Hertz: No Longer No. 1, For a Good Reason

Buck Throckmorton29 Mar, 2024 4 Min Read
This way to the EV egress!

The catastrophic tenure of Stephen Scherr as CEO of Hertz has come to an end, with the announcement that he is stepping down after just two years in the position. A confluence of business, environmental, cultural, and management pathologies came together under his leadership, leaving a bloodbath of red ink, a crashing stock price, and a growing number of dissatisfied customers.

At the center of the Hertz debacle was its poorly thought-out commitment to electric vehicles. With Scherr at the helm, Hertz acquired 60,000 EVs, with a goal of putting over 300,000 into service. A CEO who understood his product and his customers would have understood what a calamitous mistake Hertz was making. Mr. Scherr, however, was not such a CEO. Customers didn’t want to rent the EVs, counter agents struggled to lease them, and make-ready crews struggled to keep them charged and road-ready.

Tom Finnerty wrote about Hertz’s illogical commitment to EVs last November, noting that despite the blizzard of EV commercials that Hertz was running during sporting events, its investment in EVs was starting to cause financial pain due to the poor resale value and extraordinarily expensive repair costs of its electric vehicle fleet. In January of this year, Hertz waved the white flag on its EV misadventure, suspending its prior commitments and also dumping 20,000 of its current EV fleet. Hertz took a $245 million unplanned depreciation loss on those cars, which amounted to an unbudgeted loss of $12,500 per unit.

Um, no thanks.

But the news just kept getting worse. With the cost of excessive EV repairs on top of the depreciation loss, and with the company and its employees heavily distracted by the EV mess, Hertz recorded a loss of $348 million for the fourth quarter of 2023. By contrast, Hertz had a profit of $148 million during the same period the prior year. There was no way for Hertz to blame the economy or the state of the rental car business for its problems, because its competitor, Avis, reported fourth-quarter 2023 net income of $260 million on record revenue. Unsurprisingly, Hertz stock has collapsed, losing 60 percent of its value within the past year, while the overall stock market has risen.

The CEO had to go. But he never should have been hired in the first place. Who is Stephen Scherr? Per Linked In, he has graduate degrees from Princeton and Harvard. According to his biography on the Hertz website, “Stephen Scherr is Chair and Chief Executive Officer of Hertz. He is focused on transforming the iconic American company into a global leader in shared mobility, electrification, and digital-first customer experience. Prior to joining Hertz in February 2022, Stephen spent nearly three decades at Goldman Sachs.”

An elite education, decades at Goldman Sachs, and a globalist commitment to “shared mobility” and “electrification” may impress the Davos crowd, but Scherr’s resume and worldview made him a disastrous fit for this position. A rental car company’s assets necessarily burn petroleum, the product it sells is alien to the limousine left, and its middle-American customer base is generally held in contempt by the people who inhabit Scherr’s world.

But above all else, Scherr’s goal of making Hertz a prominent EV operator revealed a staggering obliviousness to the daily operations of its rental centers. A front-line worker at any Hertz airport location could have avoided the mistakes that Scherr made because counter agents have an understanding of what is involved in each customer transaction. EVs are as bad a fit for a rental car operation as tofu is for a barbecue restaurant. Reasons include:

  • EVs are not operationally interchangeable with the gasoline-powered cars that customers are used to. Driving in an unfamiliar location, possibly at night, is not a good time to try to learn an entirely different way of operating a vehicle.
  • There is not likely to be charging capacity at lodging spots. While Scherr probably has an EV charger at his home and in his corporate parking spot, the Hertz customer staying at a hotel or vacation rental probably doesn’t.
  • Customers need to rent cars in winter. Remember the Chicago horror story where cars couldn’t keep a charge, or even get charged up? They also need to use air conditioning in summer, which also chews up range.
  • EVs can’t be quickly charged up on the way to be turned in. By contrast, a gasoline-powered car can be fueled up in minutes.
  • For those EVs not brought back with a full charge, the rental facilities don’t have the charging capacity or turnaround time to spend hours re-charging every turn-in. They need to get those cars back on the line.
  • Cars are often rented for destinations outside the major cities, or for day trips to nearby cities where air travel isn’t practical.

Of course, despite his disastrous mismanagement of Hertz, Stephen Scherr was also enriching himself via the company and its shareholders. According to a story in the Wall Street Journal titled “Meet the CEOs Who Pull in More than $100 Million a Year,” Scherr was the third highest paid CEO in 2022, with total compensation of $182 million, trailing only the CEOs of Blackstone and Alphabet (Google).

