Hertz Bankruptcy Is A Big Deal

Hertz filed for bankruptcy protection on Friday and I think this is actually a pretty big deal. While Hertz will continue to operate, in order to satisfy their debts they will need to sell a big chunk of their 500k cars in the rental fleet. A bigger problem though, is that just about every car rental company is dumping cars because with no revenue, these "assets" are rapidly depreciating and costing car rental companies a lot. Avis Budget Group says that by June, their fleet will be 20% smaller. In total, there's around 2.3 million rental cars and if 20% is suddenly for sale, that's a sudden introduction of 460k rental cars - and this comes at a time when manufacturers look forward to increased sales from rental companies as they ramp up the fleet for higher summer demand. On Hertz car rental sale website, they are already pricing cars to sell quickly and this could cause a lot of pressure on dealerships selling used cars in the months to come. Unfortunately, this is one of the worst times to be competing with dealers since they are recovering from the shutdown since March. Naturally, this problem will extend to manufacturers due to decreased fleet sales and possibly gross margins due to pricing impact of fairly new rental cars hitting the market. Manufacturers have lost billions due to the pandemic and ongoing losses could lead to ongoing losses and unfortunately, mass layoffs. In the US, the auto industry directly employs nearly 2 million people and keeps hundreds, if not thousands of supplier businesses operating. If government stimulus isn't enough to stabilize this, we could be looking at a long-term negative economic impact.