Two months ago, we reported that Hertz was giving out its car fleet freely to healthcare workers in New York which was a noble cause for the transportation company whose operation is largely dependent on people moving from one place to the other has now filed for bankruptcy citing the coronavirus pandemic as having a really negative impact on its business.
Hertz is a car rental company in the US and has announced on Friday that it has filed for the Chapter 11 protection in Delaware. The company also operates Dollar, Thrifty and Firefly rental-car brands with as much as 12,400 offices throughout the world is now aiming to restructure in order to 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. The social distancing order has left many airlines stranded as well while other transportation businesses including hotels and restaurant industries had to shut close.
The impact of the pandemic on Hertz’s business may have been sudden but the car rental giant has had it’s finances on the decline for some many years now. Back in 2019, the company announced a record annual revenue of US$9.8 billion while booking a US$58 million loss which is an improvement over the US$225 million loss the company had reported a year earlier back in 2018.
Although Hertz has filed for bankruptcy, the company still has over US$1 billion in cash on hand which itwill use to support continuing operations though CNN reported the company is running against its US$18.8 billion in debt since March 31st which is an increase of US$1.7 billion since the end of 2019.
The car rental company has also been telegraphing its financial distress for some times as well as of April, it reported that it had missed a lease payment and a spokesperson from the company told Roadshow that the company 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.
The company’s Chief executive, Kathryn Marinello was part of those that parted the company in May 16th while the board announced Paul Stone who was formerly the company’s executive vice president and chief retail operations officer as the replacement of the vacant CEO job by May 18th.
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.
With this, Hertz had halted its ordering for new cars from car manufacturers as well as recently revealing that it had begun selling off some of its specially liveried Chevrolet Corvette Z06 and Camaro high-performance rentals , models and other luxury cars it has in it’s fleet.
The Novel-coronavirus aside, traditional taxis as well as car rental companies like Hertz have been facing the bigger threat which was ride sharing companies such as Uber and Lyft and even startups such as Turo and so had prompted Hertz to attempt intiatives such as the 24/7 car-sharing service as well as starting a monthly subscription service in June in which it attempts to combat the rise in automaker monthly subscription pilot programs. It also increased it’s annual telecommunication prior to the pandemic which has been curbing business-related travel, as well as 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 which is a big number all which showed the economic impact of the Coronavirus on businesses.
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