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Flexcar Receives Infusion Of Cash

Flexcar has Hondas available for rent at Metro stations including King Street, pictured here. The firm is adding 150 cars to its fleet.
Flexcar has Hondas available for rent at Metro stations including King Street, pictured here. The firm is adding 150 cars to its fleet. (By Jahi Chikwendiu -- The Washington Post)
By Annys Shin
Washington Post Staff Writer
Tuesday, June 20, 2006

Revolution Living, the lifestyle company started by AOL co-founder Steve Case, is pumping millions more dollars into car-sharing service Flexcar and has recruited a former DaimlerChrysler AG executive as part of an effort to expand the business aggressively.

With the price of a gallon of gas still hovering around $3, Case and Flexcar's other backers, including former Chrysler chairman Lee Iacocca, believe more Americans are ready to embrace car sharing and have upped their stake in Flexcar (also known as Mobility Inc.) from 55 percent to 85 percent, the company plans to announce today.

"This is the time to be slamming down the pedal," Case said in an interview.

Mark D. Norman, a former chairman, president and chief executive of DaimlerChrysler's Canadian operations, will spearhead the expansion as chief executive starting July 1. He will be based in the District, where Flexcar's headquarters will also be relocated.

Lance Ayrault, Flexcar's outgoing chief executive, will become vice chairman of the company's board of directors and continue to "evangelize" car sharing, especially among government officials, whose support is required to secure designated parking spaces and other considerations.

Flexcar also has hired J.J. Millard, formerly with chauffeur-service company Carey International Inc., as chief financial officer, and Griff Long, a 15-year veteran of the Hertz Corp., as head of operations.

Flexcar was launched as a for-profit business in Seattle in 2000 by Neil Peterson, former head of that city's municipal transportation agency, whose early ambition for car sharing was to turn it into a movement. The company, which has yet to turn a profit, has grown from about 1,000 members at the end of 2000 to more than 30,000 today.

Revolution bought out minority investors who were not comfortable with its "aggressive" expansion plans for the business, Case said.

"We are willing to put the capital in and not willing to rein in our expectations for this business," he said.

The latest capital infusion will allow Flexcar to add 150 cars to its fleet over the next 50 days and to revamp its marketing strategy.

Flexcar operates in seven major metropolitan areas, including Washington. After paying an annual fee of $35 to $50, Flexcar members can reserve a car at an hourly rate of $7.30 to $10 that covers the costs of fuel and insurance.

Flexcar's chief competitor is Cambridge, Mass.-based Zipcar Inc., which operates 1,500 vehicles in 11 states and Canadian provinces, though so far they overlap in only two areas, Washington and San Francisco. Zipcar is also in expansion mode. Last year, it raised $10 million in capital with help from Benchmark Capital Management Co., a Menlo Park, Calif.-based venture firm that has backed winners such as eBay. Zipcar also replaced its chief executive three years ago in an attempt to jump-start growth.

Since Revolution first invested in Flexcar, in July, the company has added newer cars to its fleets, increased the number of locations where cars are available, upgraded technology so drivers can extend their reservation in the car with the push of a button and installed amenities such as a place to plug in an iPod.

Revolution officials have also cut deals that they believe might have been impossible without Case's cachet. Earlier this year, Revolution Living executive Jonathan Foster figured out that the same company owned several Seattle office buildings where Flexcar vehicles were parked. Foster, a veteran of several Wall Street investment banking firms, then brokered a deal to put Flexcars in all of the real estate company's buildings nationwide.

When asked whether Flexcar would have been able to get an appointment with the real estate company on its own, Foster said no.

Spokesman Brad Burns said in an e-mail that he was unconcerned about the company's lack of a profit so far.

"The focus now is growth over profitability," he said.

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