4530 Wisconsin Avenue, NW
Washington, D.C. 20016
Telephone: (202) 895-1200
Fax: (202) 895-1201
Incorporated: 1920 as Grand Central Cadillac Renting Corp.
Operating Revenues: $86.37 million (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: CARY
SICs: 4119 Local Passenger Transportation, Not Elsewhere Classified
We take our position as the world's leading provider of chauffeured transportation seriously. Since 1920, our brand has been synonymous with reliability, convenience, and superior quality. Our objective is to provide personalized, professional service, immaculate luxury vehicles, and courteous, well-trained professional chauffeurs who are fluent in English and thoroughly familiar with the destinations they serve. We're careful to maintain these high service standards consistently at all of our locations worldwide. Our quality assurance programs are unique in the industry, with strict standards of performance governing every aspect of our operations, from reservations and billing to the driving and communications skills of our chauffeurs to the cleanliness and maintenance of our vehicles.
The world's largest chauffeured vehicle service company, Carey International, Inc. operates through a worldwide network of company-owned and operated companies, licensees, and affiliates. As of August 1998, Carey served 420 cities in 65 countries on six continents, providing 7,500 chauffeured sedans, limousines, vans, and minibuses for such transportation needs as airport pickups and dropoffs, business meetings and conventions, and multi-city travel to special events. About 80 percent of Carey's business is from corporate customers, with the rest from government and leisure travelers. The company estimates it provides more than 22,000 trips a day for its clients.
From Haircuts to Touring Cars: 1921-68
In 1921, New York businessman J.P. Carey acquired a limousine service with six Packard touring cars to serve wealthy travelers arriving at Grand Central Station. Carey, a barber, had emigrated to New York in the early 1900s. He opened a barbershop at Grand Central Station, and eventually had 50 barbers working for him. Over the years he expanded his Grand Central Station operations to include a laundry, shoe store, and haberdashery, before opening the limo service. All three of the Carey sons, John, Edwin, and J. Paul worked in the family businesses, and J.P. eventually created a transportation company for each of them.
J. Paul was put in charge of the Grand Central Cadillac Renting Corp., which later became known as the Carey Cadillac Touring Company. In 1935 Carey opened one of the first Hertz franchises, putting son Edwin in charge of the self-drive operation. During the depression of the 1930s, Carey Cadillac added regularly scheduled service to the area's only airport, in Newark, New Jersey, first with touring cars and then with buses. When LaGuardia Airport opened, Carey served it as well. In 1939 the airport service was spun off into a separate company, operating under the name Carey Transportation and headed by son John.
From its earliest days, Carey prided itself on its customer service and innovation. A favorite company story related how a Carey mechanic created the first air-conditioned chauffeured vehicle to ease the King of Sweden's asthma condition. The mechanic put a block of ice in the trunk of the touring car and hooked up a fan to blow over it into the back seat.
By the late 1960s, Carey Cadillac was the only one of the transportation companies still in the family; Edwin Carey had joined Hertz when it began buying its franchises in the 1950s, eventually becoming Hertz president, and Greyhound Corporation had bought Carey Transportation, the airport bus company. The third generation of Careys wanted to expand the limousine service beyond New York, and three Carey cousins formed Carey Chauffeur Driven Systems, licensing the Carey name to local operators. Carey Cadillac became the new company's first licensee. Others soon followed as the company began augmenting its fleet of limousines with sedans for the corporate market.
National Executive Service Founded in the 1960s
As Carey was moving outside of New York, several former United Airlines employees were establishing a limousine service in San Francisco. Dan Dailey and his partners had worked as customer service and sales employees at United, serving executive and top corporate accounts. They found that the existing limo services in the Bay Area catered to top corporate executives such as board chairmen and company presidents, but no one was serving the middle and upper levels of corporate management.
