May 23, 2020
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About this Deal
Hertz was forced to file for bankruptcy after missing the payment to a group of lenders who hold the leases on most of its US fleet. The company rents cars under the Hertz, Dollar and Thrifty brands. In the US, Hertz employs 38,000 people. So far, 12,000 have lost their jobs and 4,000 have been furloughed.
The downturn was driven by reduced air travel.
Rental car companies get two-thirds of their revenue from airport locations. With flying down 94% in April and May, according to data of people passing through TSA checkpoints, there are far fewer people needing to rent cars. Car rental rivals Avis Budget Group and privately-owned Enterprise are also hurting.
The ripple effect of reduced travel has crippled the rental car industry and threatens to impact the entire auto industry.
Now, major auto manufacturers like Ford, GM, and Fiat Chrysler are seeing a vast aspect of their annual sales threatened. Last year, Hertz bought 1.7 million US automobiles - or about 10% of the US auto industry production. And the drop in used car prices by Hertz to sell off their fleet will hurt automakers' new car sales.
At the start of the year, Hertz had 568,000 vehicles parked at 12,400 locations across the globe with overall revenues in 2019 at $9.8 Billion.
But carrying cars on a balance sheet is a pricey proposition: in March of this year the company was servicing nearly $19 billion in debt with $1 billion in cash available.
It's difficult to turn cars into cash.
Hertz is halting car purchases and selling off cars from fleets. Hertz already sold 54,000 cars in March, but the cancellation of auto auctions and the closure of many new car dealerships have blocked the company from continued relief. The difficulty in continuing to sell cars is one of the reasons it cited as the cause of its bankruptcy filing.