The Story of Hertz Going Bust(bloomberg.com)
bloomberg.com
The Story of Hertz Going Bust
https://www.bloomberg.com/news/articles/2020-05-24/o-j-accounting-fraud-and-icahn-the-story-of-hertz-going-bust
119 comments
I had the unfortunate opportunity as an Accenture consultant to work on the Hertz redesign. It was a shit show and hands down the worst project I've ever been on. I left Accenture but not sure how much I'm allowed to talk about it.
Needless to say, leadership across ALL disciplines (mobile, front-end, backend, etc) was a fucking joke and they didn't listen to the red flags we brought up in literal sprint 1.
Sorry to hear about your Hertz experience.
Needless to say, leadership across ALL disciplines (mobile, front-end, backend, etc) was a fucking joke and they didn't listen to the red flags we brought up in literal sprint 1.
Sorry to hear about your Hertz experience.
For the most part, all that I've heard of Accenture seems to match what you are saying.
A remarkably large number of job offers/bid requests I've seen start with some variation of "Accenture screwed up and [client] is looking for someone else to take over". And looking at the former co-workers that have landed there it's not even a little surprising they're that bad.
I've seen this more than once. Senior management thinks maintaining a portfolio of software applications is like flipping hamburgers: they see no problem or risks in one team of developers handing the spatula to another team. What, wasn't the one-day knowledge transfer session not enough? So, the transfer from the home-grown team to Accenture is screwed up. Let's try it again, from the Accenture team to another team; lightning cannot strike twice, can it?
It's not the transfer. Accenture (or at least some parts of it) are just that bad.
Yep. Worked for a company that was brought in to fix what Accenture messed up. Sadly they were able to regain the contract that I worked on because of some bizarre run around involving another contract.....
I believe the parent comment was talking about the shitshow that Hertz was, not Accenture.
There’s a couple of us that were on the Accenture frontend team of the Hertz project that, justifiably, became amazing friends after such a dumpster fire of a project.
Accenture was just as culpable as Hertz in terms of incompetence and negligence.
Accenture was just as culpable as Hertz in terms of incompetence and negligence.
Oh no, definitely calling out ACN, where I worked at the time. Sorry if that wasn't clear.
Both are bad. Every big "consulting" company sucks nowadays.
I've had good experiences with Accenture in a staff aug role, but leading projects have been disasters. Similar problems working with Deloitte.
That being said, I've had nothing but good experiences working with McKinsey.
That being said, I've had nothing but good experiences working with McKinsey.
> Both are bad. Every big "consulting" company sucks nowadays.
From what I've heard, Accenture always sucked (except at C-suite sales, which I guess is all that really matters).
From what I've heard, Accenture always sucked (except at C-suite sales, which I guess is all that really matters).
Accenture tops the list though. I've worked with other consulting companies that are better compared to them.
[deleted]
What’s funny is that the Hertz website became so bad that I gradually stopped using Hertz (former Presidents Circle guy). Never knew that it was because they fired their entire team and replaced it with an offshore team.
My experience with Accenture is that you start with two blokes from Accenture in your team as fellow consultants and before you know there are 10 Accenture people without knowing what they are doing. On some projects I worked with them you had test teams in Manilla which just didn't do anything so you ended up doing all testing too.
The company is bankrupt, but Hertz is a success story for the executives who got rich and got out.
The incentives encourage destruction through short term value extraction at the expense of long term health.
The incentives encourage destruction through short term value extraction at the expense of long term health.
> "we had a great team and incompetent senior management."
Whether or not it's true, I think you'll find this sentiment from any engineering level alum from a big company that died.
Whether or not it's true, I think you'll find this sentiment from any engineering level alum from a big company that died.
Well yeah, it's not typically the engineering dept. that runs the boat into the iceberg.
Specific metaphor chosen on purpose.
Specific metaphor chosen on purpose.
2014 - its interesting this is when headquarters moved from NJ to Florida. Its a bit like SV - are California/North East expensive because its worth it? I'm not sure if Hertz went downhill because of the move or you just can't run a smart company from Florida.
I have a family member that worked for Hertz during the time of this move.
After a lot of consideration and soul searching, they decided not to move down because both his family and his wife’s family were in the North East U.S. and they had small kids who wouldn’t have adjusted well to a cross-country move.
So somewhat reluctantly, he resigned his job with Hertz and stayed back while the rest of the team moved down. It was difficult for him because he had worked there for a number of years to reach the level that he was at and essentially reset when he switched jobs.
Anyway, a short time after that, he found out that everyone he worked with and had made the move to Florida had been laid off by Hertz.
He dodged a bullet on that one. I always suspected the move was a strategic-but-unethical one by Hertz to terminate a whole bunch of people without drawing too much attention to themselves. (Older employees with families typically don’t make moves like that, and you can easily get rid of the rest after.)
After a lot of consideration and soul searching, they decided not to move down because both his family and his wife’s family were in the North East U.S. and they had small kids who wouldn’t have adjusted well to a cross-country move.
So somewhat reluctantly, he resigned his job with Hertz and stayed back while the rest of the team moved down. It was difficult for him because he had worked there for a number of years to reach the level that he was at and essentially reset when he switched jobs.
