Inside Hertz: What Bill Ackman’s Major Stake Means for Employees and the Future

Inside Hertz: Bill Ackman’s Major Stake Shakes Up the Rental Giant’s Future

Hertz Global Holdings faces a pivotal moment as billionaire investor Bill Ackman’s Pershing Square Capital Management acquires a significant stake in the rental car company. In a recent letter to employees, CEO Stephen Scherr addressed the implications of this move, sparking speculation about Hertz’s strategic direction, potential restructuring, and what it means for its workforce. The investment comes as Hertz navigates post-bankruptcy challenges and an evolving electric vehicle (EV) strategy.

Ackman’s Bold Bet: Why Hertz?

Bill Ackman, known for his activist investments in companies like Chipotle and Starbucks, has taken a 10% stake in Hertz, valued at approximately $250 million. This positions Pershing Square as one of Hertz’s top five shareholders. Analysts suggest Ackman sees untapped potential in the rental giant, which emerged from Chapter 11 bankruptcy in 2021.

“Ackman’s investment signals confidence in Hertz’s ability to capitalize on the post-pandemic travel boom and its aggressive EV push,” says Rebecca Lindland, an auto industry analyst at Cox Automotive. “However, his track record suggests he’ll push for operational improvements or strategic pivots.”

Hertz’s stock surged 15% following the news, reflecting investor optimism. Yet, the company faces headwinds:

• Fleet utilization rates remain below pre-pandemic levels at 78%, compared to 82% in 2019.
• EV depreciation costs have eroded profits, with Tesla Model 3 resale values dropping 30% in 2023.
• Competition from Uber and Lyft continues to pressure traditional rental demand.

Employee Concerns: Stability or Shake-Up?

In his internal memo, Scherr reassured employees that Ackman’s involvement aligns with Hertz’s long-term vision. However, insiders report mixed reactions. “There’s anxiety about cost-cutting or layoffs,” said a Hertz branch manager who requested anonymity. “Ackman isn’t known for passive investments.”

Labor unions are watching closely. “Workers remember the bankruptcy’s impact,” said Tim Rankin, a representative for the Transport Workers Union. “We’ll hold Hertz accountable to protect jobs and benefits.”

Historical context adds weight to these concerns. When Ackman invested in Air Products & Chemicals in 2013, he successfully lobbied for leadership changes and a spinoff. Hertz’s current EV strategy—including a $4.2 billion order for 100,000 Teslas—could face scrutiny.

The EV Gamble: Will Ackman Accelerate or Hit the Brakes?

Hertz’s high-profile bet on electric vehicles has been both a branding win and a financial challenge. While the Tesla partnership garnered media attention, the company took a $245 million charge in Q1 2023 due to lower EV resale values. Ackman may push for:

• Revised EV adoption timelines: Slowing the rollout to match infrastructure and demand.
• Diversified fleet investments: Balancing EVs with profitable gasoline models.
• Better depreciation hedging: Exploring lease-back arrangements with automakers.

“The EV strategy needs fine-tuning, not abandonment,” argues Mike Austin, senior mobility analyst at Guidehouse Insights. “Ackman could help Hertz negotiate better terms with automakers or pivot toward hybrids during the transition.”

Competitive Landscape: Can Hertz Outpace Rivals?

Ackman’s arrival coincides with fierce competition. Enterprise Holdings maintains a 40% U.S. market share, while Avis Budget Group has focused on cost discipline. Meanwhile, startups like Turo (peer-to-peer rentals) and Kyte (app-based rentals) are gaining traction.

Key metrics highlight Hertz’s challenges:

• Debt-to-equity ratio: 4.1, higher than Avis’s 3.7.
• Average daily rental rate: $50, down 8% from 2022 peaks.
• Customer satisfaction: J.D. Power ranks Hertz third behind Enterprise and National.

Scherr’s turnaround plan—emphasizing digital upgrades and corporate accounts—has shown progress. Revenue hit $9.4 billion in 2023, up 12% year-over-year. But Ackman’s playbook may demand faster results.

What’s Next for Hertz and Its Stakeholders?

Industry watchers expect Ackman to advocate for board representation or operational reviews. “He’ll likely target SG&A (selling, general, and administrative) costs first,” predicts David Whiston, an equity analyst at Morningstar. “Hertz spends 22% of revenue on overhead versus Avis’s 18%.”

For employees, the stakes are high. Hertz employs 24,000 people globally, with frontline workers comprising 70% of its workforce. A shift toward automation or franchise models could reshape jobs.

Looking ahead, three scenarios could unfold:

1. Collaboration: Ackman supports Scherr’s vision while pushing incremental efficiencies.
2. Activist overhaul: Leadership changes or asset sales (e.g., Donlen fleet management unit).
3. Strategic pivot: A renewed focus on business travel or subscription services.

As Hertz navigates this inflection point, stakeholders are advised to monitor Pershing Square’s next moves. For investors, the stock’s volatility may present opportunities, while employees should stay informed through internal channels. One thing is certain: Ackman’s involvement ensures Hertz won’t stay in park.

For deeper insights into Hertz’s financials, download our exclusive industry report on rental car sector trends.

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