How Hertz’s CEO Blew It, And Why Friday Is Make-Or-Break

Rental car giant Hertz has ditched its CEO as it missed a large debt payment and maneuvers to avoid bankruptcy.

At the end of April Hertz was looking at a large payment on $17 billion in debt. Their loans are backed by their fleet of vehicles, but the plummeting value of used cars meant Hertz had to make up the difference in cash. Lenders didn’t want to force them into bankruptcy, though, believing debt would have a better shot getting paid if the rental company continued as a going concern.

Hertz has a deadline of May 22 to develop a financing plan – but the lack of financing is an own goal, since their CEO walked away from up to half a billion in cash back in March.

Weeks ago I passed along a piece on why Hertz has struggled so badly compared to others like Avis.

On March 26 — amid shelter-in-place orders from New Jersey to Illinois — Hertz filed a baffling public document that appeared to suggest the company’s fleet financing wouldn’t need any more attention through 2020. Hertz “does not anticipate any vehicle debt financing requirements for its global car rental business for the remainder of the year,” it said.

But that outlook changed the first two weeks of April when the value of the average used car plummeted by 18 percent over the previous year, according to the Manheim car index. The drop was devastating because, as The Post has previously reported, it’s 500,000 cars act as collateral for $13 billion in financing — and when the collateral drops in value, the company has to make up the difference in cash.

“Hertz only woke up to all this weeks ago,” one lending source said.

There was a time when Hertz was the rental company for business travelers. In this extended montage from Up in the Air when George Clooney is grounded in Omaha he wants to buy a Chrysler Sebring from Hertz.

Now I avoid them. Their problems aren’t all financial or COVID-related. On the bright side though Hertz just dumped a bunch of cheap Corvette Z6s onto the market.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. This s*cks. I have Gold with Hertz from my Amex Platinum. I almost always use Hertz, because Gold canopy is so convenient. Hopefully, the bankruptcy will not impact operations too much.

  2. I doubt creditors would allow Hertz to liquidate (Chapter 11 much more likely), but if it did, it would have major ripple effects in the economy. In the short term, tens of thousands of employees would be laid off. Half a million vehicles would be dumped on the late-model used car market, depressing prices there with demand already in a slump. That would cause even less demand on the new car market, potentially meaning production line slowdowns and additional layoffs of workers of auto companies, parts suppliers, logistics, etc.

    Long-term, that would even out, but it would mean much higher car rental prices unless one of the smaller players like Advantage or Sixt ramps up operations considerably.

    With that said, I wonder if we could see a pre-packaged bankruptcy with a buyer through that, like Sixt who has been pushing more and more into the US market? Chapter 11 would allow some debt shedding and upon Hertz exiting into a merger, it would immediately push Sixt into a top position in the US.

  3. Emblematic of the travel economy today and well into the future, I agree with Ben that a packaged filing might be on order however given their CEO issues that may prove to be challenging. Certainly they and the other car rental companies will be shrinking back comforting the declining demand, there goes your “ripple” effect, staff, car purchases, loss of income at airports from parking etc.
    Not sure about Sixt was never impressed with their operation maybe some consolidation possibly. As for higher prices there’s another discussion where only time will tell, remember pricing rests solely on the amount of demand less demand the pricing is pushed down.

    My own travel in the past five years has seen a dramatic reduction in car rentals in the past it was nothing to fly into an airport rent a car have meetings drive back to airport. With the advent of Uber etc that disappeared.

  4. Uber…share. car with thousands of people who may have covid…no thanks…and speaking of going bankrupt.

  5. I have a dirt cheap corporate code that has been a lifesaver at times – but Hertz is such a terrible company, I will figure out a way to make National work on the increasingly few trips where I need a rental.

    Also, don’t be fooled thinking you need a $550 AmEx to get “Hertz Gold” – you literally sign up for free on the web site.