Anyway, a short time after that, he found out that everyone he worked with and had made the move to Florida had been laid off by Hertz.
He dodged a bullet on that one. I always suspected the move was a strategic-but-unethical one by Hertz to terminate a whole bunch of people without drawing too much attention to themselves. (Older employees with families typically don’t make moves like that, and you can easily get rid of the rest after.)
Can confirm, I have many anecdotes of folks who moved and regretted it, and people who found new local jobs who were grateful. It was gut-wrenching for almost everyone.
Our department was an exception. We got to stay in NJ (they laid us all off two years later.)
Our department was an exception. We got to stay in NJ (they laid us all off two years later.)
You can probably run a smart company from Florida if you start there but can you transplant a company from New Jersey to Florida and expect it to survive?
These corporate HQ moves don't seem to work out well (e.g. Boeing)
These corporate HQ moves don't seem to work out well (e.g. Boeing)
Physical locations matters. I feel like we're appreciating the advantages -- but also the deep shortcomings -- of remote work and distant offices.
Icahn is doing just fine. https://www.epsilontheory.com/the-hertz-story-isnt-what-you-...
He also cleaned up with covid bailout funds to close his losing position with Herbalife. The man is a walking plague.
We overlapped for a short time. It was my first job straight out of college. I worked around some really nice people but even my inexperienced self knew that it wasn't a good environment to grow (terrible code base, silo-ed teams, archaic processes, weeks onboarding, etc) so I left after 6 months.
I think it was about a year later when I heard the IT team was fired. The kicker: a lot were hired by IBM _and subsequently contracted to work for Hertz_ on the exact thing they were working on before.
Safe to say I didn't regret my decision at all
I think it was about a year later when I heard the IT team was fired. The kicker: a lot were hired by IBM _and subsequently contracted to work for Hertz_ on the exact thing they were working on before.
Safe to say I didn't regret my decision at all
It's interesting to hear both sides.
> Sidenote, the work we were doing was replaced with Accenture consultants, who couldn't handle it, screwing up so bad they ended up in court [3].
And elsewhere...
> I had the unfortunate opportunity as an Accenture consultant to work on the Hertz redesign. ... Needless to say, leadership across ALL disciplines (mobile, front-end, backend, etc) was a fucking joke and they [presumably Hertz?] didn't listen to the red flags we brought up in literal sprint 1.
> Sidenote, the work we were doing was replaced with Accenture consultants, who couldn't handle it, screwing up so bad they ended up in court [3].
And elsewhere...
> I had the unfortunate opportunity as an Accenture consultant to work on the Hertz redesign. ... Needless to say, leadership across ALL disciplines (mobile, front-end, backend, etc) was a fucking joke and they [presumably Hertz?] didn't listen to the red flags we brought up in literal sprint 1.
My original post makes it sound like the accenture engineers dropped the ball. That was not my intention. I wasn't personally involved, had already gone on to other things. My impression, in talking to hertz people over the subsequent years, were that the engineers were fine; it was an issue of sales overpromising and resource allocation, as well as incongruities between stakeholders, but that's second and third-hand information, so take that for what it's worth.
I think they mean Accenture leadership
Could be; I only worked in one company with Accenture (and during the AC->Accenture migration), and the management in that gig was 100% "host company".
Mind naming names on the “incredible division head”?
sorry, but I'm certain she would prefer I didn't.
hertz had a 'hackathon' (more like datathon?) at my university in 2013. They gave us data (no PII but demographics such as age) along with other store sales, etc. goal, take the data and draw some insights.
I showed them a chart on how the average age of their customer was going up and they were failing to get newer and younger customers. I also showed search trends on car rentals going down, and search trends on ride sharing going up. They didn't like my presentation at all =|
I showed them a chart on how the average age of their customer was going up and they were failing to get newer and younger customers. I also showed search trends on car rentals going down, and search trends on ride sharing going up. They didn't like my presentation at all =|
What an incredible way for a company to signal that they only want sycophants. Good on you for pointing out what probably should have been obvious to them.
Honestly this is a good thing. There are too many big companies, not enough small, we need more to fail - esp the type that have gone through lots of mergers to reduce competition.
Have you ever rented a car from a small company? The entire process sucks. Yea it is ok if it is a once a year vacation. But for a business trip it is such a waste of time.
While I agree with the sentiment, operating at scale does mean that consumers often get lower costs.
Smaller players would also be far less likely to enter less lucrative markets.
Smaller players would also be far less likely to enter less lucrative markets.
Often, but not always - sometimes the benefits of scale are eaten up by an oligopoly gouging customers. In New Zealand, the big rental companies were much much more expensive than small local companies that were hard to find because they didn't show up on the international aggregators.
And unlike the big companies, there were no hidden costs, no upsells, no attempts to scam, no attempts to extort huge fees when trying to change the rental, ... didn't even charge us for forwarding a traffic ticket which would have totally been their right.
After my experience with Hertz (US) as a customer, the only reason why I'm not 100% happy with them going under is that I don't expect their large competitors to be much better, and less competition means the others can become even worse.
And unlike the big companies, there were no hidden costs, no upsells, no attempts to scam, no attempts to extort huge fees when trying to change the rental, ... didn't even charge us for forwarding a traffic ticket which would have totally been their right.
