Hertz has decided to pay $168 million to settle 364 individual claims that the company falsely reported its own rental cars as stolen. Criticisms date back to 2015 but the issue became national news right around the time the company was also filing for Chapter 11 bankruptcy in 2020. Hertz has since maintained that any erroneous claims made against customers were the result of a faulty inventory system that’s since been fixed. However, the people that were wrongfully accused of the crime – some of which were held at gunpoint by police and even temporarily imprisoned for a felony offense they didn’t commit – have been seeking restitution in class-action suits.
As you might have noticed, or heard from us, rental agencies have been hoovering up new and used vehicles to offset the 2020 selloff that stemmed from everyone mysteriously canceling their travel plans that year. Returning to normal, which is something anyone who didn’t assume the world was ending could have predicted, has resulted in increased pricing for vehicles — regardless of whether you’re renting or buying.
Rental companies typically try to play the vehicle market like the rest of use stocks or (if you’re hip) crypto. Buy low, sell high. But 2021 has created a perfect storm of increased demand coming after a long stretch of nothing and an auto industry that doesn’t seem to be capable of building cars thanks to all sorts of component shortages. But it’s no sweat for the big rental agencies because they’re now able to charge just about whatever they want. They’re keeping vehicles in their fleets longer, making more money off them, and selling them back at elevated prices.
Rental-car agencies, shunned by a population that didn’t know whether it was safe to go outside for most of the year, have reportedly started to turn things around. While the recovery didn’t come soon enough to save Hertz from having to declare bankruptcy, the summer months were much kinder to the industry as a whole. Despite the likelihood of 2020 remaining an unprofitable year, the final two quarters should help rental groups recoup some of the sustained losses.
A recent assessment conducted by the Wall Street Journal suggested that the industry is benefiting from a population that continues to shun air travel during the pandemic and elevated used vehicle pricing. While discount prices actually hampered Hertz right when it needed a miracle, secondhand auto rates surged through the latter half of the summer and helped stabilize the rest of the vehicle rental industry.
Colossal rental car provider Hertz is on the hunt for life-sustaining cash, but raising it itself now seems out of the question. Hertz Global Holdings, which filed for bankruptcy in May, recently moved ahead with a plan to raise a cool half-billion through a stock sale, only for the Securities and Exchange Commission to step in and say “hey, whoa, no more of that.”
Left with no other option, Hertz is now seeking a bankruptcy loan.
While negotiating the terms of its bankruptcy with creditors, Hertz has been informed that it can sell 200,000 would-be rental vehicles to help cover its debts.
According to a filing with the U.S. Securities and Exchange Commission (approved Friday in the U.S. Bankruptcy Court in Wilmington, DE), Hertz will be allowed to “dispose of at least 182,521 lease vehicles” between now and the end of 2020. Proceeds will then be used to pay off $650 million it owes lenders, with most funds going toward principal payments on financed vehicles.
With the pandemic knocking out manufacturing for months, this is likely welcome news for buyers eyeballing the secondhand market. Dealer lots are light on fresh product at present and times are getting tougher for consumers, making used vehicles all the more appetizing. Even though former rentals have a tenancy to be abused, they typically to go for a bit less than something living a more carefree existence — and Hertz will be desperate to offload them quickly.
Lenders are cutting Hertz a break by affording the company an extended grace period, giving it a chance to cope with its debt. Last we checked on the rental agency, things weren’t going well. With governments cracking down on movement amid the coronavirus pandemic, no one is going anywhere — and the Hertz’s bottom line showcases exactly how bad this has been for business. Hertz had to bring in economic advisors to help the business manage its swiftly mounting debt load as it discussed how to avoid bankruptcy.
Similarly hit by the pandemic, airlines got a multi-billion-dollar bailout. Agencies like Hertz, Avis, and Enterprise, however, have had to seek their aid elsewhere, all the while hoping the U.S. Treasury Department answers their plea. Thus far, it’s been crickets.
Car renters are confronting a harrowing reality. They need to refresh their gigantic fleets in a period where no one can turn a profit, there’s little promise of a swift recovery, and used car values are cratering. Hertz started laying off workers in March as customers evaporated. By the end of April, it also announced it was defaulting on lease payments related to its fleet. With creditors rarely unclear about when they want their money, things were looking grim.
Hertz Global Holdings is reportedly bringing in economic advisors to help the business manage its mounting debt. Unsurprisingly, everyone in the world simultaneously canceling their vacation plans wasn’t great for business. Your author has had to cancel four trips this year, three of which would have included going from an airport to a rental agency. With others forced to do the same as the events and places they planned on enjoying closed up shop, the prognosis is not been good for the borrowed-automobile sector.
