On Tuesday, Sen. Elizabeth Warren (D-Massachusetts) despatched a letter to Hertz, criticizing the automobile rental firm for proposing a $2 billion inventory buyback plan that may line the pockets of executives and the non-public fairness agency Apollo International Administration, straight after the corporate exited chapter.
The letter comes at a time of skyrocketing rental car prices, which Hertz has been benefiting from. An evaluation cited by Warren’s workplace discovered that whereas rental automobile and truck costs elevated by 39 p.c between 2020 and 2021, Hertz’s costs have risen even greater. In August, the corporate was charging a median worth of about $114 a day — 147 p.c greater than their charge earlier than the pandemic.
Final Might, the corporate filed for chapter after the automobile rental business was hit laborious by the pandemic. Hertz laid off or furloughed 20,000 employees — simply after paying out $16 million in bonuses to executives — because it handled debt that it had already amassed earlier than the pandemic. The corporate exited chapter in June, simply over a 12 months after it filed, and paid out $3 million in bonuses to executives shortly after.
In November, practically 5 months later, the corporate introduced plans for a brand new program to purchase again as much as $2 billion worth of stocks, which is almost 20 p.c of the corporate’s market cap. Hertz’s shares rose by 6.8 p.c instantly following the announcement.
Warren has slammed this choice, saying that the buyback program will pad executives’ and Apollo’s pockets “on the expense of consumers and the long-term well being of the corporate,” giving a 70 p.c annualized return to the non-public fairness agency that had simply invested within the firm to be able to assist pull it out of chapter.
“This choice, and different actions taken earlier than and after their chapter course of, reveals that the corporate is completely happy to reward executives, firm insiders, and large shareholders whereas stiffing customers with record-high rental automobile prices and ignoring the current historical past that just about worn out the corporate,” Warren wrote within the letter.
“Hertz executives had been inexplicably rewarded on each side of this chapter,” Warren continued. “However customers are footing the invoice… Shoppers are struggling to make ends meet as prices rise all through the financial system and Hertz owes the general public an evidence for this company greed.”
Warren concluded her letter by demanding solutions about how the buyback plan will have an effect on the corporate’s well being and the way a lot executives and board members will profit. She additionally requested if the corporate is contemplating potential dangers posed to the business because of the Omicron variant of COVID-19, and whether or not the buyback program is a danger the corporate can afford to take.
Possible partially because of their sky-high costs, Hertz has been posting record profits, making $2.2 billion in whole income within the third quarter of 2021 alone. In the meantime, prospects have reported struggling to get rental automobiles at an affordable worth — and even to get one in any respect, no matter whether or not they’ve made a reservation. Automotive manufacturing has been inflicting shortages in rental automobile availability, and rental corporations are evidently benefiting from that in spades.
The rental car business isn’t alone in benefiting from the delicate COVID financial system to extend costs. Different firms have been benefiting from the financial system to pad their income, disguising rising costs as inflation. However in actuality, whereas manufacturing prices for a lot of corporations have gone up, information exhibits that firms have been absorbing these prices, reaching into customers’ pockets to pay for the upper prices after which some.