After my experience with Hertz (US) as a customer, the only reason why I'm not 100% happy with them going under is that I don't expect their large competitors to be much better, and less competition means the others can become even worse.
i could get on board with this. Its shortsighted when companies are bailed out for being "too big too fail" so then we don't get a bunch of small companies filling the vacuum.
I think the most “duhhh” moment was moving the headquarters. Of course they lost a ton of experienced and qualified staff when they moved the headquarters to Florida. Why wasn’t this seen coming?
I don't want to reply with a blanket statement, but a lot of the times senior management just doesn't understand how much work it takes to build complex IT systems and how a great team can make it happen. They see IT as disposable and expect anybody with some computer skills to be able to do complex work.
That makes sense for IT networks, annoying as it may be. But the article makes it clear they lost quality leaders as well, and the CEO should have fully understood and appreciated the impact that would have.
The headquarters are in Estero/Ft Meyers florida. I would know little to nothing about this place except I have a friend living there. He was in golf course management, which should give you a hint about the type of town this is. It is largely a place for wealthy northern folks to spend the winter. To me it seems that the move was so that the CEO could live in a resort town.
Which I get why the CEO would want that, but I don’t get why the board would tolerate such a clear waste of their resources, plus the strategic risk that losing employees represents.
What is the ten-year survival rate for companies after a leveraged buyout? It has to be near zero right?
Full disclosure: I've worked in PE before, though I do not currently. Did not directly do anything involving LBOs.
Companies seeking LBOs are not generally in a great financial position. As a result, they tend to go bankrupt at a much higher rate than would otherwise be experienced. Hertz LBO happened before Icahn (a HF manager) got involved. People like Icahn don't invest in a company to lose money — clearly he believed that the company still had value even after PE got involved.
Companies seeking LBOs are not generally in a great financial position. As a result, they tend to go bankrupt at a much higher rate than would otherwise be experienced. Hertz LBO happened before Icahn (a HF manager) got involved. People like Icahn don't invest in a company to lose money — clearly he believed that the company still had value even after PE got involved.
You only hear about LBOs that fail. There are dozens that work every year
Do you know of any data referring to the success to failure ratio of leveraged buyouts?
The easiest way to do this is to look at the performance of LBO funds. It's up and down, returns are pretty poor compared to the stock market, but still positive, so that means they're getting back more cash than they are putting in - which means more success than failure, especially as success means +20 to +40% whereas fail means -80 or -90%
sceadu(1)
In the end Kathryn Marinello failed. She was at the helm for years where she could have positioned the company better. Blaming it on a 2014 misfilling and the wasted years cleaning it up only gives false cover. She didn't pay back debit when times were better because it would have affected her compension.
Why do you say Kathryn Marinello failed?
Compensation incentives are there for a reason. Acting according to them just means fulfilling the shareholders wishes. (Unless the shareholders are idiots or impotent and the board set the wrong incentives.)
Running a riskier strategy that fails under a pandemic is a perfectly cromulent business decision to make. Shareholders and creditors knew what they were in for.
Not all gambles pay off. That doesn't mean taking on any risk whatsoever is wrong.
Compensation incentives are there for a reason. Acting according to them just means fulfilling the shareholders wishes. (Unless the shareholders are idiots or impotent and the board set the wrong incentives.)
Running a riskier strategy that fails under a pandemic is a perfectly cromulent business decision to make. Shareholders and creditors knew what they were in for.
Not all gambles pay off. That doesn't mean taking on any risk whatsoever is wrong.
> Unless the shareholders are idiots or impotent and the board set the wrong incentives.
That's quite a big leap. Humans are exceptionally good at gaming objective metrics if that's all that matters... setting the right incentives is by no means something any non-idiot can do; it's in fact exceptionally rare to find people able to set right incentives for an entire organization (or for it's leadership; if the leadership doesn't inherently have the right motivation, I don't actually think you can fix that via a set of incentives; probably the best you can do is constantly-modifying incentives, tracking aggressively any sign of misaligned motivation etc)
That's quite a big leap. Humans are exceptionally good at gaming objective metrics if that's all that matters... setting the right incentives is by no means something any non-idiot can do; it's in fact exceptionally rare to find people able to set right incentives for an entire organization (or for it's leadership; if the leadership doesn't inherently have the right motivation, I don't actually think you can fix that via a set of incentives; probably the best you can do is constantly-modifying incentives, tracking aggressively any sign of misaligned motivation etc)
Yes, that is indeed a problem.
However, CEO and shareholders are playing a repeated game here. So they can retro-actively reward last years performance by giving more (or less) money for next year.
Mostly, shareholders do want CEOs to take some amount of risk. And giving your CEO eg stock options means you want to encourage risk taking.
If you want your CEO to be careful, you pay them in eg long term company debt instead.
Exactly how you align the precise risk appetites is a harder problem. And there might be some loopholes clever management can exploit. But the broad strokes are clear.
However, CEO and shareholders are playing a repeated game here. So they can retro-actively reward last years performance by giving more (or less) money for next year.
Mostly, shareholders do want CEOs to take some amount of risk. And giving your CEO eg stock options means you want to encourage risk taking.
If you want your CEO to be careful, you pay them in eg long term company debt instead.