When we last checked in, rental agencies had slashed rates to an almost unimaginable degree. Realizing that cheap rentals actually earn you less money when you have a surplus of vehicles nobody wants, those prices have begun creeping back towards normal. But financial problems have not abated. Still, we can put a positive spin on this since you’re probably tired of hearing bad news. Instead of this signaling disaster for rental agencies, think of Hertz bringing in restructuring experts as a sign that it’s being proactive in coping with a truly undesirable situation.
Feel better? Alright, let’s bring you back to reality.
With auto manufacturers, dealerships, and insurance agencies scrambling to find a way to retain customers during a global pandemic, now is the season of trying new things. Insurance companies have begun offering refunds on premiums for certain people who can’t afford to pay (and aren’t driving) during the health crisis. Automakers are offering heavy incentives on just about everything, cutting additional breaks for those left unemployed. Dealers are swapping to digital sales models to avoid as much direct contact with buyers as humanly possible while still making a sale.
But what are ride-sharing companies supposed to do?
Zipcar has a few ideas. With ride-hailing services and taxi cabs being viewed by many as mobile germ carriages, you wouldn’t expect shared vehicles to be in demand. Zipcar is making a few changes in a bid to make it all the more appetizing. Rather than relying on its typical hourly (or daily) price rates, it has expanded its Dedicated Zipcar vehicle program for weekly rentals. But that puts the business up against traditional rental firms, which have slashed their prices to an almost comical degree.
Once upon a time, your transportation options upon touching down at a U.S. airport involved hailing a taxi, renting a car, or taking a shuttle to your hotel. Those options still exist, but business travellers and tourists can now waltz out the door and into a number of app-based ride-hailing services and a growing list, depending on location, of short-term, app-based car rental services that don’t carry any of the usual names seen at the rental line.
Hertz clearly felt that omitting a couple of minutes from the rental counter-to-destination trip might help it stay ahead of those pesky mobility upstarts. Enter the magic of biometrics.
Car rentals have evolved rather dramatically in the new millennium. While you can still reserve over the phone before walking into an office to pick up the manager’s special for the agreed upon timeframe, alternatives are many. ZipCar transformed how some people get around an urban environment by allowing customers access to an array of automobiles at hourly rates. Seeing its potential, Avis acquired the company in 2013, expanding its function to include a less stringent return policy via ZipCar Flex.
Meanwhile, Enterprise has its own short-term rental services. Recently, the company has been on a kick to purchase as many mobility firms as it can. Hertz, which has been a little slower to dive into mobility culture, does offer alternatives to traditional rentals in specific markets. It also announced a new strategic partnership with the tech firm Aptiv last July to start testing autonomous fleets this fall.
This, of course, is all taking place in an era where carmakers are launching fleets of their own while attempting to rebrand themselves as data and mobility companies. But surely these rental agencies are just hedging their bets and trying to adopt new tech to better serve their customers. They’re not about to adopt the same tired rhetoric, are they?
Having already launched the Care by Volvo subscription program, the Swedish-Chinese automotive brand wants to continue cramming feathers into its cap. It’s now launching a new mobility brand that sounds very similar to car-sharing services offered by numerous automakers and rental firms.
There could be an issue with the naming strategy, however. Volvo wants to call the company M, which is a letter of the alphabet that’s of particular interest for BMW. In case you’ve been in a coma for the last forty years, the German automaker has used the letter M (for Motorsport) to denote its performance division and affixes it to everything in its lineup with sporting pretensions. While it probably can’t claim ownership of all things relating to the mark, it’s definitely not going to be thrilled to see Volvo using it.
If you live in the north, you might consider taking your kids tobogganing on Tesla’s NASDAQ trend line.
That, GM wants less rentals, “Imported from Detroit” becomes “Deported from Auburn Hills,” automakers fear the Brexit, and rage grows around pointless concept cars … after the break!
Uber and Enterprise Rent-A-Car announced Tuesday a pilot program in Denver to rent cars to mobile entrepreneurs for ride-sharing services, according to the Denver Post.
The program, which will cost $210 a week on top of a $500 deposit, will make available cars to roam the city streets for people who don’t sleep for a week at a time. The $210 cost for the rental will be automatically deducted from the driver’s earnings, and if the driver doesn’t make enough to cover the cost of the car they’re still totally on the hook.
“What we’re trying to do here is lower the barrier to entry for someone who does want to work with Uber but who does not have a qualifying car or doesn’t have a car at all,” Andrew Chapin, Uber’s Head of Vehicle Solutions, told the Denver Post.
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