After conducting a market research study, they created National Executive Service (NES) with eight cars. Within 15 months, NES had 25 cars and customers in other cities requesting similar radio-equipped, chauffeur-driven sedans. By developing a plan to serve management clients with a sedan and limo service built on what was then a sophisticated communication network, NES attracted investment money, enabling it to acquire established operations in Seattle, Detroit, Boston, and Chicago.
As Carey Cadillac and National Executive Services explored growth opportunities, they found each other. At the end of 1969, the two companies merged on a 50-50 basis, becoming Carey Corporation, a 13-city operation that did business as Carey Limousine. Dan Dailey was named president of the merged company and Vincent Wolfington, a major NES investor, became chairman of the board. The Carey family continued to own and run the New York operation as a licensee.
The new company operated on a franchise system, charging initial and monthly licensing fees for the use of the Carey name, for reservation and billing services, and for marketing activities. Over the years, the company added affiliates to its network as well, developing relationships and joint ventures with companies in smaller cities where there was no Carey presence. The company also began developing partnerships with various corporate entities. One of its first airline programs was created during the 1970s with American Airlines. VIP flyers who belonged to the American Admirals Club had access to a direct telephone line to the local Carey office from each Admirals Club at an airport. By the late 1970s, the company's network served more than 100 cities in the United States, and management decided to expand overseas.
Going International: 1979-86
To reflect this new global strategy, in 1979 Dailey and Wolfington incorporated the company as Carey International, Inc. The company also acquired certain rights to the "Carey" name and moved into Europe, establishing licensees and affiliates. Within four years Carey had more than tripled the size of its network, and by 1984 travelers could book a Carey vehicle in over 390 cities in 60 countries. To make that booking as easy as possible, Carey began developing its one-stop reservation center, which included a computerized reservation system and access to the rates in each of the cities where the company provided service.
Nearly 80 percent of Carey's business came from chauffeuring traveling executives and mid-level managers, but itineraries included more than just trips to and from airports or business meetings. A 1984 column in the Arkansas Democrat-Gazette announced that readers could call Carey's 800 number to arrange a three-day trip through Normandy, the Champagne country, or the Loire Valley for around $1,600, with a chauffeur who doubled as a licensed, English-speaking guide.
Carey-Owned and Operated Companies: 1987-89
In 1987 Carey expanded from being solely a holding company and reservation system through the purchase of the company's licensees in New York, Washington, D.C., and Los Angeles. The new subsidiaries essentially gave Carey control of chauffeur-driven services in three of the largest U.S. limousine markets. The company raised the money for these acquisitions through a private financing agreement.
The subsidiaries continued to operate as separate companies that were managed locally with access to Carey's corporate infrastructure for marketing and sales, quality service, customer satisfaction, technology, accounting, and budgeting. Unlike some chauffeured transportation companies, Carey stressed entrepreneurship among its chauffeurs, converting them from salaried employees to independent operators. Carey owned the brand, but the drivers owned and maintained their vehicles. This strategy met two objectives according to Carey: independent operators were more productive, efficient, and service-oriented, and the company saved money on labor and capital costs, allowing it to focus resources on its infrastructure services.
Under the typical 10-year agreement, an independent operator paid Carey a fee ranging from $30,000 to $45,000 (depending on the local market), which the company financed at an annual interest of nine to 12 percent. The individual also agreed to purchase their vehicle and pay all of the vehicle's maintenance and operating expenses, including gasoline. In return, the company agreed to bill and collect all revenues and remit 60-67 percent of those revenues to the operator. If the driver failed to meet Carey's standards of service, the company could terminate the agreement.
The 1990s saw Carey seriously and successfully begin implementing an acquisition strategy as it moved to consolidate a highly fragmented industry. From 1991 through 1997, the company bought 19 chauffeured vehicle companies, including four of its own licensees.
