The rental car giant has been around for over a century, but Hertz was not able to ride out the impact of the COVID-19 crisis on its finances and filed for Chapter 11 bankruptcy protection in the U.S. after its creditors were unwilling to grant it another extension on auto lease debt payments past a Friday deadline.
According to its official statement, the company has $1 billion cash on hand to support its operations, but also carried $24 billion in debt as of the end of March, according to their bankruptcy filing. After states locked down and still, at time of writing, discourage unnecessary travel, Hertz and its subsidiaries lost nearly all revenue to put toward its debt payments. Hertz Global Holdings Inc., under which rental car brands Dollar and Thrifty also lie, cut 12,000 workers and furloughed another 4,000 to try and stem the losses.
In late March, Hertz also cut its vehicle purchasing by 90 percent and stopped all essential spending. At the time, the company said the move would save $2.5 billion per year. However, as it enters reorganization, it seems the cuts came too late to save the nation’s second-largest rental car chain.
Despite the filings, Hertz says it will file “first day” motions, which should let it continue to operate normally at its public-facing locations. The company may also seek out additional cash through borrowing depending on how long the coronavirus crisis continues.
Hertz will lay off or furlough half its global workforce
Other actions include reducing fleet levels, consolidating rental locations, and deferring capital expenditures as well as reducing its marketing spend. However, one of the most impactful decisions its making is to lay off or furlough a further 20,000 employees, or about 50 percent of its global workforce.
As it emerges from Chapter 11 bankruptcy, Hertz says the reorganization will provide it “a path forward 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.”