“The impact of Covid-19 on travel demand has been sudden and dramatic,” says the group, “causing a sharp drop in the company’s revenue and future bookings.” Hertz claims to have adopted “immediate actions” that privilege the health and safety of employees and the company, also eliminating “all non-essential expenses”. “However,” continues the note, “uncertainties remain about the return of revenue and the complete reopening of the market, which made today’s action necessary”.
On April 21, Hertz announced that it was cutting 10,000 jobs in North America, or 26.3% of its global workforce, to save money due to the uncertainties caused by measures to contain the pandemic. Government travel restrictions have reduced air and land traffic, decimating the vehicle rental market. Hertz is burdened with a debt of approximately $ 19 billion, consisting of $ 4.3 billion in corporate bonds and loans and $ 14.4 in vehicle-backed debt at special financing branches.
The colossus that survived the Great Depression
After more than a century of activity, the world-famous American car rental giant has found itself having to ask for the protections of the so-called ‘chapter 11’ at the United States Bankruptcy Court in Wilmington, Delaware. Chapter 11 is a device that provides for the reorganization of business, assets and debts of a company protected from creditors. Usually it is required when a company needs time to restructure its debt. Hertz failed to pay the lease payments for its US vehicle fleet; the group of creditors extended the payment period until 22 May, but no agreement was found.
By declaring bankruptcy, Hertz has expressed its intention to remain active, while restructuring its debts to emerge later as a financially healthier company. The appeal to chapter 11 does not include the main international regions where the company operates: Europe, Australia and New Zealand.
The group – which in North America rents cars under the Hertz, Dollar, Thrifty and Firefly brands – was devastated by the pandemic and travel restrictions put in place by world governments to curb the spread of the coronavirus. Air traffic crashes weighed particularly heavily: almost two thirds of Hertz’s revenues come from vehicle rentals at airports.
The company had already acted to stem the losses: in March it had cut 12 thousand jobs, put 4 thousand employees on unpaid leave, cut the acquisitions of new vehicles by 90% and stopped all non-essential expenses, for a saving of $ 2.5 billion a year. Hertz is burdened with a debt of approximately $ 19 billion, consisting of $ 4.3 billion in corporate bonds and loans and $ 14.4 in vehicle-backed debt at special financing branches.
But the cuts came too late to save the company, the number 2 car rental company. Founded in 1918 by Walter L. Jacobs, Hertz has been renting cars since then, when it brought a dozen Ts model Ford to market; Jacobs then sold the company, initially called Rent-A-Car Inc., to Johns D. Hertz in 1923. Since then, Hertz has survived the Great Depression, stopping car production in the US during the Second World War and numerous oil shocks.