As the company expanded, an important factor in its operations was its quality assurance system. Based on a 250-point checklist, the system evaluated everything from how quickly a telephone was answered to the use of the proper logo on business cards. Every chauffeur had to satisfy strict standards as defined in a list of 40 items that ranged from such crucial factors as on-time arrival and knowledge of destinations to more minor criteria such as chauffeur attire, courtesy, and the age and condition of a car. This verification system made it possible for Carey to state that all of the company's sedans offered cellular phones and all of its limousines came equipped with televisions and VCRs. All employees received initial and follow-up training, coordinated by a central training department, and the company held two meetings a year internationally and two domestically for management and licensees.
Beginning in 1993, the company invested heavily in developing its proprietary central reservations and billing system, Carey International Reservation System (CIRS). Linked to major reservations systems used by the travel and tourism industry, CIRS allowed customers to make their chauffeured transportation arrangements in multiple cities with one phone call. It also enabled those making travel arrangements for others (over 300,000 travel agents, corporate travel departments, and government offices) to organize Carey transportation in conjunction with other travel plans.
By the end of 1997, CIRS provided more than 27,000 screens of information, including services available in each city, customer profiles, airport greeting capabilities, and over 200,000 rates in both U.S. and foreign currencies. The system also made it possible for Carey to provide its clients centralized billing in many currencies for transportation provided in several different countries, as well as for multi-city use of Carey services.
The company bought its first European operations in 1996, acquiring Camelot Barthropp Ltd. and Europcar Chauffeur Drive U.K. International, both based in London and with offices throughout the United Kingdom. Camelot, a former Carey affiliate, had a fleet of 70 cars; Europcar Chauffeur had about 25. Carey opened its second worldwide reservation center, linked to its U.S. center, at the Camelot headquarters. In the first three months of the year, Carey moved aggressively into Eastern Europe, setting up affiliates in Bulgaria, Croatia, Romania, and Belorussia; into the Middle East with new affiliates in Qatar and the United Arab Emirates; and into Kenya and South Africa.
By the end of the year, the first of Carey's 10-year agreements with its independent operators began expiring. Carey introduced a new 15-year agreement, with fees of $45,000 to $75,000, financed by the company at an annual interest rate of 15.75 percent. In the company's 1997 annual report Carey claimed that the typical independent operator earned, after expenses, two to four times the average annual wage of an employee driver.
Carey went public in May 1997, selling 2.9 million shares and raising over $30 million. The company used the money to pay off debt and to finance a portion of the $17.1 million paid by the company for the June acquisition of Manhattan International Limousine Network Ltd. and an affiliate. Long Island-based Manhattan Limousine, with a worldwide network of more than 300 affiliates, had revenues of approximately $18.4 million in 1996. This acquisition gave Carey greater power in the largest chauffeured vehicle service market in the world, the New York metropolitan area.
Before 1997 was over, Carey bought three more companies: Commonwealth Limousine Services, Ltd., based in Los Angeles, with 1996 revenues of $1.7 million; Indy Connection, an 11-year-old Indianapolis firm with annual revenues of $6.8 million; and TWW Plc, established in 1961 and serving the London metropolitan area, with annual revenues of about $2 million. The same year, Carey added three new domestic licensees and signed an agreement with Virgin Atlantic Airways to serve its Upper Class passengers, a contractual arrangement similar to ones the company had with JAL, British Airways, Air France, Aer Lingus, and other carriers. Carey also maintained service partnerships with major hotel chains and credit card companies.
Further Acquisitions in the Late 1990s
In March 1998, Carey moved into the Boston area as an operator, acquiring Custom Transportation Services, Inc., with revenues of approximately $5 million. A month later, Carey bought certain assets of A and A Limousine Renting, Inc., which had been its Boston licensee since 1970. A and A had annual revenues of approximately $3.7 million. Also in April, Carey purchased certain assets of American VIP Limousine, Inc., a Miami-based company with annual revenues of about $1.2 million. Carey paid some $5.5 million in cash and notes and over 900,000 shares of stock for these six companies.