  6. Multiple unconfirmed reports on Reddit about Hertz lots getting emptied out. Rumors that the car were taken away

  7. I been a loyal Hertz customer, I’m in the market for a great buy on a vehicle! I contacted a local Hertz lot in Nashville recently and got a really rude unprofessional sales person the car was listed at over 20K! Hertz your employees is running people away……1325 Vultee Blvd 37217

  8. Most of Hertz employees have already been let go…regarding attitudes of employees…we worked for Hertz.. should be self explanatory…I apologize on behalf of all employees for any rudeness experienced…those still employed are trying to keep their jobs I’m sure…everyone at Hertz is just a number…and the CEO was a female…now a male…thank you..

  9. So what is the advice for what to do with Hertz points that are currently in the account? Transfer to an airline instead before bankruptcy?

  10. Hatchet company with horrible upper management

    I worked at the as an f&i manager on the car sales side of hertz business

    I quickly realized that the foundation was built on sand and left shortly after starting

  11. A Hertz BK will have other ramifications – with depressed used car market – further than it is presently, a lot of people with car loans with suddenly be upside down (owe more than vehicles resell value).

    This will effect new car sales as well as Insurance cost (vehicles totalled rather than repaired – repair cost is greater than market value). It will trickle down to multiple ancillary industries.

    So unless we see a Cash for clunkers 2.0; which is unlikely in current political climate – as well copper, steel and Al prices are not what they were during great recession – when China was gobbling up so much of the scrap metals.

    Unemployment numbers and four million mortgages in forebearance and noted as since in comments section on credit reports – will further impact auto loans.

  12. The current CEO is still a women! Hertz let go of a lot of employees regarding attitude and customer service some time ago! We were just just given J.D Power award for customer service in Jan! I’m sure all Hertz aren’t the same but the one I worked at loved our jobs and I will go back after this covid mess if able! Kathy Marinelli (CEO) gave up her salary and kept working as soon as covid started so the employees could continue to work! Yes unfortunately it got to the point that we were furloughed but hertz is a great company and no you do not have to have a certain amount or credit to become Gold, 5star, or presidents circle however EVERYONE has to have a credit card to HOLD their rental on and can change form or payment at return! Again if you have had bad experiences with Hertz I’m not sure where it was but not at mine! Also remember, fill up your tank to avoid being charged for gas, don’t smoke in the car and you won’t be charged a smoking fee.. lastly for a hassle free rental take the ins unless you’re company covers you completely bc you may not want to spend $130.00 on ins at the moment but it’s a lot cheaper then paying for a 30,000 car bc you wanted to be cheap!

  13. I worked for Hertz for 17 years. I moved on ,in 8 years I’m eligible to receive my lump sum pension. I just received literature from Hertz stating the pension plan is 101% funded. If Hertz declares bankruptcy what happens to their pension fund? Are the two separate entities as stated on one website? Or am I sol in 8 years?

  14. They’re such a terrible company I wonder why they go bankrupt
    They did an honor the healthcare promise for the month of April so all those people will never rent there again
    And after you have a come after confirming a booking and traveling they tell you don’t have the car what you booked And instead of upgrading you they downgrade you

  15. Not surprised at all. Former corporate employee here, let go in the massive layoffs. Kathy (former CEO) was making fun of the coronavirus and downplaying its impact in a town hall on March 4th. They were totally unprepared for the significant drop in demand and still now price themselves highest in the market despite most locations sitting at single digit utilization. I feel luckier than the employees that got to stay.

  16. I worked for Hertz for over 20 years and was let go yesterday and was told to reapply after next week and start all over at the bottom with pay and vacation time. I’m utterly heartbroken that a company I gave my heart to would do this

  17. I’m a laid off Hertz employee. We had a huddle in our department by a manager, informing us about Covid-19. After be spoke we had questions. I asked if they anticipated a layoff, he dismissed my question, and ended the meeting. Now look at us.

  18. If Hertz goes under, and even if they do not, the “trade in” value of your vehicle is/has dropped dramatically.
    Like fuel, the market is flooded with vehicles and they are backing up the car companies, so layoffs in the auto industry should be imminent.
    Change and downsizing are here.

  19. Yeah it sucks I’m a former hertz employee that lost his job due to the covid 19

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