Massachusetts Senator Elizabeth Warren has sent a letter to rental car company Hertz, criticizing its recent decision to spend $2 billion on stock buybacks, despite skyrocketing rental car prices.
The senator questioned the company’s decision to spend money on buybacks rather than investing in new fleet inventory that could ease the imbalance between the demand for rental cars and the supply, reports CNN, which obtained the letter.
“This decision, and other actions taken before and after Hertz’s bankruptcy process,” Warren wrote in a letter to Hertz interim CEO Mark Fields, “reveals that the company is happy to reward executives, company insiders, and big shareholders while stiffing consumers with record-high rental car costs and ignoring the recent history that nearly wiped out the company.”
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Hertz filed for bankruptcy in May 2020, a high-profile victim of the pandemic. At the time, the company laid off 12,000 employees and furloughed another 4,000. Since then, though, it was acquired by Apollo Global Management and it successfully emerged from bankruptcy in June 2021.
By October, the record-high rental car prices meant that Hertz was reporting record adjusted profit and corporate margin, despite rental car volumes that were below 2019 levels. Indeed, Senator Warren cited estimates that Hertz was charging a daily median rental price of $114.49 in August 2021, up 147 percent from pre-pandemic levels.
“You owe your customers and the public an explanation for this $2 billion buyback,” Warren wrote, “and whether it is in the best interests of the long-term health of the company and its consumers.”
Among the factors contributing to the high prices for rental cars is the shortage of new vehicles. As a result of the pandemic, parts shortages have led to a shortfall in production, limiting the supply of rental cars.
This has led to shares of other rental companies, like Avis Budget, to rise more than 600 percent in 2021. Warren questioned the wisdom of Hertz’s stock buyback and its timing, though.
The buyback “weakens capital reserves as the country faces a new scare from the Omicron coronavirus variant that again threatens the travel industry,” wrote Warren, “and as Hertz faces fresh questions about how long it will take the company to rebuild its rental car inventory.”
Warren asked Hertz to respond to a series of questions contained within the letter by December 17. Hertz said on Monday that it had received the letter and intended to respond.
