The corona crisis and a pressing debt burden have forced u.S. Car rental company hertz into insolvency. The decline in travel has led to a "sudden and dramatic" drop in sales and bookings, the company explained over the weekend. During the reorganization in the crisis, the operation will be continued. The car rental company’s international business in europe, australia or new zealand is not affected by the insolvency petition – nor are franchise partners.
Hertz is one of the world’s largest car rental companies and rents vehicles under the dollar and thrifty brands among others. The company has been suffering for years from a mountain of debt that recently reached around 19 billion dollars.
Hertz filed for bankruptcy protection under chapter 11 of the U.S. Bankruptcy code for a total of 30 companies. The idea behind this procedure is to restructure a company while donors waive at least part of their claims.
Hertz said it had been unable to agree in advance with its major creditors on a long-term reduction in payments. Hopes for support from the U.S. Government for car rental companies had also been dashed. These developments eventually forced hertz to file for bankruptcy. At the same time, the "wall street journal" reported that the company and the creditors still wanted to negotiate a deal to avoid the dissolution of the fleet of hundreds of thousands of rental cars.
Hertz emphasized that the company had more than one billion dollars (920 million euros) in cash on hand to maintain operations. In march, hertz had already initiated initial measures in response to the corona crisis. Around 20.000 employees worldwide were furloughed or laid off – about half of all employees. The number of vehicles and locations will be reduced. Nevertheless, the company intends to continue to offer customers the same quality and to pay suppliers and employees, hertz emphasized. Loyalty programs should also be continued.
Hertz, currently headquartered in estero, florida, is more than 100 years old. 22-year-old car salesman walter jacobs founded the company in 1918 in chicago under the name rent-a-car, inc with twelve ford model T vehicles. Five years later, the company was taken over by cab entrepreneur john hertz and given its current name – which was initially hertz drive-ur-self system. Hertz was, among other things, a pioneer of car rental at the airport since the 1930s.
Hertz has been carrying the burden of debt since a temporary takeover by financial investors some 15 years ago. The 2012 acquisition of dollar and thrifty also cost more than two billion dollars. Since then, there have been several changes and hertz has recently been stuck in the red. Just a few days ago, company CEO kathryn marinello, who had been touted as a reorganizer, threw in the towel. One major shareholder is carl icahn, an investor known for his tough stance on management, who owns nearly 40 percent of the shares.
Hertz competitors such as avis also resorted to harsh cuts in the wake of the corona crisis and stocked up their cash reserves. Meanwhile, germany’s largest car rental company, sixt, was recently in the red and has "planned for a devastating second quarter" – but does not plan to cut jobs or close stations. He expects business to pick up again in the second half of the year, said chief executive erich sixt.
The crisis has taken a heavy toll on the u.S. Economy. Only about a week ago, the 118-year-old department store chain J.C. Penney filed for bankruptcy. Following the bankruptcy filings of the store chains neiman marcus and J. Crew was J.C. Penney the biggest corona victim in US retail so far. Around 85 employees work for the company.000 people.
Since the coronavirus pandemic in the u.S. Came to a head in march, more than 38 million people have already lost their jobs at least temporarily – more than ever before in such a short period of time. The USA is in a serious economic crisis because of the pandemic. President donald trump is urging u.S. States to loosen protective measures as quickly as possible to get the economy moving again before the presidential election in november.