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Avis blames IT for multimillion-dollar loss

The car rental company takes a major hit because of problems with IT, including high costs associated with an ERP project.

Car rental company Avis Europe has taken a multimillion-dollar hit on its bottom line because of problems with its IT.

According to the company's annual statement, it will take an exceptional charge of between $50.5 million to $56.8 million (40 million to 45 million euros) as a result of shutting down its accident management business, Centrus, and because of problems with IT restructuring.

One of the main culprits was a new enterprise resource planning (ERP) system. Development of the system has been terminated by Avis on the grounds it had "encountered substantial delays and consequently higher costs due to a number of fundamental problems with its design and implementation," the company said in a report.

Avis' report also said the company had canceled the system "as fast as practicable to avoid further cost."

The company had previously decided, as outlined in its 2003 annual report, to switch its ERP provider to PeopleSoft.

PeopleSoft confirmed in a statement that Avis bought software licenses in the first quarter of 2003 but said Atos Origin KPMG (now Atos Consulting) was in charge of the implementation.

The effect of canceling the ERP system will be minimal, according to Avis, as it has not been rolled out to any of its operations. IT restructuring connected with the ERP system will also be scaled back.

Avis, which does business in several European countries, also announced that its ongoing project to create a shared service center for centralizing back-office work in Budapest, Hungary, would cost the company a less-than-predicted $17.7 million (14 million euros) in future accounting periods.

Murray Hennessy, the company's CEO, said in a statement: "We will continue to implement the successful aspects of the project, but we will halt immediately the parts of the project that are not going well or will no longer deliver a satisfactory return on investment.

"We are very disappointed that major IT parts of the project have incurred significant exceptional costs and will not deliver the anticipated benefits. We felt that it was right to take decisive action on the results of the review."

Jo Best of Silicon.com reported from London.