As Hertz Global Holdings Inc. works to stay out of bankruptcy, the company has canceled 90% of its new-car purchases for the 2020 model year, a move likely to further depress fleet sales by major automakers.
Chief Executive Officer Kathy Marinello revealed the cost-cutting move in a 20-minute conference call Tuesday, one day after the company reported a larger-than-expected first-quarter net loss and said it may have difficulty continuing as a going concern. This signaled that the company’s management doesn’t expecting a quick recovery in demand for rental cars over the next 12 months.
“The coronavirus created a major disruption as the global travel market and the used-car market effectively shut down,” Marinello said. “We have to be pragmatic about the timing of an economic rebound, including a second wave of the virus in the fall. So we are focused on safeguarding liquidity.”
Hertz is tightening its corporate belt as it negotiates with lenders ahead of a May 22 deadline. The company risks bankruptcy if it can’t reach a solution to restructure lease payments with bondholders, but Marinello gave no update on the status of those talks. The rental-car giant’s decision to curtail orders underscores the ripple effects the Covid-19 crisis is having on the travel business and auto industry. Automakers rely on rental companies to buy about 1.7 million vehicles a year, or about 10% of U.S. auto sales.
Detroit’s three car manufacturers will be hardest hit by the lack of business. General Motors Co. was Hertz’s largest vehicle supplier last year with 21% of its fleet, according to a regulatory filing. Fiat Chrysler Automobiles NV followed with an 18% share, and Ford Motor Co. was the third biggest supplier with 12%. Among foreign brands, vehicles from Korea’s Kia Motors Corp. made up 10% and Toyota Motor Corp. provided another 9%.
Shares of the company (HTZ) pared a decline of as much as 5.9%, falling 5.5% to $3.01 as of 12:01 p.m. in New York.
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