As Hertz Global Holdings Inc. makes attempts to stay out of bankruptcy, the company has canceled 90% of its new-car purchases for the 2020 model year, a move likely to depress fleet sales further by major automakers.
CEO Kathy Marinello announced the cost-cutting move in a short 20-minute conference call Tuesday, one day after the company reported a larger-than-expected first-quarter net loss and stated it may have hard time continuing as a continued concern. That signaled the company’s management doesn’t expecting a swift rebound in demand for rental vehicles over the next 12 months.
“The coronavirus created a major disruption as the worldwide travel market and the used-car market effectively shut down,” Marinello stated. “We have to be pragmatic regarding 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 prior to a May 22 deadline. The company would be on verge of bankruptcy if a solution is not reached to reorganize lease payments with bondholders, but Marinello provided no update on the status of those discussions. The rental-car giant’s decision to curtail orders highlights the ripple effects the Covid-19 coronavirus crisis is having on the travel business and auto industry. Automakers rely on rental companies to purchase about 1.7 million vehicles a year, or about 10% of U.S. auto sales.
On April 21, Hertz had decided to lay off 10,000 workers for cutting costs in order to survive during the ongoing coronavirus crisis.