Hertz declares bankruptcy, blames COVID-19
The rental-car giant will seek to reorganize under Chapter 11 protection.
Hertz has filed for bankruptcy. Citing the coronavirus pandemic's swift and cataclysmic impact on its business, the rental-car giant announced Friday that it had filed for Chapter 11 protection in Delaware. The company, which also operates Dollar, Thrifty and Firefly rental-car brands with some 12,400 offices worldwide, will aim to restructure and stay in business. The filing is one of the highest-profile business bankruptcies in the wake of the virus crisis so far.
"The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company's revenue and future bookings," the company said in a statement. Indeed, with shelter-in-place orders around the globe, rental car companies have been hit hard by greatly reduced travel bookings, much like the airline, hotel and restaurant industries.
The pandemic's impact on its business may have been sudden, but Hertz's financial decline has been an ongoing concern for many years. In 2019, despite reporting a record annual revenue of $9.8 billion, it booked a $58 million loss, itself a substantial improvement on the $225 million loss the company reported in 2018.
Hertz has begun selling off its specially liveried Chevy Corvette Z06 rental cars.
As part of its bankruptcy-filing announcement, the company confirmed it has over $1 billion in cash on hand to support continuing operations, but according to CNN, the company is fighting against $18.8 billion in debt as of March 31, an increase of $1.7 billion since the end of 2019.
Hertz has been telegraphing its financial distress for some time. In late April, it was reported that the company had missed a lease payment, and a company spokesperson told Roadshow that Hertz was "...reducing expenses, deferring capital expenditures, and adjusting fleet levels and staffing," further noting that the company was having ongoing conversations with lenders and the US Treasury.
Hertz's chief executive, Kathryn Marinello, left the company on May 16, and the board named her replacement, Paul Stone, previously the company's executive vice president and chief retail operations officer, on May 18.
In its statement, Hertz revealed it has "implemented furloughs and layoffs of 20,000 employees" so far, representing about half of its global workforce. Of that total, it's estimated that in North America, the company has already shed 12,000 employees this year and placed a further 4,000 workers on furlough.
Wracked by COVID-19, Hertz had already implemented new sanitation protocols to improve safety.
Hertz has all but halted the ordering of new cars from automakers, and it was recently revealed that the company had begun selling off some of its specially liveried Chevrolet Corvette Z06 and Camaro high-performance rentals, models among the crown jewels of its fleet.
In recent years, along with taxi companies and the rest of the traditional car-rental industry, Hertz had been battered by the rise of ride-sharing firms like Uber and Lyft, along with car-sharing startups like Turo. The company has itself attempted to make inroads into these emerging businesses, launching initiatives like its 24/7 car-sharing service as well as starting a monthly subscription service in June to combat a rise in automaker monthly subscription pilot programs. Additionally, yearly increases in telecommuting prior to the pandemic has also been curbing business-related travel, long a pillar of rental-car bookings.
While not unexpected, Hertz's bankruptcy and the heightened distress of the rental industry as a whole during the COVID-19 crisis is already taking a toll on the auto industry at large. Rental companies are estimated to be responsible for around 10% of car companies' yearly new-vehicle purchases.