On Tuesday, Sen. Elizabeth Warren (D-Massachusetts) sent a letter to Hertz, criticizing the car rental company for proposing a $2 billion stock buyback plan that would line the pockets of executives and the private equity firm Apollo Global Management, directly after the company exited bankruptcy.
The letter comes at a time of skyrocketing rental car prices, which Hertz has been taking advantage of. An analysis cited by Warren’s office found that while rental car and truck prices increased by 39 percent between 2020 and 2021, Hertz’s prices have risen even higher. In August, the company was charging a median price of about $114 a day — 147 percent higher than their rate before the pandemic.
Last May, the company filed for bankruptcy after the car rental industry was hit hard by the pandemic. Hertz laid off or furloughed 20,000 employees — just after paying out $16 million in bonuses to executives — as it dealt with debt that it had already accumulated before the pandemic. The company exited bankruptcy in June, just over a year after it filed, and paid out $3 million in bonuses to executives shortly after.
In November, nearly five months later, the company announced plans for a new program to buy back up to $2 billion worth of stocks, which is nearly 20 percent of the company’s market cap. Hertz’s shares rose by 6.8 percent immediately following the announcement.
Warren has slammed this decision, saying that the buyback program will pad executives’ and Apollo’s pockets “at the expense of customers and the long-term health of the company,” giving a 70 percent annualized return to the private equity firm that had just invested in the company in order to help pull it out of bankruptcy.
“This decision, and other actions taken before and after their bankruptcy process, 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,” Warren wrote in the letter.
“Hertz executives were inexplicably rewarded on both sides of this bankruptcy,” Warren continued. “But consumers are footing the bill… Consumers are struggling to make ends meet as costs rise throughout the economy and Hertz owes the public an explanation for this corporate greed.”
Warren concluded her letter by demanding answers about how the buyback plan will affect the company’s health and how much executives and board members will benefit. She also asked if the company is considering potential risks posed to the industry due to the Omicron variant of COVID-19, and whether the buyback program is a risk the company can afford to take.
Likely partially as a result of their sky-high prices, Hertz has been posting record profits, making $2.2 billion in total revenue in the third quarter of 2021 alone. Meanwhile, customers have reported struggling to get rental cars at a reasonable price — or even to get one at all, regardless of whether they’ve made a reservation. Car production has been causing shortages in rental car availability, and rental companies are evidently taking advantage of that in spades.
The rental vehicle industry isn’t alone in taking advantage of the fragile COVID economy to increase prices. Other corporations have been taking advantage of the economy to pad their profits, disguising rising prices as inflation. But in reality, while production costs for many companies have gone up, data shows that corporations have been absorbing these costs, reaching into consumers’ pockets to pay for the higher costs and then some.
We’re not backing down in the face of Trump’s threats.
As Donald Trump is inaugurated a second time, independent media organizations are faced with urgent mandates: Tell the truth more loudly than ever before. Do that work even as our standard modes of distribution (such as social media platforms) are being manipulated and curtailed by forces of fascist repression and ruthless capitalism. Do that work even as journalism and journalists face targeted attacks, including from the government itself. And do that work in community, never forgetting that we’re not shouting into a faceless void – we’re reaching out to real people amid a life-threatening political climate.
Our task is formidable, and it requires us to ground ourselves in our principles, remind ourselves of our utility, dig in and commit.
As a dizzying number of corporate news organizations – either through need or greed – rush to implement new ways to further monetize their content, and others acquiesce to Trump’s wishes, now is a time for movement media-makers to double down on community-first models.
At Truthout, we are reaffirming our commitments on this front: We won’t run ads or have a paywall because we believe that everyone should have access to information, and that access should exist without barriers and free of distractions from craven corporate interests. We recognize the implications for democracy when information-seekers click a link only to find the article trapped behind a paywall or buried on a page with dozens of invasive ads. The laws of capitalism dictate an unending increase in monetization, and much of the media simply follows those laws. Truthout and many of our peers are dedicating ourselves to following other paths – a commitment which feels vital in a moment when corporations are evermore overtly embedded in government.
Over 80 percent of Truthout‘s funding comes from small individual donations from our community of readers, and the remaining 20 percent comes from a handful of social justice-oriented foundations. Over a third of our total budget is supported by recurring monthly donors, many of whom give because they want to help us keep Truthout barrier-free for everyone.
You can help by giving today. Whether you can make a small monthly donation or a larger gift, Truthout only works with your support.