Hertz Car Rental United States – Car rental company Hertz, which has been hit hard by the global coronavirus pandemic, has filed for bankruptcy in the United States and Canada, it announced on Friday.
“The impact of Covid-19 on travel demand was sudden and severe, causing a sudden drop in company revenue and future bookings,” Hertz said in a press release.
Hertz Car Rental United States
Hertz said it took “immediate action” to prioritize the health and safety of employees and customers and to eliminate “unnecessary costs.”
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“However, it is still unclear when revenues will return and when the used car market will reopen for sales, which calls for action today,” he said.
Its main international operating regions, including Europe, Australia and New Zealand, were not included in the US Chapter 11 filing.
Hertz had cut 10,000 jobs in North America, or 26.3% of its global workforce, on April 21 to save money after the coronavirus shutdown paralyzed travel and slowed the economy.
Chapter 11 is a tool that allows a company that cannot repay its debts to restructure without creditors.
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“The financial restructuring leads Hertz to a stronger financial structure that will better position the company for the future as it heads what will be a long and difficult journey.” – General global economic recovery,” Hertz said.
Hertz franchise sites, which are not owned by the company, are also in Chapter 11 negotiations. Like cruise company Carnival Corp. (CCL) and hydrocarbon exploration company Occidental Petroleum
Corp. (OXY), both of which had battered balance sheets before the pandemic abruptly disrupted their operations, survived.
However, one of the largest rental car companies in the United States, Hertz Global Holdings Inc. ( HTZ , Financial ) , somehow found itself in Chapter 11 even as its main rivals Avis ( CAR , Financial ) and its home equity firm avoided it. the same fate thanks to better financial instruments.
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Hertz emerged from bankruptcy court in mid-2021, and after an initial rise above the $30 mark, the market was skeptical about the stock.
However, while the current negativity is certainly deserved, investors may be underestimating the company’s new life after the big drop. He didn’t just go back to work as before; Hertz not only learned a valuable lesson, it also took a new direction of growth under CEO Stephen Scherr. Hertz embraces electric vehicles and artificial intelligence, making it unique among American rental car companies. Could this make Hertz a promising opportunity, or will such aggressive investments push it back into bankruptcy?
In June 2021, the bankruptcy court approved Hertz’s reorganization plan, which includes eliminating more than $5 billion in debt and providing more than $2.2 billion in liquidity. – organized. Amazingly, shareholders received over $1 billion in value, despite being completely wiped out earlier. For comparison, Hertz had a market cap of $5.83 billion as of this writing.
Where did the money come from for such a restructuring plan? Fortunately for Hertz, while dealing with bankruptcy, the used car market was suddenly red hot. The company has historically used proceeds from the sale of its retired cars to pay off creditors, but when the pandemic first hit, there was no way they could get a good price for them, adding to their bankruptcy. Semiconductor shortages and easy cash policies quickly turned things around, however, and suddenly, Hertz was charging top dollar for its used cars.
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So the company was able to avoid bankruptcy and buy 100,000 electric vehicles from Tesla ( TSLA , Financial ) for $4.22 billion, making EVs about 20% of its total fleet.
Hertz’s electronic strategy is not over. Under the leadership of Scherr, a former Goldman Sachs ( GS , Financial ) financial executive who was brought in as the company’s new CEO in February 2022, Hertz is making EVs and artificial intelligence cornerstones of its long-term plan.
In addition to Teslas, Hertz has also committed to adding 65,000 EVs from Polestar ( PSNY , Financial ) and 175,000 from General Motors, according to Scherr.
(GM, Financial) to its fleet, with deliveries starting for the 2023 model year. The company aims for 25% of its fleet to be electric by 2024.
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To help drive EV adoption among consumers, Hertz is also working with local governments when it comes to building charging infrastructure. For example, Hertz recently announced a partnership with the city of Denver to build its own EV charging infrastructure (focusing on low-income, underserved areas) and offer tools and training around the city. These resources will also support Hertz customers who may be driving an EV for the first time or need help finding a charger in an unfamiliar area. Hertz provides chargers through its partnership with BP Pulse, which owns oil giant BP (BP, Financial).
“Public private partnerships are very powerful vehicles,” Scherr said in an interview with CNBC. “We can see what’s happening in motion, we can see the direction of travel. And so we can be a force with a city and a strong mayor to move this forward the way I think we all want to see it.” to be, this is a broad participation in electricity.”
Another part of Hertz’s technology transformation is artificial intelligence. Major advances in artificial intelligence have made it valuable for some parts of the car rental industry. For example, there is no longer as much guesswork with the company trying to get its vehicles to different locations to meet demand, because technology will help understand where the demand is. Hertz is also testing artificial intelligence monitoring technology that provides a 360-degree view of the car when you rent it and when you return it, which could help eliminate the hassle (and associated costs) of damaging a vehicle. lift up
Hertz appears to be on an impressive growth trajectory as one of the major frontrunners in the EV rental space. Sure, it’s not the first company to offer EV rentals, but it’s the first household name with a desk at nearly every airport in the country to do so on such a large scale. .
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Hertz’s push into gas-powered rental cars, along with the need to present a new growth story as it emerges from bankruptcy, has made a breakthrough that could have been long overdue. It would be slower if the company survived Covid without bankruptcy.
In terms of valuation, Hertz trades at a price-to-earnings ratio of 9.91, which seems small when taken out of context but is higher than Avis’s price-to-earnings ratio of just 3.59. By maintaining a stronger balance sheet, Avis not only managed to survive the pandemic, it even achieved an impressive three-year quarterly growth rate of 111%, while Hertz just returned to pre-pandemic levels.
While Avis is also in the process of adding EVs to its fleet, it has been much slower than Hertz, taking a “wait and see” approach. In fact, it was Hertz’s purchase of 100,000 Teslas that prompted Avis to move on the EV front. CEO Joe Ferraro said in the company’s third quarter 2021 earnings call, “You’re going to see in the future that we’re going to be much more active in electric situations as the situation evolves over time.”
In the long run, I think whether Hertz or Avis is the better value will depend on how quickly the auto market transitions to EVs.
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Hertz has worked hard to turn itself around since its bankruptcy. After enjoying a significant boost from the stronger used car market, it managed to return to the general market with a bang by making big investments in EVs and artificial intelligence, which promises to improve efficiency and positioning for long-term growth.
As of 2022, only 4% of North American car production is electric, which may make Avis’ slow EV adoption seem like the most effective way forward. However, Hertz doesn’t just aim to imitate the general market; it aims to capture demand for testing EVs without buying one and partnering with cities to help them build charging infrastructure to improve transportation (and, as it were, create demand).
As the EV movement accelerates and some states and companies make dates to go all-electric, Hertz is poised to play a leading role. Investors should keep a close eye on their balance sheets, however, as mismanagement of the balance sheet can once again become a major risk.
I/we have no positions in any of the stocks mentioned, and we have no plans to buy new positions in the stocks mentioned within the next 72 hours. trying to raise money. Photo: Régis Duvignau/Reuters
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