Hertz and Avis Corona’d

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Rental car companies Hertz and Avis need respirators – even though 99 percent of Americans never did.

tHe country’s two largest rental car companies teeter on the verge of bankruptcy, which will cost thousands of Americans their jobs and many of them their lives (unlike projected Corona deaths, actual deaths result from the suicidal depression, lack of medical care and hard living that attends poverty).

The trade publication Automotive News reports that “General Motors is taking back cars it agreed to sell that were on their way to Hertz Global Holdings Inc., Avis Budget Group Inc. and closely held Enterprise Holdings Inc., a spokesman said. Hyundai Motor Co. also confirmed it has redirected some vehicles to its retailers that it was planning to produce for fleet customers.”

When no one’s renting – because driving has been “locked down” – no one’s earning, the necessary prerequisite to buying.

Ah well. We have to “flatten the curve” – of the economy. No price is to high to be paid – by actual human beings – on account of computer-modeled human beings, who “might” get sick.

Most of whom won’t even know they were – and fewer than 1 percent of those who do actually dying.

Hertz’s lenders granted an eleventh-hour reprieve from a potential bankruptcy on Tuesday, while Avis sold $500 million of high-interest junk bonds to weather what it expects to be back-to-back months of revenue plummeting 80 percent.

Hertz, Avis and Enterprise have canceled all orders of GM vehicles for May, June and into July, according to a person familiar with its operations who asked not to be identified because the information is private. Hertz said in a filing Tuesday that it doesn’t expect to acquire new vehicles for the remainder of this year.

There was “virtually no business” last month in the fleet industry, about 80 percent of which usually goes to rental-car companies, according to Bob Carter, executive vice president of sales at Toyota Motor Corp.’s North American unit.

Ah, Corona!

 

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16 COMMENTS

  1. I need to get from San Diego to LAX this weekend. Instead of spending $50 to take Amtrak and a bus, I’m spending the same to rent a Cadillac XTS (“or similar”) for 2 days unlimited mileage with a morning dropoff at LAX. I’m sure I can upgrade at the counter too.

  2. The idea that these companies have such debt means they deserve their fate. These companies should not be running borrowed money. They are so many decades old they should operate on a cash basis. They still might go under but on a cash basis they could weather things much better.

    • Got news for you Brent. All large companies operate on debt. I worked at a large chem company for 20 years and the company borrowed billions each year to fund operations. This is how the international bank cartel have all the large companies under their bootstraps. If the companies do not heed the latest instructions from the banks, they get their funds cut off.

      • Not all.
        And they still shouldn’t. But since the fed has been doing bailouts since WW1 well…
        (banks loaned money to the UK and France. The federal government gave money created by the fed to the UK and France who used it pay their debts to the US banks, I guess they had to work it that way back then to fool the people, today they don’t bother with such pretense. )

      • Hi to5,

        Yup. Very hard to run a business on a cash/pay-as-you-go basis unless it’s a very small operation – and even then. I was speaking with the owner of a small business I know about just this issue. In order to pay for all the things required by the government – including to open her business in the first place – she had to take out a large business loan. Very few people have the cash on hand to just pay for all that’s required, such as the physical building (and making it “complaint”). Her monthly nut is startlingly high. Which is she is now out of business, Because Corona.

        Almost no business can take two months of no cashflow while debt continues to build.

        • Hey Eric,

          True, it takes a lot to establish a bidness- even a very small one- but these corps have been around for many decades, and are well-established; and big corps also can be funded by IPOs, etc.

          Once established, if it’s a viable business, there really is no need for perpetual debt. Usually when these businesses fail…it is because of the debt- like Toys-R-Us…..if it weren’t for a humongous loan payment which they couldn’t meet, they’d still be around.

          Debt enslaves businesses, just like it enslaves individuals.

          I’ve run all of my tiny businesses throughout my life on a strictly no-debt basis. As a result, I ended up making more money for less work, and endured when things got bad. Like when I was hauling junk in my 30’s: Started out with a $1000 truck whose motor I rebuilt in the bed of my pick’up. Parlayed profits into a better truck, advertising, yard space, etc.

