CEO of Hertz comes out after electric car horror show

Brendan McDermid/Reuters

A man photographs a Hertz Tesla electric vehicle on display during the Hertz Corporation’s initial public offering at the Nasdaq Market site in Times Square in New York City.


New York
CNN

Problems and unrest continue at car rental company Hertz.

The company, which announced in January it was selling 20,000 of the electric vehicles in its fleet, or about a third of the electric vehicles it owned, is now replacing the CEO who helped build that fleet, making it the company’s fifth boss company in just four years. year.

The company announced that Stephen Scherr, who joined the company two years ago after nearly three decades at Goldman Sachs, will step down at the end of this month. He will be replaced by Gil West, former chief operating officer of Delta Air Lines and General Motors’ Cruise unit.

In its most recent quarter, Hertz suffered a $245 million profit loss due to a decline in the value of the electric vehicles it sold.

While the number of electric cars purchased by U.S. customers rose 40% last year, surpassing 1 million for the first time, there was less demand than some traditional automakers expected when they started offering electric cars. Tesla, the leader in electric vehicle sales in the US, started an electric vehicle price war just over a year ago, driving down the value of both new and used electric vehicles like those in Hertz’s fleet . And the price drop affected Hertz’s bottom line, as the company was able to make less money reselling the vehicles.

But the problem for Hertz wasn’t necessarily that the cars were electric, and customers simply don’t want to drive electric cars. Industry analysts said the problem was Hertz’s handling of its fleet overall.

“The implementation and marketing of EVs [by Hertz] was a horror show across the board,” said Daniel Ives, an analyst at Wedbush Securities who tracks the EV market. “It’s a black eye that they couldn’t recover from.”

Part of the problem for Hertz was that even people who might want to buy an EV wouldn’t necessarily want to rent one while they’re on the road, when they don’t necessarily have the option to plug it in to charge them , as they do in a private home. There may not be a charging station, or not enough time, for a rental car customer to charge an EV, Ives said.

By adhering to charging rules the way Hertz has enforced fueling rules, it may have deterred customers from wanting to rent an electric car. Without building any charging infrastructure at its rental locations, Hertz may have hurt its own business.

“They don’t want to spend 20 minutes at five in the morning trying to find a charging station,” says Ives.

Hertz had announced it would buy 100,000 electric vehicles from Tesla in October 2021, just before it held its post-bankruptcy initial public offering. The hope was that its promise to be at the forefront of growing demand for electric vehicles would attract investors and boost its share price.

It then announced plans to buy up to 175,000 EVs from General Motors and 65,000 EVs from Polestar, the EV company co-owned by Volvo and its Chinese parent company Geely. But Hertz’s total EV fleet only reached 60,000 before it decided to pull out. Still, that was enough to cover 11% of the fleet.

Even without the decline in the value of the cars it bought, Hertz struggled to repair collisions and damage to an electric car that was traveling about twice as fast as a comparable internal combustion car, Scherr told investors on a 2023 call.

But even without the $245 million that the problems with its electric cars added to its bottom line, Hertz would have lost money in the fourth quarter and the full year. That compares with profits at rival Avis Budget Group, which reported record revenue and the second-best adjusted operating profit in its history.

And the EVs weren’t the only black eye for Hertz. In December 2022, the company agreed to pay $168 million to settle 364 claims related to the company. incorrectly reporting rental cars as stolen. These cases sometimes resulted in Hertz customers being arrested and even imprisoned. Although Hertz said a “meaningful portion” of those costs would be covered by insurance, this was another blow to its reputation.

Scherr wasn’t the one who decided to make a big bet on the demand for electric cars from car rental customers. That was his predecessor, Mark Fields, a former Ford CEO who was named interim CEO in October 2021, just weeks before Hertz announced plans to buy 100,000 Teslas, the largest order ever for Tesla from a single buyer.

Fields’ predecessor as CEO, Paul Stone, remained as president and chief operating officer of Hertz, positions he held until he resigned last September. Stone had taken over just days before Hertz filed for bankruptcy in May 2020. While the entire car rental industry was hit by the pandemic and the drop in demand for travel and rental cars, rivals Avis Budget and privately held Enterprise were able to ride the wave. out of the storm without filing for bankruptcy.

While Hertz, which has been renting cars since the days of the Model T, was once the largest car rental company in the world, its turnover in 2023 was 22% less than that of its listed rival Avis Budget.

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