As Hertz Global Holdings Inc. works to stay out of bankruptcy, the company has canceled 90 percent 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. That signaled the company’s management doesn’t expecting a quick rebound 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 has traditionally been a leading buyer of fleet cars from the Detroit 3 and other automakers. Last year, Hertz held as many as 567,600 vehicles in its U.S. fleet and 204,000 in its international unit, holding those in the U.S. for an average of 18 months and international vehicles for 12 months, according to a U.S. filing.
Hertz is tightening its corporate belt as it negotiates with lenders ahead of a May 22 deadline. The company risks bankruptcy if a solution is not reached 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.