The Covid-19 pandemic has claimed one more victim. For more than a century, the American car rental company Hertz has filed for bankruptcy in the United States on Friday, May 22. For the moment, this procedure only concerns its operations in the United States and Canada, the group said in a press release. 

"The impact of Covid-19 on travel demand has been sudden and dramatic, resulting in a sharp drop in company revenues and future bookings," said the group. "Uncertainty remains regarding the return of revenues and the complete reopening of the market (...) which necessitated today's action," he adds.

Hertz says it has taken "immediate action" that prioritizes the health and safety of employees and its customers. The Estero, Florida-based company employed 38,000 people at the end of December, including 29,000 in the United States

On April 21, Hertz had already announced that it would cut 10,000 jobs in North America, or 26.3% of its global workforce, to save money in the face of uncertainty caused by measures to stem the pandemic. 

Use of "Chapter 11" 

Hertz's board of directors voted to use "chapter 11" in a Delaware court, according to court documents. This device allows a company that can no longer repay its debt to restructure away from creditors. "The financial reorganization will provide Hertz with a path to a more robust financial structure, which will better position the company for the future," said Hertz.

The group did not mention the amount of its debt but the Wall Street Journal reported on Friday about $ 19 billion and nearly 700,000 vehicles largely unused because of the coronavirus.

The pandemic has brought activity to a halt and the group's management fears that the recovery will soon materialize. In addition, the question remains unanswered about the group's ability to find its business customers, while the pandemic has generalized teleworking.

Iconic of the crisis in the United States 

According to the boss, the use of Chapter 11 will protect "the value" of the group's assets and "will give the group the necessary time to set up a new, more solid financial base to successfully weather this pandemic and to better position ourselves". 

For the past few years, Hertz has been struggling with competition, including Avis Budget, and carpooling services, such as Uber. The company had thus suffered a fourth consecutive annual net loss in 2019. But 2020 had started well with an increase in turnover of 6% in January and 8% in February, compared to the same months last year. "Hertz has more than a century of industry leadership and we entered 2020 with strong revenue and profit dynamics," said Paul Stone, the group's CEO, who was quoted in the release.

This bankruptcy illustrates the extent of the crisis that the United States is currently going through, a consequence of the paralysis of entire swathes of the economy, notably transport and tourism, in an effort to contain the spread of the virus. In total, since the sudden economic downturn in mid-March, 38.6 million people have applied for unemployment benefit in the United States.

 With AFP and Reuters 

The summary of the France 24 week invites you to come back to the news that marked the week

I subscribe

Take international news everywhere with you! Download the France 24 app

google-play-badge_FR