With Demand at an All-Time Low, Can Hertz Survive?

Hertz, as well as the rest of the car rental industry, is in a race against time.

With travel demand at an all-time low and only incrementally increasing, so is the demand to rent a vehicle upon arriving at a destination. It’s just simple math – fewer people taking flights or railroad trips means fewer people showing up at the car rental counter.

Now, according to a great article by the Detroit-based magazine Autoweek, Hertz and its fellow rental car companies are wondering how long they can survive given the current levels of demand.

That’s not industry speculation or media speculation, mind you.

That’s Hertz itself.

In its recent second-quarter earnings statement, Hertz said, “If our business does not recover quickly and we are unable to successfully restructure our substantial indebtedness, obtain further waivers or forbearance or raise additional capital, there is substantial doubt that we will be able to continue as a going concern.”

In addition to its bankruptcy, Hertz, according to Autoweek, has sold about 100,000 used vehicles to reduce its fleet. The company plans to sell nearly 200,000 more cars before the end of the year, and the two sales might have forced it to the brink.

The problem is a perception of time. There are no reliable forecasts on when the travel industry will bounce back. Some say end of year if the coronavirus doesn’t pick back up again in the cold weather, as many health experts have said. Some say it will be well into 2021. Others, like the hotel industry, caution that it could be even beyond next year.

“In our case, the forecasts will be even more speculative than normal, because they may involve fundamental changes in the nature of our capital structure,” Hertz said in its financial statement.

“Additionally, the impact of the COVID-19 pandemic on the travel industry in general, and on us, make it even more challenging than usual to develop forecasts on business. Accordingly, we expect that our actual financial condition and results of operations will differ, perhaps materially, from what we have anticipated. Consequently, there can be no assurance that the results or developments contemplated by any plan of reorganization we may implement will occur or, even if they do occur, that they will have the anticipated effects on us and our subsidiaries or our businesses or operations. The failure of any such results or developments to materialize as anticipated could materially adversely affect the successful implementation of any plan of reorganization.”

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