Exactly how you align the precise risk appetites is a harder problem. And there might be some loopholes clever management can exploit. But the broad strokes are clear.
> Humans are exceptionally good at gaming objective metrics if that's all that matters
I think that's OP's point: the board should understand that, and set them appropriately.
I think that's OP's point: the board should understand that, and set them appropriately.
And my point is that's basically impossible to "set them appropriately", and one shouldn't throw around strong words such as "idiots or impotents" for those failing to do so. Did the board fail in its mission? Obviously. But do only the idiots fail?
Shareholders also diversify over several firms — so the individual parts of a portfolio should run at riskier positions on the efficient frontier than shareholders (already the investors with the highest risk appetite) wish to have for themselves.
Good comment that I was going to make myself. I hope you won't mind if I translate for people (perhaps non-native English speakers) unfamiliar with the jargon:
Large investors have stock in many companies. Some are low-risk, some are high-risk. Ideally, these will balance each other out. In theory, this allows large, publicly-traded companies to do risky things. Amazon was a great example of this for years.
The problem is that some companies are perceived as risky or not-risky by different investors.
If 30% of their shareholders want a conservative strategy and 30% of them want a risky strategy, the conservative shareholders will always win because it's easier to build a coalition around "don't do anything" than it is around "do something". "Do something" can mean any one of a billion different strategies, and it's very hard to get a large group to agree on one.
Large investors have stock in many companies. Some are low-risk, some are high-risk. Ideally, these will balance each other out. In theory, this allows large, publicly-traded companies to do risky things. Amazon was a great example of this for years.
The problem is that some companies are perceived as risky or not-risky by different investors.
If 30% of their shareholders want a conservative strategy and 30% of them want a risky strategy, the conservative shareholders will always win because it's easier to build a coalition around "don't do anything" than it is around "do something". "Do something" can mean any one of a billion different strategies, and it's very hard to get a large group to agree on one.
So by that logic the shareholders and board members _were_ idiots then.
Making a bet and losing doesn't imply idiocy. What were the odds? What was the potential payoff?
The odds, according to more than a few scientists (but citing just one here: https://cmr.asm.org/content/20/4/660), were 100% in not too much time.
I don't know if that makes shareholders and board members "idiots," just that it's something the firm probably should've worked to mitigate a bit more effectively.
Example: EHI is still holding on, and they (from my understanding based on employees I've spoken with) had continuity planning in place for situations that might've significantly impaired travel.
I don't know if that makes shareholders and board members "idiots," just that it's something the firm probably should've worked to mitigate a bit more effectively.
Example: EHI is still holding on, and they (from my understanding based on employees I've spoken with) had continuity planning in place for situations that might've significantly impaired travel.
That's good on EHI. Though perhaps that planning would have cost some extra time and money that would have been 'wasted', if the pandemic hadn't happened.
> perhaps that planning would have cost some extra time and money that would have been 'wasted', if the pandemic hadn't happened.
Same with insurance, which is why there are many cases where insurance is a requirement (usually cases where people dismiss the risk).
Same with insurance, which is why there are many cases where insurance is a requirement (usually cases where people dismiss the risk).
Yes, exactly.
Though it's not just odds and payoff, but also risk appetite. There's something like risk-aversion, and a corresponding risk-return-tradeoff.
But unless we have evidence to the contrary, we can assume that the shareholders are broadly risk-neutral. Especially since lots of shareholding these days is via widely diversified index funds, who don't need to care whether a any single company they hold goes bankrupt as long as the expected value of gambles they take are positive.
Though it's not just odds and payoff, but also risk appetite. There's something like risk-aversion, and a corresponding risk-return-tradeoff.
But unless we have evidence to the contrary, we can assume that the shareholders are broadly risk-neutral. Especially since lots of shareholding these days is via widely diversified index funds, who don't need to care whether a any single company they hold goes bankrupt as long as the expected value of gambles they take are positive.
Indeed, so the correct question is "was / is Icahn's risk margin (since he had the largest shareholding and he's a known activist) too small?" Was there an implied direction of getting new management in turning the ship around and then flipping it? Would this lead to good long term decisions being traded off for short term ones?
> But unless we have evidence to the contrary, we can assume that the shareholders are broadly risk-neutral. Especially since lots of shareholding these days is via widely diversified index funds
Except there are low and high risk index funds as well. Just because you're invested through a passive index fund, doesn't mean you're risk-neutral.
Except there are low and high risk index funds as well. Just because you're invested through a passive index fund, doesn't mean you're risk-neutral.
Yes. Hence the 'broadly'.
As an investor, you can also always just add leverage to your index fund holding, if you want more risk. If your jurisdiction allows you, that is.
As an investor, you can also always just add leverage to your index fund holding, if you want more risk. If your jurisdiction allows you, that is.
absolutely not.
If shareholders were risk neutral, they'd be buying bonds, or holding cash. "passive" investment is wholly built upon the concept that "passive" investment outpaces active investment - the very fact that you're in the equity markets suggests you are chasing the 6-8%+ annualized returns (and associated risks) from equity investments. Passive is a replacement for stock picking, and while more conservative in nature, isn't really so in a relative sense.
> If shareholders were risk neutral, they'd be buying bonds, or holding cash.