A job well done.

The hiring of a person like Scherr to lead a company like Hertz never should have happened. He apparently saw his primary role as advancing the globalist environmental agenda, to the detriment of Hertz’s customers, employees, and shareholders. He conveyed both an ignorance of and a hostility toward the product that is at the core of every consumer interaction with Hertz, and was richly compensated while destroying the company.

Once upon a time, the lessons learned from Stephen Scherr’s disastrous tenure at Hertz would make a good case study at elite business schools. Unfortunately, his leadership style and agenda are reflective of what is now being learned at those schools. I fear that the lesson in elitist circles is not that Scherr should be viewed as a destructor, rather that he was a visionary who boldly, but unsuccessfully, tried to transition Hertz and save the planet. He just suffered from bad luck and bad timing.

Buck Throckmorton is a writer ("co-blogger") at the Ace of Spades HQ blog. His career includes many years in banking and commercial lending, as well as a stint with an American auto manufacturer. Buck's writing often takes a critical look at electric vehicles, "green" energy, and woke capital. Twitter: @BuckThrockmort; email: buck.throckmorton@protonmail.com


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11 comments on “Hertz: No Longer No. 1, For a Good Reason”

  1. Once again the American People still want the Freedom to choose for themselves and not have the Government and/or the Useless Nations(UN)choose for us and going totally EV over the totally fake Global Warming/Climate Change the American People have spoken

  2. I went to Salt Lake City for a weekend a month ago. Nobody had rented from the EV stalls - they were all full. To any consumer it made perfect sense. Why would you rent an EV for a ski trip? For an industry that succeeds or fails based on asset utilization and "turns"? Ridiculous! Any child capable of running a lemonade stand would understand where this would end.

  3. This here. I had assumed Hertz went covid belly up. Apparently there were still some millions of dollars to be looted. Good job Scherr.

  4. “Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
    This is known as "bad luck.”
    ― Robert Heinlein

  5. Look closer at his background, he is also an Aspen Institute alum. It's interesting how many CEOs and College Presidents are being trained and vetted by far left progressive Aspen... Also blame the board members and ESG lobbies that push their craziness into the business world. If I owned Hertz stock shares, I would be suing everyone and their brothers. And id start with Scher and his ill gotten bonuses...

  6. Any normal person made a stupid and easily foreseeable mistake that cost a company even a fraction of what this airheaded goofball did, and he'd find himself all but homeless and the closest thing to unemployable outside unloading trucks or sweeping floors.

    Somehow, though, this pirate managed to loot his company, crash his stock price, and destroy the brand name by doing something that any day-to-day staffer could see was stupid, and he'll doubtlessly enjoy a nice soft landing somewhere else where lather, rinse, repeat will be the order of the day.

    I'm a good capitalist. I want companies to make things that customers want to buy at prices they're willing to pay. I don't want government trying to sort this idiocy out. But at times like these, despite their obvious and total lack of any economic understanding, I get what the Bernie Bros et al are complaining about.

    1. This is an issue upon which the hard right and the hard left are in absolute agreement. We need to find more such things. Letting credentialed Ivy League morons with no practical experience run major American manufacturing and service companies is a ticket to disaster.

  7. It continues to amaze and disgust me as to how such ostensibly intelligent and educated individuals can not understand that the anthropogenic global warming paradigm is in reality the most economically destructive canard ever perpetuated on Western mankind!

  8. This is probably more of an indictment on the value of Ivy League graduate degrees. Far too many of these over-credentialed morons are being placed in high powered positioned and are destroying institutions that were created by far better people with much higher capabilities. As you mentioned, front line employees could have advised management on how travelers require reliable rental cars without the hassle of having to think about charging. Having a CEO push the company into EVs is bad enough - what about Hertz's board of directors? Where was the oversight? They should all go.

  9. Dig deeper. What were the quid-pro-quo arrangements behind Hertz’s favorable plan to emerge from its pre-Covid bankruptcy? How is debt made to magically disappear by transferring it to the balance books of the taxpayer-subsidized “green” economy? If I can’t make my mortgage, will the holders of my mortgage agree to debt forgiveness if I first agree to purchase an overpriced, taxpayer-subsidized solar system that is also owned by those who own my mortgage?

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