Hertz goes bankrupt after years of losses
The 102-year-old Hertz car rental company filed for bankruptcy protection last week Friday. The heavily in debt car rental company was already in financial trouble years before the COVID-19 took a final toll on this global car rental company.
One of the biggest auto rental businesses in the world founded in 1918 by Walter L. Jacobs, who started in Chicago with a fleet of a dozen Ford Model Ts. Jacobs sold the company, initially called Rent-A-Car Inc., to John D. Hertz in 1923.
In Malaysia, Hertz car rental is run by the Sime Darby Motors Company and at publishing time we have not heard or received any media statement of the situation of Hertz in Malaysia and their existing client pool. Sime Darby Motors in Malaysia handles Ford, Hyundai, Porsche, BMW, Mini and Volvo car retailing businesses also.
The Estero, Florida-based company’s lenders were unwilling to grant it another extension on its auto lease debt payments past a Friday deadline, triggering the filing in U.S. Bankruptcy Court in Delaware.
Hertz and its subsidiaries will continue to operate, according to a release from the company. Hertz’s principal international operating regions and franchised locations are not included in the filing, the statement said.
By the end of March, Hertz Global Holdings Inc. had racked up more than USD24 billion in debt, according to the bankruptcy filing, with only USD1 billion of available cash.
Starting in mid-March, the company whose car-rental bands also include Dollar and Thrifty car rentals lost all revenue when travel shut down due to the coronavirus. The company made “significant efforts” but couldn’t raise money on the capital markets, so it started missing payments to creditors in April, the filing said. Hertz has also been plagued by management upheaval, naming its fourth CEO in six years on May 18.
“No business is built for zero revenue,” former CEO Kathryn Marinello said on the company’s first-quarter earnings conference call May 12. “There’s only so long that companies’ reserves will carry them.”
In late March, Hertz shed 12,000 workers and put another 4,000 on furlough, cut vehicle acquisitions by 90% and stopped all nonessential spending. The company said the moves would save USD2.5 billion per year.
But the cuts came too late to save Hertz. Meanwhile, Hertz management paid a total of USD16.2 million to 340 executives on May 19 2020, as part of a plan to keep them in place while the company attempts to re-organize, the company announced in a filing with the Securities and Exchange Commission. The executives will be required to return the money should they leave Hertz on their own before March 31, 2021. This news has not gone down well with employees who lost their jobs and vendors with money owing to them.