Hertz is defleeting due to weaker than anticipated demand

Article by Anita Panait, on October 9, 2013

Hertz Global Holdings has determined that it has too many vehicles and has decided to gradually cut down its fleet over the next six months, according to chief executive Mark Frissora.  The vehicles will be sold to retail consumers directly. In September, Frissora disclosed that rental demand in July and August at its airport locations in the United States was "weaker than anticipated," creating an excess of vehicles.

Two of Hertz's major rivals -- Enterprise Holdings and Avis Budget Group – said that their summer fleets were in line with demand. According to Ricky Beggs, managing editor of Black Book, prices of one- and two-year-old used vehicles typically depreciate more in the last "three or four" months of the year than during other three-month periods.

Rental car companies typically cut their fleets by selling vehicles at auctions after Labor Day and into October, which is the end of the vacation season as well as the beginning of the new-car sales year -- something, that according to Frissora, Hertz failed to do this year. He cited the fear of putting downward pressure on the used-vehicle prices as the reason.

Beggs, however, said that he is not expectin any disruptions in the seasonal pattern as an effect of Hertz's decision. Frissora said that while rental demand was better in September, it was enough. He blamed government cutbacks, lower consumer confidence and less business travel for the weakened business climate. David Wyshner, Chief Financial Officer of Avis Budget, remarked that over-fleeting was only specific to Hertz and not industry-wide.

Topics: hertz

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