Huh?
Many people hold both bonds and stocks and other assets, like real estate.
Index funds give you broad diversification at low fees. That diversification mostly removes out company-specific idiosyncratic risk, but it still leaves you exposed to market risk, and no one in their right mind claims otherwise.
Even a risk averse person (and even more a risk neutral person) can rationally hold on to very risky assets. Risk aversion just means that you require a higher return for a given level of risk.
And a risk neutral person doesn't care at all about risk, they only care about expected returns. That's mostly a convenient abstraction like the famous home economicus.
I don't understand why a risk neutral person would want to prefer bonds and cash?
Huh?
Many people hold both bonds and stocks and other assets, like real estate.
Index funds give you broad diversification at low fees. That diversification mostly removes out company-specific idiosyncratic risk, but it still leaves you exposed to market risk, and no one in their right mind claims otherwise.
Even a risk averse person (and even more a risk neutral person) can rationally hold on to very risky assets. Risk aversion just means that you require a higher return for a given level of risk.
And a risk neutral person doesn't care at all about risk, they only care about expected returns. That's mostly a convenient abstraction like the famous home economicus.
I don't understand why a risk neutral person would want to prefer bonds and cash?
It does when you kill the entire company. It’s like losing your house in a game of poker — the problem wasn’t going all in with pocket aces, it was putting your house in the pot.
She took over in Jan 2017 - three years isn’t much to pay back $20Bn of debt.
Probably fairer to say that a decade of CEOs all failed.
Probably fairer to say that a decade of CEOs all failed.
I don’t know if that’s fair. Hertz floundered for over a decade with leveraged buyouts, failed mergers, market missteps and accounting falsehoods. She got 9 quarters to turn that around, she was headed in the right direction, but it was too little too late.
Then maybe the people who have decided the compensation structures are more to blame?
Yeah nope. Did you read the article at all? The string of bad choices before that is what did it...
US companies aren't supposed to pay back debt (in Hertz's case, how did 2005 affect the balance sheet?) because that would be an inefficient use of capital. US consumers are supposed to spend, not save, to stimulate the economy. US government is supposed to run a deficit, not a surplus.
And yet the aggregate US net worth is positive: about 5x its GDP. What sector have I missed?
And yet the aggregate US net worth is positive: about 5x its GDP. What sector have I missed?
Despite the snark, you are partially right.
Having debt in your capital structure indefinitely is a perfectly fine decision to make.
If there's a political will to favour equity over debt, the lawmakers should first remove the tax benefits of debt over equity. See https://en.wikipedia.org/wiki/Tax_benefits_of_debt
Having debt in your capital structure indefinitely is a perfectly fine decision to make.
If there's a political will to favour equity over debt, the lawmakers should first remove the tax benefits of debt over equity. See https://en.wikipedia.org/wiki/Tax_benefits_of_debt
That wasn't snark. As an undergrad, I was taught that households should be positive, corporations negative, and public sector balanced on average, which would balance out.
Either I'm missing a sector in the original analysis above (please tell me what it is), or the "common wisdoms" expressed there are false (and I should be more cynical), or...?
Either I'm missing a sector in the original analysis above (please tell me what it is), or the "common wisdoms" expressed there are false (and I should be more cynical), or...?
Your tone is snarky despite your words being more or less correct. Correcting someone by saying you’re not using snark is just digging yourself a bit deeper I’m afraid.
Mostly agreed.
Thank you.
> Having debt in your capital structure indefinitely is a perfectly fine decision to make.
We're hearing this argument a lot recently, but aren't we past that already in 1980s?
As I recall, it was somewhat popular among companies to pile up leverages by buying a large potion of their own stocks. The reasoning was the same as today: it was supposed to benefit shareholders because a levereged BS has tax benefits.
... which subsequently resulted in those highly-levereged ("recap'ed") companies filing for bunkruptcy. So that hack was shunned by the time of 1990s. What does make this time different?
We're hearing this argument a lot recently, but aren't we past that already in 1980s?
As I recall, it was somewhat popular among companies to pile up leverages by buying a large potion of their own stocks. The reasoning was the same as today: it was supposed to benefit shareholders because a levereged BS has tax benefits.
... which subsequently resulted in those highly-levereged ("recap'ed") companies filing for bunkruptcy. So that hack was shunned by the time of 1990s. What does make this time different?
If you have shares in enough companies, you don't particularly care if a few of them go bankrupt every once in a while, _if_ that trade-off makes you enough money on average.
Mostly things haven't changed that much since the 1980s. The biggest difference is probably that individual investors are les likely to own specific shares, and more likely to own via an (index) fund.
(That doesn't mean that any particular balance between equity and debt is the right one. Just that the occasional bankruptcy is not a nail in the coffin.)
Mostly things haven't changed that much since the 1980s. The biggest difference is probably that individual investors are les likely to own specific shares, and more likely to own via an (index) fund.
(That doesn't mean that any particular balance between equity and debt is the right one. Just that the occasional bankruptcy is not a nail in the coffin.)
Debt is how much (negative) money you have. Net worth also takes non-monetary assets into account. If you take out a loan to buy a house your debt increases but your net worth is constant.
And, of course, every debt is also an asset on someone else's balance sheet.
