Car rental agency Hertz filed for bankruptcy protection last Friday after its creditors denied a request to extend its auto lease debt payments.
Hertz reversed orders for countless new vehicles earlier this month, including many General Motors vehicles, as the COVID-19 pandemic flattened demand for rental vehicles in the United States and abroad. The 102-year old company’s creditors granted it an extension on debt payments it owed, briefly preventing it from entering bankruptcy protection, but the company was unable to make the required payments by the deadline last Friday and was forced into insolvency.
According to Detroit News, Hertz Global Holdings Inc. currently has $18.7 billion in debt on its books and just $1 billion in available cash. The company lost almost all of its revenue virtually overnight when the COVID-19 lockdown began and started missing debt payments in April. Former Hertz CEO Kathryn Marinello said earlier this month that “no business is built for zero revenue,” and added that “there’s only so long that companies’ reserves will carry them,” as the COVID-19 pandemic continues to hammer the U.S. economy.
While Hertz’s creditors will likely not be paid back in full under the Chapter 11 filing, the company is expected to keep operating. The company laid off 12,000 workers in late March whilst putting another 4,000 on furlough and also cut rental vehicle purchases by 90%. It’s not clear how large a workforce it will continue with post-bankruptcy or when it plans to begin purchasing new cars again.
Hertz is currently offloading some of the cars in its U.S. fleet, including its fancy Chevrolet Camaro and Corvette Z06 rental cars. It is also selling a number of other Chevrolet, Cadillac, Buick and GMC vehicles as part of its restructuring, most of which are being offered at bargain-basement prices. A quick perusal of the company’s for sale page revealed a number of strong deals, such as this 2019 Cadillac CTS, which has just 19,000 miles on the clock and is selling for only $23,590.
The sharp downturn in the car rental market is bad news for automakers, which typically rely on the fleet sales to rental companies to pad sales in the slower months. Some GM vehicles that are commonly purchased by Hertz and other similar rental car companies include the Chevrolet Spark, GMC Yukon, Buick Enclave, Cadillac Escalade and Chevrolet Express, among others.