would be as loyal to HFS as they are as

employee-owners. That would depend on how HFS treated them, workers say.

``If the company is fair to employees, employees will be fair to the company,''

McElroy says.

Contributing: Nan O'Neal in Denver and Jonathan T. Lovitt in Santa Ana, Calif.

PHOTOS, B/W, H. Darr Beiser, USA TODAY (3); Caption: Austin: Training

coordinator hopes 'this is the payoff.' Employee broadcast: Avis spokesman

Russell James, on screen, tells employees in Virginia about the proposed sale to

HFS. Avis' employee-owners begin voting on the $763 million proposal this

week. Temuri: Security man eager to cash in his shares.