So combined US assets are worth a great deal, enough so the declining equity position of (consumers+businesses+government) in those assets has not been significant. That makes sense. Thank you.
>So combined US assets are worth a great deal
Aggregate US household net worth is now upwards of $100 trillion.
That puts the $25 trillion in US National debt in perspective.
Aggregate US household net worth is now upwards of $100 trillion.
That puts the $25 trillion in US National debt in perspective.
> The company also found that Dollar Thrifty had let the tires on its cars get thinner than Hertz allowed, and many had to be replaced at a cost of $30 million
I always wonder if its worth going cheaper or more expensive when renting cars. Stuff like this is interesting, I wonder how many other corners are cut at the cheaper places.
I always wonder if its worth going cheaper or more expensive when renting cars. Stuff like this is interesting, I wonder how many other corners are cut at the cheaper places.
I've always rented from Hertz because they've historically been the least hassle, if more expensive than Enterprise.
I live in downtown Toronto and don't own a car. I use car sharing for local needs, but the traditional car rental companies for when I need to leave the city. Enterprise has been consistently terrible. On multiple occasions I've had to wait hours past my scheduled pick-up time due to either understaffing, overbooking, and/or due to other events. Enterprise apparently has a deal with insurance companies where they loan cars after accidents. I once had to wait 12 hours for a car as they were over-booked due to accidents after a snow storm. One time I was rear-ended in an enterprise-rented car. The other person's insurance dealt with the damages, but 18 months later they called me up, demanding payment for the time the car was in the shop.
I used to rent from national/alamo as they would rent to me w/o mandatory extra insurance when I was under 25. They were bought out by enterprise and almost immediately went downhill.
Hertz has always had a car available when promised. I can also take the rentals across the border to the US w/o extra fees. Twice they had to upsize my car for whatever reasons and they gave me a discount to deal with the greater fuel consumption.
As somebody who is a loyal Hertz customer, I worry what the company will look like after the bankruptcy.
I live in downtown Toronto and don't own a car. I use car sharing for local needs, but the traditional car rental companies for when I need to leave the city. Enterprise has been consistently terrible. On multiple occasions I've had to wait hours past my scheduled pick-up time due to either understaffing, overbooking, and/or due to other events. Enterprise apparently has a deal with insurance companies where they loan cars after accidents. I once had to wait 12 hours for a car as they were over-booked due to accidents after a snow storm. One time I was rear-ended in an enterprise-rented car. The other person's insurance dealt with the damages, but 18 months later they called me up, demanding payment for the time the car was in the shop.
I used to rent from national/alamo as they would rent to me w/o mandatory extra insurance when I was under 25. They were bought out by enterprise and almost immediately went downhill.
Hertz has always had a car available when promised. I can also take the rentals across the border to the US w/o extra fees. Twice they had to upsize my car for whatever reasons and they gave me a discount to deal with the greater fuel consumption.
As somebody who is a loyal Hertz customer, I worry what the company will look like after the bankruptcy.
What I liked about Hertz was being able to choose a particular from a collection of models in the chosen size category, which allowed me to get the combination of CarPlay and rear camera that I liked.
As for the article blaming their fleet for sticking with sedans for too long, to me as a European traveler, this is a feature. One time, I rented from a different company, which "generously" stuck me with some monster SUV, and I mostly hated the experience.
As for the article blaming their fleet for sticking with sedans for too long, to me as a European traveler, this is a feature. One time, I rented from a different company, which "generously" stuck me with some monster SUV, and I mostly hated the experience.
> As for the article blaming their fleet for sticking with sedans for too long, to me as a European traveler, this is a feature. One time, I rented from a different company, which "generously" stuck me with some monster SUV, and I mostly hated the experience.
I also like sedans, particularly small ones that don't use much fuel. And all of the rental companies have sedans in their fleets. The issue is that they depreciate quickly because of Americans' preferences for trucks and SUVs.
I'm gonna make up some numbers here, but they illustrate the point. A Toyota Tacoma that costs $30,000 new might retain 75% of it's value after 3 years and 30,000 miles (these numbers are approximate). So you sell it for $22,500 and you take a $7,500 depreciation hit.
Meanwhile, an Hyundai Elantra that costs $21,000 retains 55% of it's value over that same period, so you can sell it for $11,500 and take a $9,450 depreciation hit.
As a general rule, trucks seem to retain their value very well, followed by SUVs and then sedans (at least in the US). Luxury sedans devalue the most.
The issue that Hertz had is that they bought a bunch of sedans and then the market preference shifted heavily to SUVs (with oil prices being low). So their initial calculations showed that they'd be able to sell their cars on the used market for price $X, but then they ended up being worth a lower amount, $Y, when consumer preferences shifted.
I also like sedans, particularly small ones that don't use much fuel. And all of the rental companies have sedans in their fleets. The issue is that they depreciate quickly because of Americans' preferences for trucks and SUVs.
I'm gonna make up some numbers here, but they illustrate the point. A Toyota Tacoma that costs $30,000 new might retain 75% of it's value after 3 years and 30,000 miles (these numbers are approximate). So you sell it for $22,500 and you take a $7,500 depreciation hit.
Meanwhile, an Hyundai Elantra that costs $21,000 retains 55% of it's value over that same period, so you can sell it for $11,500 and take a $9,450 depreciation hit.
