Hertz filed for Bankruptcy last on Friday, 22nd May 2020. By doing so, it has joined the list of high-profile age-old companies being forced out of business due to the coronavirus. The company has been providing rent a car services for more than a century now, having started operations in 1918. With the pandemic disrupting daily life and forcing people to stay at home, Hertz’s services were no longer being used. Furthermore, a lack of travel across the globe meant no more airport rentals, which amounted to most of these companies’ sales. Let us look at how Hertz got here having survived the Great Depression and what the future of the company holds.
The founder Walter Jacobs sold the company to John Hertz in 1923 having founded it in 1918, who expanded the company and renamed it to Hertz. With big names such as Forbes and United Airlines among its owners, it became one of the biggest car rental companies in the world.
However, Hertz has survived some of the most difficult financial crises in hour history, having made it through the Great Depression. In a 1930s post-war United States, the auto manufacturing industry found itself coming to halt. Moreover, fluctuating oil prices and the economic situation of the country meant that this was the worst time to be a car-rental company. However, Hertz survived that Financial Crisis, and hence, people thought they would survive this one as well. But alas, it was not to be. The coronavirus hit the company and the overall industry hard, creating revenue uncertainty that the company just could not handle.
Hertz filing for bankruptcy protection marks another big name biting the dust. Retail giants like JCPenney and J. Crew were other high-profile names to go out of business due to the Pandemic. However, none of these companies held as large a share of the market as Hertz did. Along with rivals Avis Budget (CAR) and privately held Enterprise, Hertz dominated the rental car industry.
However, Hertz did give signs of struggle before the pandemic hit. It posted a $58 million net loss in 2019, down from a $225 million loss in 2018. But in the first three months of this year, it lost $356 million. While the company was struggling a little bit, the Pandemic hit hard and they were unable to deal with the uncertainty of revenues, mounting under greater debt, being unable to pay lenders.
Filing for bankruptcy does not necessarily mean the business is closing. Hertz can take inspiration from General Motors, who made record profits after filing for bankruptcy and survived. Hertz plans to restructure its financial model and plan its next move accordingly. They intend to try and stay in business by restructuring their debts and hopefully emerge a financially better-off company. The coronavirus pandemic has hit the travel industry extremely hard. The likes of Uber and Airbnb have laid off most of their workforce as well. With such high-profile names under pressure, who do you think will be next in filing for bankruptcy? Let us know in the comments below.