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America's second-largest rental car company, Hertz, files for bankruptcy

Team OD  | Updated: May 24, 2020, 11:52 AM IST

Hertz, one of the most well-known names in the rental car industry, has filed for Chapter 11 bankruptcy in the US. The company has confirmed that it will not affect business operations in any of the other 12,400 locations where it has set up shop, including India with service provider, Orix.

Hertz's bankruptcy filing is due to a dramatic reduction in the demand for rental cars, especially considering a large chunk of the company's business comes airport rentals. With the travel ban in the US, as in other countries, most rental car companies have been struggling. It's reported that Hertz had already furloughed or laid off between 10,000-20,000 employees in March, a significant portion of its 48,000 strong workforce. The company also sought relief from lenders and the US Treasury Department, and was only able to manage short-term reprieve from its creditors. It's said Hertz may have to scale down their operations and sell assets.

Hertz has a fleet of about 4 lakh cars, and it may need to liquidate some of its fleet to repay the bonds. Experts believe this could tank used-car prices in the US further, if the sale of these vehicles doesn't happen in a staggered manner over several months. With the news suggesting that Hertz is not the only rental car company in trouble in the US, these companies do not qualify for a federal bailout, unlike airline companies. For us in India, it remains to be seen how local rental car companies fare, with travel restrictions only set to lift in the coming weeks, after an over two month long lockdown with close to no business.

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