As a general rule, trucks seem to retain their value very well, followed by SUVs and then sedans (at least in the US). Luxury sedans devalue the most.
The issue that Hertz had is that they bought a bunch of sedans and then the market preference shifted heavily to SUVs (with oil prices being low). So their initial calculations showed that they'd be able to sell their cars on the used market for price $X, but then they ended up being worth a lower amount, $Y, when consumer preferences shifted.
Thanks for the explanation! This seems very plausible to me, but I wonder why that is so.
I can understand trucks retaining their value, as there is a clientele who drives them for utilitarian reasons (though not necessarily the ones who buy them new). I can understand why luxury sedans devalue quickly, as they are bought for prestige.
But it is not self evident to me why SUVs would have superior utilitarian value to regular sedans.
I can understand trucks retaining their value, as there is a clientele who drives them for utilitarian reasons (though not necessarily the ones who buy them new). I can understand why luxury sedans devalue quickly, as they are bought for prestige.
But it is not self evident to me why SUVs would have superior utilitarian value to regular sedans.
There's nothing self-evident about it :)
Crude oil was going for $113/barrel in 2014 (which is likely around the time that Hertz made the decision to buy sedans) and then went down to less than half of that a year later. While the price has fluctuated since then, the prices have remained fairly low. Meanwhile, Americans like SUVs for reasons that I don't fully understand, but it's just a fact. And when gasoline is cheap, it doesn't cost that much more to buy one, so demand is high, and therefore resale prices go up (at least compared to sedans).
Crude oil was going for $113/barrel in 2014 (which is likely around the time that Hertz made the decision to buy sedans) and then went down to less than half of that a year later. While the price has fluctuated since then, the prices have remained fairly low. Meanwhile, Americans like SUVs for reasons that I don't fully understand, but it's just a fact. And when gasoline is cheap, it doesn't cost that much more to buy one, so demand is high, and therefore resale prices go up (at least compared to sedans).
They do not. The higher price for the SUV is a product of American market preferences for SUVs that have nothing to do with utility and everything to do with branding and self-image.
I hated Hertz with a passion. On one occasion I reserved a compact car. When I arrived they didn't have any available, so they "upgraded" me to an Infiniti Q60. The Q60 is a two-door car; the other couple we were traveling with were older and it would have been extremely difficult for them to get in and out of the back seat. Fortunately, they had rented an SUV, so when we went to the same places on our trip we went in their car.
The trunk on the Q60 wasn't big enough to hold all our luggage, the car required super-premium gas, it got crap gas mileage, and after the trip Hertz tried to bill me $150 for gas, even though I had paid the premium for a gas fill up at the end. I swore I would NEVER rent from Hertz again. I even cancelled a reservation I had with Dollar Rent-a-car when I discovered that they were owned by Hertz.
The trunk on the Q60 wasn't big enough to hold all our luggage, the car required super-premium gas, it got crap gas mileage, and after the trip Hertz tried to bill me $150 for gas, even though I had paid the premium for a gas fill up at the end. I swore I would NEVER rent from Hertz again. I even cancelled a reservation I had with Dollar Rent-a-car when I discovered that they were owned by Hertz.
I generally have a 3-strikes rule with companies. Single-bad experiences can be for any number of reasons. The person you dealt could have been a jerk or going through a divorce, or whatever.
If I got a rental car that required premium gas, I'd still fill it with regular.
That being said, I hear you.
If I got a rental car that required premium gas, I'd still fill it with regular.
That being said, I hear you.
I've also had similar experiences with Enterprise. The outcome was different. In a few cases I've driven off with cars from their luxury fleet because the car I had reserved, midsize SUV, was unavailable. So for $50/day/weekend I've driven XC90, Escalade, and a F150. But I've never had to wait 12 hours. They'd call in a car from another location before that would happen.
Also, great experiences with Hertz. I've rented through them in many countries and it's always been great service.
Also, great experiences with Hertz. I've rented through them in many countries and it's always been great service.
> I've always rented from Hertz because they've historically been the least hassle, if more expensive than Enterprise.
The only company that insisted on doing a personal credit pull for a rental that was being paid for on corporate card. And then declined me because "details didn't match". And then (initially) refused to refund my prepaid rental.
Enterprise on the other hand has always been a cakewalk for me.
The only company that insisted on doing a personal credit pull for a rental that was being paid for on corporate card. And then declined me because "details didn't match". And then (initially) refused to refund my prepaid rental.
Enterprise on the other hand has always been a cakewalk for me.
I can’t remember if I’ve ever seen Sixt in North America? They’re definitely one step above the rest here in Europe
They're a step above in the US as well. I rent from them whenever possible. Their vehicle selection is relatively small, they have few outlets, and I can't say they have the best (or most uniform) service.
But they're the only agency that actually rents cars I have any desire to drive.
I got a brand new full-size Volvo S90 sedan for what all the other agencies charge for a janky Corolla or something. And this wasn't a lucky upgrade scenario, they just had better cars at lower prices when booking.
But they're the only agency that actually rents cars I have any desire to drive.
I got a brand new full-size Volvo S90 sedan for what all the other agencies charge for a janky Corolla or something. And this wasn't a lucky upgrade scenario, they just had better cars at lower prices when booking.