          Meanwhile, I met this 19 year-old Mick…..he took out a loan and got a nice truck to begin with…..was doing O-K, so wanted to expand- so took on a whole yard for himself (at literally 10x a month more than I was paying for my humble space) and borrowed more money to get a second truck…..etc. Then when he’d hit slow periods, he had to kill himself to make payments (He even started working with the pigs, to pick-up “illegallyu-parked” cars…many which weren’t illegally parked…and eventually got busted)- and then when a really slow time came along, and few mechanical breakdowns…poof! Couldn’t keep making those payments, and his business was gone- although if it had not been for the debt, it was every bit as viable as my business (And he bought a house too…which he also lost)

          People- whether everyday working people, or business execs, have been trained to rely on debt….and that is often their financial downfall.

          • People take on debt for the sake of prestige and instant gratification. The whole “I’m growing my business” shtick is simply an excuse to act on those impulses. ROI is never part of their decision-making process. Just ask those suckers that attend college.

    • large companies fund acquisitions and stock buybacks with debt to goose the executives stock options. when the SHTF they’ll either be gone or get a taxpayer bailout. Easy

  3. They were already losing market share to the uber’s. I’m wondering if they’ll be selling off some vehicles? Might be some deals to be had.

  4. Why TF does Avis own $500 million in high-interest junk bonds? Why didn’t they use that money to hire someone to answer the phone, or clean the cars? (Neither is done at my location). You could probably hire two additional full time workers at every US location for less than $500 mil. What a scam. What greed. Let them fail.

    • FAIL?!? That’s Wrongthink, brother.

      After the Federal Reserve went “full European socialist” by proposing to buy corporate bonds — not only investment grade bonds, but also recently junked fallen angels such as Ford — companies have gone on an epic borrowing spree in the midst of an unfolding depression.

      Gorging on debt as revenues collapse … yeah, that’s always been the ticket for long-term success and prosperity! /sarc

      But it also is a recipe for zombie companies. Why would a newcomer try to make better car, when gov-propped competitors such as GM and Ford aren’t allowed to die?

      They could convert their production lines to building Ladas, Trabants and Yugos, or Pintos and Vegas for that matter. And Big Gov STILL would mindlessly pump in more billions not matter what, in the name of preserving union j-o-o-o-o-o-o-o-o-b-s.

      Welcome to the Dark Ages, comrades. Horse-drawn sulkies likely will see more innovation in this decade than Ford/GM/FCA zombiemobiles.

  5. Hertz and Avis were among the virtue signaling companies that publicly rescinded their NRA discounts after the Parkland, HS shooting.

  6. Here in Austin, Hertz and the other rental car companies were being force fed so much of the unsold truck product out of GM Arlington that it wasn’t uncommon to receive a free upgrade from compact to a full cab Silverado over the last 18 months.

  7. Government causes a problem, government offers a solution to the problem they created. Welcome to the modern bailout economy.

    Being in the cable industry, we’ve seen an explosion in bandwidth utilization at the local/residential level. This is causing us to throw out our capital budgets and forecasts for the year and just get into triage mode. We used to rate “node” capacity relief plans on a 1 to 5 scale. Last month we started seeing priority 0 and -1 nodes because of all the work from home and video conferencing. Now we’re starting to get the attaboys and crowing about all the activity from senior management. Sure, we’re doing 200% more work, but why? Meanwhile all that capital and equipment that is going into shoring up the existing network isn’t going to build out in new areas, isn’t going to drive costs down and isn’t going to do anything but leave a lot of unnecessary capacity in the network once we get through this (but only in some areas. Others will still be left out).

    I watched the airline industry execs begging the FAA to allow them to reduce and suspend flights to second and third tier airports because they were flying empty aircraft. The wise and good senator from Montana asked about why he had to drive 250 miles to get to an airplane because the airline stopped flying to his local field. The CEO waffled on for 5 minutes about fear of flying or other such nonsense while never pointing out that the senator’s actions (by being part of the entity encouraging panic) are why he can’t fly from his back yard anymore. Meanwhile, CNBC is running ads for NetJets in heavy rotation. Welcome to your future, where NetJets (a Berkshire Hathaway company BTW) is there for those who can afford it, and the rest of us are Zooming and looking forward to the 3 hour trip to a two hour flight (and associated probing, bio-testing and screening of our underwear). Then rent a wreck from a bailed-out agency and fingers crossed it will get you to your destination (that’s another 2 hour drive away from the airport). At least the tow truck will find you with the GPS tracker…

    • “Begging the FAA to allow” is not a viable business model, any more than asking permission to do anything by anyone from a gang of professional liars is. Begging indicates one is on one’s knees, in which case you are a slave. Should have unilaterally reduced service as needed. What’s the FAA going to do? Shut you down because you reduced service? Exactly how is that going to satisfy the FAA’s demand to continue service?

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