Hertz’s Doomed Bet on 100,000 Teslas
00:00 A pair of finance veterans bought the bankrupt car rental company Hertz in 2021 and were all in on electric. And it turned out to be a bad bet. Bloomberg\'s Erik Schatzker co-wrote the article and joins us now. Eric, just how long have you been working on this article? Alex I came to it three years ago when they when the two guys who bought Hertz out of bankruptcy concocted this electrification plan. And I have to be honest with you at the time, to them as well as to me it seemed like a great idea. Take a effectively a century old business and bring it into the 21st century by taking the gas powered cars that go to gas guzzlers and replace them with Teslas. So when you started writing the article three years ago, was the article like, this is a great move? And then slowly it turned into like, oh, this did not go well. Well, what it was at the time was this is what they\'re doing. And the reason we put it on the shelf is that we didn\'t know where it was going. As it turned out, it went it just didn\'t go. It just didn\'t go where they wanted it to. Were, they just early. Or were there fundamental issues in turning a rental car company into an EV fleet? That is in essence the issue. Some of it for sure is early EV demand from a rental standpoint just isn\'t there yet. And as we\'re finding out right now, EV demand from a purchasing standpoint isn\'t quite there yet either. The early adopters have their Teslas and other EVs,
everybody else just isn\'t ready yet. So that was problem number one. Problem number two, when you take newbie EV drivers and put them behind the wheel of a Tesla, they get into a lot of accidents, it turns out. And those accidents were extremely expensive. The cost hurts a lot of money and the cars were out of service for a long time. And finally, as we know now, Elon Musk, over the course of 2023, cut Tesla prices multiple times in a battle for market share. And that blew a hole wide open into Hertz\'s balance sheet cost the company hundreds of millions of dollars in depreciation costs, made a bad situation that much worse. And now they\'re unwinding the plan. They\'re selling off some 20,000 Teslas, doubling down on gas powered cars and putting Hertz kind of where it was before. Some of the stuff that that was part of the strategy is working, but the company going forward will look a lot more like the company that came into this. That\'s crazy. Who\'s in charge now? A guy named Gil West is the former chief operating officer at Delta Airlines. He definitely knows operations and is used to the ups and downs of the transportation industry. He\'s probably probably a good guy for a turnaround job like Hertz. Stephen. Sure. The former chief financial officer from Goldman Sachs, who has been the CEO for the past two years, has stepped down. And to be fair, he doesn\'t think he\'s the right guy for this job. He probably isn\'t.