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Hertz Bankruptcy
In this episode of Company Forensics, let’s see why Hertz went bankrupt. Taking into consideration Hertz’s sheer size alone, the consequences of this event will ripple throughout.

Yes, 2020 dealt a fatal blow, but you’ll see that it wasn’t the only reason. In fact, many of the wounds were self-inflicted. Plus, we’ll dive into the bankruptcy itself, and try to shed light on the ethics behind these processes.

#slidebean #startups #hertz

0:00 - Intro
0:59 - Hertz: Go from the start
3:36 - Hertz: Market standards and firsts
4:33 - Hertz: A very expensive, fragile business
9:54 - Hertz: Bankruptcy and reality
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Chances are you heard the news, but in case you haven’t, Hertz, one of the biggest rental companies in the world, has filed for Chapter 11 bankruptcy.

Taking into consideration Hertz’s sheer size alone, the consequences of this event will ripple throughout.

Yes, 2020 dealt a fatal blow, but you’ll see that it wasn’t the only reason. In fact, many of the wounds were self-inflicted. Plus, we’ll dive into the bankruptcy itself, and try to shed light on the ethics behind these processes.

In this episode of Company Forensics, let’s see why Hertz went bankrupt.

Go, from the start

We go back to 1918. That’s right, 102 years ago; that’s how old this company is. Originally known as a Rent-A-Car Inc., it was the brainchild of Walter L. Jacobs, who started his venture with a dozen Model T Fords.

Within five years, his company had a fleet of 600 vehicles and turned in $1 million in revenue; these were fantastic numbers for 1923.

And this caught the attention of John Hertz, who owned a truck and coach company. He purchased Rent-A-Car and named it Hertz Drive-Ur-Self System. But get this, he kept Jacobs as president.

Jacobs even remained as president after General Motors became interested in the successful venture and purchased it in 1926.

GM went into an aggressive expansion plan, which included airports, such as Chicago Midway, as well as opening in Canada and, after World War II, their first European location, in France.

But John Hertz wasn’t done. In 1953, he repurchased the brand, through another of his successful companies, and created the Hertz corporation. Then he purchased a truck leasing company with 4000 trucks. So, by 1954, Hertz Corporation had 15500 trucks and 12900 cars.

In 1967, Hertz sold the corporation again, this time to Radio Corporation of America, which held on to it for almost 20 years. Then, in 1985, UAL corporation purchased it for $590 million only to sell it two years later, for $1.3 BN, to Park Ridge.

Just a detail: Park Ridge was owned and operated by Ford Motor Company. And, Hertz worked well for Ford. In some years, the rental business was up to 10% of Ford’s profits before tax.

Under Ford’s ownership, Hertz grew even more. In 2002, it even became the first international rental company to open in China, a very lucrative market.

But, though it had been lucrative for some years, Hertz was a bit of a headache for Ford, as they faced tough times of their own. So, it changed hands once more. And I really want you to remember this deal. In 2005, Ford sold Hertz to a private equity group composed of very big names, including Merrill Lynch, for $5.6 BN. That’s not pocket change.

It was under this new ownership that, in 2012, after two years of back and forth bidding, Hertz purchased Dollar-Thrifty, for $2.3 BN, and this gave Hertz 10400 locations and presence in 150 countries in total.

And if you are a fan of the show, you know how some big acquisitions end up.

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