Hertz said Friday night that it would use more than $1 billion in cash to maintain its operations as it continues its bankruptcy proceedings. Almost immediately, he made bad moves. He placed John Tague, a former chief operating officer of United Airlines, as CEO when there was a better candidate, Scott Thompson, the former CEO of Dollar, with a lot of experience in the industry. And Tague just didn`t get it right. He renewed the fleet with sedans as the market shifted to SUVs. Customers fled, so Icahn pushed to raise prices. After all, the car rental business is pretty much an oligarchy and he believed that Avis and Enterprise (the biggest competitors) would follow, but they didn`t. Instead, they stole Hertz customers with lower prices. Icahn is a very successful businessman. But it is known as a kind of predator; a “Corporate Raider”. He operates the spinning mills, buys them, then withdraws assets from them and then sells the remainder. When Icahn heard in 2014 that Hertz was a good brand that needed authority, it was just in his driveway and he stepped in. He bought a total of 39 percent of the company and three board seats for $2.3 billion.
“If our business does not recover quickly and we are not able to successfully restructure our significant debt, obtain new waivers or leniency, or raise additional capital, there are significant doubts that we will be able to continue our business,” the company said. “They`re doing pretty well, but when you stop the revenue and you own all these cars and suddenly the cars are worth less, it`s a very difficult undertaking,” said John Healy, an analyst and managing director of Northcoast Research in Cleveland. Hertz was founded in Chicago in 1918 when a former Ford engine salesman, Walter Jacobs, bought a dozen T-models and founded Rent-a-Car, Inc. The company grew rapidly and, according to Hertz, had a fleet of about 600 vehicles in five years. By the third quarter, Hertz expects demand for its cars to be much stronger, as it typically increases with travelers looking for summer vacations, so it doesn`t want to lose that business, Lauria explained. “Today`s action will protect the value of our business, allow us to continue our operations and serve our customers, and give us time to create a new, stronger financial foundation to successfully weather this pandemic and better position ourselves for the future,” Said Paul E. Stone, Chief Executive Officer, in a statement. Our car rental business, which accounts for the majority of our revenue, is particularly sensitive to the decline in passenger air travel, and the reduction in air traffic could have a significant impact on our financial position, results of operations, cash flow and cash flow.
In 1923, Jacobs sold the company to John Hertz, the owner of the Chicago Yellow Cab Company, who renamed it. Together, the two expanded the company nationwide. In 1932, the company opened its first car rental at Chicago`s Midway Airport, according to Hertz. The following year, it began offering one-way rentals. In 1955, the company had more than 1,000 locations worldwide. Today, there are more than 12,000 corporate and franchised locations. In 1967, Hertz sold the company again, this time to Radio Corporation of America, which held it for nearly 20 years. Then, in 1985, UAL Corporation bought it for $590 million, only to sell it to Park Ridge for $1.3 billion two years later.
Just a detail: Park Ridge was owned and operated by the Ford Motor Company. And Hertz worked well for Ford. Within a few years, the leasing business accounted for up to 10% of Ford`s pre-tax profit. Then there were the cars themselves. Dollar and Thrifty allowed the tires of their cars to wear thinner than Hertz. To standardize its fleet, Hertz had to invest $30 million in tire replacement alone. The merger was supposed to save Hertz $100 million, but it cost it $70 million. At the end of 2012, Hertz had a debt of $20.2 billion. The debt was simply too high and Hertz could not make payments for its lease transactions. But before Hertz went bankrupt, they asked for a government bailout, which was rejected. One important reason was Icahn himself, who was worth $18 billion. That`s what`s going to happen with Hertz as well, and I know that because Hertz bonds are trading at a significant discount.
On June 10, according to the Wall Street Journal, Hertz`s nearly $3 billion in unsecured bonds were trading at about 40 cents per dollar. .
