Driving through a Perfect Storm

Context

When the world shut down in early 2020, Hertz – once the crown jewel of car rentals – hit the skids at breakneck speed. A brand that had cruised along for over a century, through wars, recessions, and ownership changes, suddenly found itself in free fall. In military parlance, it was like a decorated general finding himself behind enemy lines without reinforcements, surrounded on all fronts. 

And yet, against the odds, Hertz didn’t retreat – it reloaded, restructured, and launched a counteroffensive that brought it back from the brink.

Real-Life Story

Founded in 1918 with a dozen Ford Model Ts, Hertz had long enjoyed the high ground. By the time it rebranded under John D. Hertz in 1923, the company was innovating faster than its rivals could react – coast-to-coast rentals, radio-equipped vehicles, and early loyalty programmes like the Hertz #1 Club Gold.

For decades, it dominated the rental space, becoming a household name synonymous with mobility.

But by April 2020, the firm’s defences crumbled. The COVID pandemic delivered a direct hit to its core operations. Air travel collapsed by 94%, and bookings dried up almost overnight. With 73% of its revenue historically tied to airport rentals, Hertz’s business model was run aground.

Trapped in Financial Crossfire

Yet, even before the pandemic, Hertz’s balance sheet showed a debt-to-capital ratio approaching 90%, which is nearly double the industry average. Much of this debt – somewhere between US$13bn and $15bn – was secured against its car fleet through asset-backed securities, a structure that worked well in fair weather but turned into a booby trap when used car values plunged.

April 2020 was the flashpoint. Hertz was forced to shell out an additional $135m just to keep its ABS arrangements intact. Meanwhile, a $400m missed payment loomed like a ticking time bomb. The financial cavalry never arrived – downgraded credit ratings disqualified the firm from federal rescue programmes, and the leadership vacuum, thanks to a revolving door of CEOs, made lenders skittish.

A patchwork of forbearance agreements failed to hold the line. With no clear path forward, Hertz was boxed in and out of ammunition. In May 2020, it pulled the trigger and filed for Chapter 11 in the US and Canada.

Reorganising for Battle

In the war room of bankruptcy court, Hertz mounted a disciplined approach. Executives at the top made brutal but necessary calls – 20,000 jobs cut, 200,000 vehicles sold, and a full retreat from capital-heavy operations.

The company axed $4bn worth of fleet orders, offloaded its Donlen leasing arm for $891m, and scaled up neighbourhood rentals, pivoting away from airports to meet changing consumer demand.

Cash reserves, credit lines, and renegotiated supplier terms kept the company on life support while it plotted its resurgence. The company’s war chest was refilled through a $5.9bn equity raise and $2.8bn in financing, including a revolving credit facility of $1.25bn.

Back from the Brink

In June 2021, just over a year after entering bankruptcy, Hertz revved back into the game. The restructuring plan wiped out over $5bn in debt, leaving it leaner, meaner, and with only $1.5bn in post-bankruptcy obligations. Creditors were repaid in full, and over $1bn was returned to shareholders – a rare battlefield victory in corporate warfare.

By 2024, the company was rebuilding its battalion. Losses were narrowing, depreciation of vehicle value became more efficient, and operational focus shifted towards customer trust, financial discipline, and premium service delivery. Hertz was once again manoeuvring for advantage, but this time with a sharper, leaner strategy.

Lessons from the Frontlines

The fall and rise of Hertz is a case study in corporate survival under fire. It exposes the dangers of overleveraging, the fragility of revenue concentration, and the costs of leadership instability. 

But more importantly, it’s a testament to the power of swift, decisive command in crisis. Unlike many firms that vanish into the fog of financial ruin, Hertz regrouped, recalibrated, and launched a full-scale comeback.

Postscript: Today, Hertz has clawed its way back from bankruptcy with strategic precision. In 2024, the company generated $2.04bn in revenue, narrowing its adjusted net loss by 13% year over year and improving its EBITDA losses – early signs of stabilisation. Operationally, it returned to core strengths: fleet optimisation, revenue management, and a 40% fleet refresh already completed. Liquidity remained steady, bolstered by new financing and disciplined capex. While profitability remains gradual, Hertz has entrenched its defences – proof that resilience wins the war.

Key Lessons

1) Burn Rate is Your Enemy – Cash Flow is Your Fuel

In wartime, cash is the ammunition that keeps operations running. Hertz’s liquidity discipline – through vehicle sales, reduced capex, and renegotiated terms – kept it from total collapse. WarTime CEOs preserve cash like a field general guarding their last supply line.

2) Know Your Leverage Or It Will Break Your Back

With a debt-to-capital ratio nearly double the industry average, Hertz walked into battle already wounded. WarTime CEOs know exactly where their financial armour is weakest and move fast to reinforce it – or they risk being overrun when the enemy strikes.

3) Asset-Backed Debt is a Double-Edged Sword

ABS gave Hertz scale, but collapsing car values turned that scale into a liability. WarTime CEOs understand the risks embedded in their funding models, especially those tied to volatile assets, but they build contingency plans.

4) The Fight Doesn’t End with Survival – Stay Battle-Ready 

Even in 2025, Hertz faces refinancing risks and margin pressures. WarTime CEOs remain vigilant long after the dust settles. The next ambush could be just around the corner.

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Until next week, may the force be with you.

Kevin

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