Car- rental company Hertz files for bankruptcy protection amid pandemic.

NEW HAVEN — Hertz, founded in Chicago in 1918 with a fleet of a dozen Ford Model Ts, filed for bankruptcy protections Friday, allowing the company to reorganize its finances amid the global pandemic.

In a statement, company officials traced the decision to the “impact of COVID- 19,” which dramatically diminished travel, “causing an abrupt decline in the Company’s revenue and future bookings.”

The company, which had accrued $ 24 billion in debt against $ 1 billion in cash, will continue to operate but will be able to pay creditors less than it owes, according to The Associated Press.

“With the severity of the COVID- 19 impact on our business, and the uncertainty of when travel and the economy will rebound, we need to take further steps to weather a potentially prolonged recovery. Today’s action will protect the value of our business, allow us to continue our operations and serve our customers, and provide the time to put in place a new, stronger financial foundation to move successfully through this pandemic and to better position us for the future,” said Hertz President and CEO Paul Stone. “Our loyal customers have made us one of the world’s most iconic brands, and we look forward to serving them now and on their future journeys.”

The decision, local experts said Saturday, will continue the economic pressure on the Connecticut car market sparked by the coronavirus and potentially drive down used vehicle prices in the state.

Brian Marks, a lecturer at the University of New Haven and former legal and economic adviser to Robert Davis, a Reagan appointee at the Commodity Futures Trading Commission, said the demand for both used and new cars has dwindled during the pandemic, as people change their spending priorities to meet an uncertain future, prompting an increase in supply.

“We have two things going on in this marketplace that no seller of goods wants to face,” said Marks.

If Hertz starts selling off their used cars in large amounts, thus further adding vehicles to the market, it could be a great time to get a deal on a vehicle in Connecticut, said David Cadden, Professor Emeritus of Entrepreneurship and Strategy at Quinnipiac University.

The company did not specifically announce plans to sell off its fleet. Reuters reported, citing “a person familiar with the matter,” that Hertz has proposed selling 30,000 cars a month in an effort to appease creditors that finance its vehicles.

Marks said the company has two major obligations it can shed in the bankruptcy process — vehicles leased as part of its rental fleet and real estate. While the company has reduced its fleet size in recent years, it still has more than 500,000 vehicles, he and Reuters said.

Some of the company’s former cars will likely make their way onto the used car market, Marks said, adding to the existing strain.

“Will Connecticut feel this pressure?” Marks asked. “I suspect yes.”

New car sales fell off dramatically across the nation in April, according to a CNBC report, with Toyota and Honda each seeing sales fall about 54 percent.

Used car sales have fallen approximately six percent in 2020 as compared to 2019, according to Manheim Consulting, a company which “brings together qualified sellers and volume buyers of used vehicles that include automotive dealerships, banks, car rental agencies, car manufacturers and government agencies.”

That’s a rebound from the end of March, when sales were off 67 percent, according to the consulting firm.

Used car prices have fallen 4.8 percent year over year, the firm reports.

Hertz laid off approximately 20,000 employees and consolidated “off- airport rental locations” as the effects of the pandemic became clear, according to the company. Franchisee locations are not affected by the bankruptcy.

The company did not immediately respond to a request for information about whether people in the New Haven area had been laid off.

Fred McKinney, also a Quinnipiac proessor and the university’s Carlston Highsmith Chair of Innovation and Entrepreneurship called the news about Hertz “symbolic of what’s going on in the travel industry and the automobile industry.”

Both tourism and vehicle sales depend on “a traveling public,” and people aren’t traveling because of the pandemic, McKinney pointed out.

“I think that it’s not going to be a massive event for Connecticut, but it is a significant bankruptcy in what it signals, and it’s also not a surprise,” McKinney said.

McKinney contended that the bankruptcy reflects the crisis’ impact on small businesses, as well as sizable companies. Like Hertz, many small businesses have lenders to pay, along with other fixed costs like insurance and rent payments, he noted.

He argued that the PPP funds Congress has given businesses to pay their workers would have been better used toward helping businesses meet fixed costs.

Hertz said it “sought assistance from the U. S. government” in the statement announcing its bankruptcy filing, but noted that “access to funding for the rental car industry did not become available.”

Employees can find support in unemployment funds, McKinney argued, adding that it’s fixed costs that are likely to sink large and small businesses alike.

“Almost any debt with no consumers is not sustainable,” McKinney said, noting that the lack of consumers is part of the same systematic issue that ran Hertz into bankruptcy.