Virus-hit Hertz declares bankruptcy in US and Canada
GLOBAL car rental company Hertz became the latest economic casualty of the coronavirus pandemic, filing for bankruptcy in the US and Canada after more than a century in business.
“The impact of Covid-19 on travel demand was sudden and dramatic, causing an abrupt decline in the Company’s revenue and future bookings,” Hertz said in a press release last week.
Hertz said it took “immediate action” to prioritize the health and safety of employees and customers and eliminate “all nonessential spending”.
“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,” it said.
Its main international operating regions, including Europe, Australia and New Zealand, were not included in the
US Chapter 11 filing.
Hertz had already cut 10,000 jobs in North America, or 26.3 per cent of its global workforce, to save money after the coronavirus shutdowns paralysed travel and crippled the economy.
Chapter 11 is a mechanism that allows a company that is no longer able to repay its debt to restructure itself without creditors.
The Wall Street Journal reported Friday that Hertz held debts of roughly US$19 billion, in addition to nearly 700,000 vehicles sitting idle because of the coronavirus.
“The financial reorganisation will provide Hertz a path toward a more robust financial structure that best positions the company for the future as it navigates what could be a prolonged travel and overall global economic recovery,” the Hertz statement said.
Hertz’ franchise sites, which are not owned by the company, are also not included in the Chapter 11 proceeding.
Established in 1918 with only a dozen cars, the global car rental giant had survived the Great Depression and numerous American recessions.
But in recent years the company has struggled with competition – including Avis Budget and carpooling services such as Uber.
Hertz suffered a fourth consecutive annual net loss in 2019. But 2020 had started well with an increase in turnover of six per cent in January and eight per cent in February compared to the same months of last year.
The chapter 11 filing follows that of another well-known American business, retailer J Crew, and illustrates the extent of the damage to the economy from the deadly disease.
More than 38 million people have applied for US unemployment benefits since the shutdown began in March.