Virus-hit Hertz declares bankruptcy in U.S., Canada

WASHINGTON, USA (UPDATED) – Global car rental company Hertz became the latest economic casualty of the coronavirus pandemic on Friday, May 22, filing for bankruptcy in the United States and Canada after more than a century in business.

“The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company’s revenue and future bookings,” Hertz said in a press release.

Hertz said it took “immediate action” to prioritize the health and safety of employees and customers and eliminate “all non-essential spending.”

“However, uncertainty remains as to when revenue will return and when the used-car market will fully reopen for sales, which necessitated today’s action,” it said. 

Its main international operating regions, including Europe, Australia, and New Zealand, were not included in the US Chapter 11 filing.

Hertz had already cut 10,000 jobs in North America, or 26.3% of its global workforce, by April 21 to save money after the coronavirus shutdowns paralyzed travel and crippled the economy.

Chapter 11 is a mechanism that allows a company that is no longer able to repay its debt to restructure itself without creditors.

The Wall Street Journal reported on Friday that Hertz held debts of roughly $19 billion, in addition to nearly 700,000 vehicles sitting idle because of the coronavirus.

“The financial reorganization will provide Hertz a path toward a more robust financial structure that best positions the company for the future as it navigates what could be a prolonged travel and overall global economic recovery,” the Hertz statement said.

Hertz’s franchise sites, which are not owned by the company, are also not included in the Chapter 11 proceeding.

Established in 1918 with only a dozen cars, the global car rental giant had survived the Great Depression and numerous American recessions.

But in recent years the company has struggled with competition – including Avis Budget and carpooling services such as Uber.

Hertz suffered a 4th consecutive annual net loss in 2019. But 2020 had started well with an increase in turnover of 6% in January and 8% in February compared to the same months of last year.

The Chapter 11 filing follows that of another well-known American business, retailer J. Crew, and illustrates the extent of the damage to the economy from the deadly disease.

More than 38 million people have applied for US unemployment benefits since the shutdown began in March.

Federal Reserve chief Jerome Powell recently spoke of a likely 20% to 25% unemployment spike, after climbing to 14.7% in April.

More than 1.6 million people have been infected with the coronavirus in the US and the pandemic has killed over 96,000 people, according to the Johns Hopkins University. – Rappler.com