Hertz Reports $392 Million Loss
[Stay on top of transportation news: Get TTNews in your inbox.]
Hertz Global Holdings Inc. reported a loss that was nearly three times worse than analysts expected as it accelerated sales of electric vehicles to reduce its fleet of Tesla Inc. models that have weighed on profits for the past year.
The company said it lost $1.28 a share, or $392 million, against analyst expectation for a loss of 44 cents a share. The car rental company took a $195 million charge for the depreciation of an additional 10,000 EVs that Hertz is now holding for sale. While the company met revenue expectations, it is trying to quickly work past its failed bet on electric vehicles that resulted in lower rental rates and higher costs.
Shares fell 2.4% at 8:19 a.m. in New York before the start of regular trading. Hertz had dropped 44% this year through the April 24 close.
New CEO Gil West appears to be willing to take bitter medicine in the near term to get the right number of EVs in Hertz’s fleet and reduce the damage the cars are doing to the company’s profits. EVs have higher repair costs than traditional gas-powered vehicles and the values have fallen after Tesla cut prices last year and continued to do so this year.
West
“Fleet and direct operating costs weighed on this quarter’s performance,” West said in a statement. “We’re tackling both issues.”
“We’ve put the right strategy in place, and I see a clear path for Hertz to generate sustainable and higher earnings for our shareholders,” he said.
That will take time, which means Hertz will spend much of this year unwinding its big bet on electric cars made over the past two years at the behest of controlling shareholder Knighthead Capital Management. Hertz ordered 100,000 Teslas in October 2021 expecting prices to hold steady and for renters to snap them up. The opposite happened.
The company never bought that many and is now trying to sell 30,000 EVs by the end of the year.
Hertz said its monthly depreciation costs soared to $592 per vehicle, an unusually high amount in the rental business. Part of that is because used-vehicle prices rose so much in the comparable period last year when the company made money on some sales. Hertz said that $119 of the monthly per vehicle depreciation was related to the additional EVs that are held for sale.
Want more news? Listen to today's daily briefing above or go here for more info
Collision costs are still an issue. The company’s direct vehicle operating expenses rose 3% to $1.4 billion. If not for collision and repair expenses it would have been flat, the company said.
Besides the company’s EV problems, Hertz performance slumped in other areas. Revenue per day fell 7% to $56.68 and vehicle utilization dropped fell slightly to 76%. Rental companies like to be at 80% or better.
The CEO who doubled down on EVs, Stephen Scherr, stepped down last month. West, the former chief operating officer of General Motors Co.’s Cruise robotaxi unit, has held the top job at Hertz since April 1.
