Hertz’s operations in US ask for protection from creditors
Car rental company Hertz became the latest economic casualty of the coronavirus pandemic on Friday, filing for bankruptcy protection in the US and Canada after more than a century in business.
Its main international operating regions, including Europe, Australia and New Zealand, were not included in the US chapter 11 filing.
Hertz’s franchise sites, which are not owned by the company, are also not included.
Chapter 11 is a mechanism that allows a company that is no longer able to repay its debt to restructure itself.
The Wall Street Journal reported on Friday that Hertz had debts of roughly $19bn, in addition to nearly 700,000 vehicles sitting idle because of the coronavirus.
“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 media release.
Hertz said it took “immediate action” to prioritise the health and safety of employees and customers and eliminate “all non-essential spending”.
“However, uncertainty remains as to when revenue will return and when the used-car market will fully reopen for sales, which necessitated today’s action,” it said.
Hertz had already cut 10,000 jobs in North America, or 26.3% of its global workforce, to save money after the coronavirus shutdowns paralysed travel and crippled the economy.
“The financial reorganisation will provide Hertz a path towards 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.
Established in 1918 with 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 6% in January and 8% in February compared with the same months of 2019.
The chapter 11 filing follows that of another 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.
Federal Reserve chief Jerome Powell recently spoke of a probable 20%-25% unemployment spike, after the rate climbed to 14.7% in April.
More than 1.6-million people have been infected with the coronavirus in the US and the pandemic has killed more than 96,000 people, according to Johns Hopkins University.