Expanding through acquisitions was one of Carey's key strategic objectives. With over 9,600 companies in the highly fragmented chauffeured vehicle industry, consolidation was an obvious means to grow. Carey, with about two percent of the market, anticipated strengthening its presence in its existing markets and moving into new cities in North America and Europe by buying current licensees as well as other companies. Carey also planned to expand operations in Africa, Asia, and South America by developing alliances with companies in major cities on those continents. In July 1998, Carey announced it was in acquisition talks with 63 companies representing $420 million in annual revenue, and in August, purchased American Limousine Corp., the largest limo service in Chicago.
In addition to acquisitions, the company's strategy included increasing its share of the international market, which by the end of fiscal 1997 was generating $9.9 million for Carey, expanding its licensee network, and converting salaried drivers to independent operators. Ultimately, according to Steven Ginsberg in a 1997 Washington Post article, Carey hoped "to control the market in the largest U.S. and international cities, to compete in second-tier cities such as Baltimore and to have a presence in smaller cities."
Most of Carey's revenues came from the companies it owned and operated in Boston, Chicago, Indianapolis, London, Los Angeles, New York, Philadelphia, San Francisco, South Florida, and Washington, D.C. In fiscal 1997, these companies accounted for over 81 percent of Carey's net revenues, up from 76 percent the year before. While some of these companies, such as American Limousine and Indy Connection, were competitors when Carey bought them, others, including companies in Boston, London, and Washington, D.C., grew as Carey licensees before being purchased. Carey indicated it would continue to help its licensees grow, through marketing and sales efforts, and then acquire those that fit its strategic plans. Many licensees were previously affiliates, meeting the company's quality standards and paying Carey a commission for all referred business, but not licensed to use the Carey name and not paying license fees.
The only public company in the industry, Carey International grew dramatically from the 13-city operation created by the merger in 1969. During those three decades the global economy and the resulting increase in business travel changed a chauffeur-driven limousine from an executive perk to a business necessity. Carey not only recognized but encouraged that shift, developing its global reservation system and offering one-stop shopping for chauffeur services for any need; Carey services ranged from airport pickup and transportation to meetings, to getting people to and from special events such as Presidential Inaugurations, the Super Bowl, or international financial conferences, to weekend sightseeing or multi-city "road shows." With more than 75,000 companies using its services, by the late 1990s Carey was the leader in the industry.
Principal Subsidiaries: Carey Services, Inc.; Herzog Cadillac Rental Service NY, Inc.; Carey Limousine SF, Inc.; Carey UK Limited; Carey Limousine L.A., Ltd.; Carey Limousine Indiana, Inc.; Carey Limousine DC, Ltd; Carey Limousine Florida, Inc.; International Limousine Network Ltd.; Manhattan International Limousine Network Ltd.; Squire Limousine, Inc.; American Limousine Corp.
"BancAmerica Robertson Stephens Conference," CNBC/Dow Jones--Business Video, Interactive Desktop Video, LLC, June 16, 1998.
"Carey Says It Is in Talks to Acquire 63 Companies," New York Times, June 26, 1998, p. D3.
"Driven to Success," Travel Agent, August 19, 1996, p. 48.
Foster, Sam, "Carey International, Inc.," Venture Capital Journal, July 1, 1997.
"The French Chateau County by Limo? What Better Combination?" Arkansas Democrat-Gazette, December 9, 1984.
Ginsberg, Steven, "Carey International's Limousines Traveling the Globe," Washington Post, July 7, 1997, p. F12.
Lazarus, George, "Chicago Limo Deal May Trigger Others," Chicago Tribune, August 21, 1998, p. 3.
McCormick, Susan, "Carey Financing Lets Limo Firms Expand System," Travel Weekly, September 21, 1987, p. B17.
Woods, Lynn, "Carey Purchases Two U.K. Limousine Companies," Business Travel News, April 8, 1996, p. 9.
Source: International Directory of Company Histories, Vol. 26. St. James Press, 1999.