The coronavirus puts car rental in crisis: the Hertz giant starts bankruptcy – La Stampa


FROM THE MAIL TO NEW YORK. The gods of the American economy begin to fall, dragged to the ground by the economic crisis caused by the coronavirus. This is demonstrated by the surrender of Hertz, which declared bankruptcy on Friday evening. The use of Chapter 11, that is, protection from creditors, suggests that the company that has been renting cars all over the world for over a century still aims to restructure and survive. However, the signal is chilling, and not only for its sector.

The company was founded in 1918 in Chicago by Walter Jacobs, a former Ford dealer. It was then called Rent-a-Car and owned a fleet of a dozen Model T. The name by which it had become famous had received it from John Hertz, who bought it in 1923. It now has over 12,000 locations worldwide , about 667,000 cars, and 40,000 employees, but halved during the past week to face the crisis. Activist investor Carl Icahn owns 39% of the shares, and therefore essentially has a controlling position.

Hertz’s problems didn’t start with the pandemic. Analysts have already traced them back to the crisis of 2008, and then to the purchase in 2012 of Dollar Thrifty for 2.3 billion, a price deemed too high. In 2014 she had been forced to admit that she had rigged the accounts, paying a fine of 16 million, and a few months later the CEO Mark Frissora had resigned.

In recent years the company had accumulated 17 billion in debt. Analysts believed that he was recovering from these difficulties, but when the coronavirus paralyzed travel and transportation, he was left with no way out, for two reasons: first, the obvious drop in revenues; second, the profound devaluation of the car fleet, which placed on the second-hand market. She tried to stay on her feet by changing the leadership, selling machines, cutting staff, but was unable to find an agreement with creditors, and on Friday she had to surrender. The new CEO, Paul Stone, said Hertz still has a billion dollars in cash, with which it intends to continue operating, until it has completed the restructuring with the protection of Chapter 11. The problem, however, is that it must find an agreement with creditors, downsizing the company, and hoping that the business will resume in the coming months. Salvation, in essence, does not depend only on the behavior of the company.

Concerns also concern the side effects on the economy, because Hertz bought all its cars from General Motors and FCA, which will now remain without such an important customer, and orders will also decrease from competitors like Avis, which thanks to a situation less serious debt estimates that it can survive until the end of the year.

The emergency is unfortunately global, as Giuseppe Benincasa, general manager of the National Association of Car Rental Industry and Automotive Services, also pointed out in Italy. He called it a “perfect storm”, because the drop in revenues came just at the beginning of the season, when the investments to face it had already been made and only in April the sector lost 97%. Hertz claims that it also suffered from a lack of state aid. Now the hope is that it will survive thanks to the restructuring.

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