Rented a Jaguar F-Type from Sixt during a trip to Miami. Service was great, car was awesome, and I paid around the same I would have for a 4cylinder Mustang from somewhere else.
I've used them once in Florida. I've noticed that they do not seem to have as many locations here as they used to, though.
They have locations at larger US airports. I've used them a few times and never had a bad experience.
I have always liked enterprise. You could sometimes get pretty interesting cars from them.
The more and less expensive places are owned by the same companies in most cases. The flagship gets the newest cars. When they get a bit older, they get moved to the mid-tier prices, then to the cheapest places, before sold as used cars in wholesale. So that would be Hertz-Dollar-Thrifty, And you can quickly find out many of the rest. I don’t know how Enterprise manages its fleet though.
It's stunning to me that such a (seemingly?) relatively modest maintenance cost would be specifically called out as a massive oversight.
Perhaps I'm thinking about this the wrong way. Oil changes cost next to nothing, the customer pays for fuel, everything from brakes to suspension components on down to wiper blades are irrelevant when they sell the cars before any of that stuff needs to be replaced. Maybe tires actually are their biggest wear item?
While you might generally not have to replace tires before, say, 30k miles, the tires on a rental car do not exactly live an easy life, and when you're talking about fleets going up to 50k miles, they'll absolutely be needing replacement.
It also makes me wonder if Dollar Thrifty was letting them get illegally low, or just below the Hertz standard.
Perhaps I'm thinking about this the wrong way. Oil changes cost next to nothing, the customer pays for fuel, everything from brakes to suspension components on down to wiper blades are irrelevant when they sell the cars before any of that stuff needs to be replaced. Maybe tires actually are their biggest wear item?
While you might generally not have to replace tires before, say, 30k miles, the tires on a rental car do not exactly live an easy life, and when you're talking about fleets going up to 50k miles, they'll absolutely be needing replacement.
It also makes me wonder if Dollar Thrifty was letting them get illegally low, or just below the Hertz standard.
I was able to get very cheap deals at renown companies with high quality service and also had to use expensive deals at very shitty ones.
With massive rental cars franchising you never know. Rental car is always a potential problem and should be treated as such.
Hence, the main property you should be looking for is how does the rental company manage problems. Starting from the rental garage (when you point to some issue like worn out tires) and throughout the road. Also it means you should make some trial and errors.
With massive rental cars franchising you never know. Rental car is always a potential problem and should be treated as such.
Hence, the main property you should be looking for is how does the rental company manage problems. Starting from the rental garage (when you point to some issue like worn out tires) and throughout the road. Also it means you should make some trial and errors.
The article uses the term 'bitfd' which apparently means "burn it the fuck down".
why is Carl Icahn, always involved in dirty takeovers n putting the wrong managers.
Turo[0] immediately crossed my mind upon finishing the article. I have never used a traditional car rental service and plan to avoid them.
[0] https://turo.com/
[0] https://turo.com/
I'm not sure how that's your takeaway here.
Hertz's troubles seem pretty unrelated to the experience as a consumer.
While Turo is great for your weekend trip or whatever, it is not at all good for a business traveler.
Hertz's troubles seem pretty unrelated to the experience as a consumer.
While Turo is great for your weekend trip or whatever, it is not at all good for a business traveler.
the business traveler began using other things. its this same mentality ('it doesn't relate, business <insert here> are our customers and they wont go away') that gave a false sense of security to blackberry.
I agree this is a weak comment. My takeaway is that Hertz seems irredeemable as a consumer and that alternatives exist.
To us, there is a quote in a different bloomberg article from last week [1] which strikes us as accurate. Attributed to Maryanne Keller, who is referred to in this article, it says:
> 'It’s a saga about gross mismanagement,” said Maryann Keller, a longtime auto-
> industry consultant who was on the board of Dollar Thrifty when Hertz acquired
> the company. “It could have been salvaged had he picked the right management,”
> she said, referring to Icahn.'
Icahn lost $1.6b. Thousands of us lost our jobs. But these C-suiters sailed the company to bankruptcy over five years, each of them extracting 7 or 8 figure bonuses. The CIO who laid us all off, for example, received $6.5 million compensation that year [2]. (Sidenote, the work we were doing was replaced with Accenture consultants, who couldn't handle it, screwing up so bad they ended up in court [3].)
One former colleague of mine wrote a post on LinkedIn suggesting Icahn was the unwitting victim of untenable debt situation, and while he may be correct that the debt made it difficult, Icahn can read a balance sheet and he understood the situation.
I can't speak about Marinello's performance, but I agree that the problem dates back to 2014 or even earlier. People have a widespread belief that Frissora was flying too close to the sun, driven by his aggressive personality. Despite his flaws, he had a great team of people who kept the business running, and it wasn't Frissora who fired them all. Nobody, it turns out, was a fan of him. But everyone agrees he was far better than the gang of unusually wealthy miscreants that Icahn replaced him with.
[1] https://www.bloomberg.com/news/articles/2020-05-27/icahn-fil...
[2] https://www.cio.com/article/3404205/how-much-do-cios-really-...
[3] https://news.ycombinator.com/item?id=19737070