The perfect storm of events has happened.
One of America's most recognizable and oldest car rental agencies has officially filed for bankruptcy. Hertz filed for Chapter 11 bankruptcy protection this past Friday, citing the COVID-19 pandemic and resulting global economic slowdown as the main reasons.
"The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company's revenue and future bookings," the company said in a statement. "Hertz took immediate actions to prioritize the health and safety of employees and customers, eliminate all non-essential spending and preserve liquidity. However, uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales, which necessitated today's action."
The Florida-based company is still open for business, however, and will continue accepting bookings. It has some $1 billion in cash on hand in order to keep operations going.
Even before Friday's announcement, Hertz had taken measures to save money during the crisis by laying off some 12,000 employees. The Chapter 11 filing does not necessarily mean the company will go out of business, but rather work with creditors in order to reorganize and, hopefully, emerge from bankruptcy in a stronger financial state. While the pandemic and global economic downturn will eventually pass, what won't change are Hertz's previous problems.
Years before the pandemic struck, Hertz was facing newfound competition from the likes of Uber and Lyft ride-hailing services.
Travelers rightly realized it was far less expensive to simply hail single rides rather than pay for a private rental car. Doing the latter also has additional expenses, mainly insurance and gas fill-ups. Hertz's 20th-century business model simply no longer worked in this century. The company was founded back in 1918 by Walter L. Jacobs in Chicago, Illinois. Its first rental vehicles were Ford Model Ts. It later became America's second-largest car rental agency and operates in over 150 countries.
Hertz has also dabbled in high-end exotic rental cars over the years. Some recent examples include the C7 Chevrolet Corvette Z06 and the Ford Mustang Shelby GT-H. Just last week we reported about Hertz's Z06 fleet fire sale, which is still likely happening.