The Massachusetts Democrat wrote Hertz ( a letter Monday calling the company out for )rewarding shareholders with up to $2 billion in stock buybacks despite skyrocketing rental car prices.
Warren questioned why Hertz is plowing money into buybacks instead of investing in new inventory that could ease the supply-demand imbalance.
“This decision, and other actions taken before and after Hertz’s bankruptcy process,” Warren wrote in a letter obtained exclusively by CNN, “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.”
Hertz filed for bankruptcy in May 2020 as the pandemic crushed the travel industry, making it one of the highest-profile bankruptcies of the health crisis. At the time, Hertz notified 12,000 employees in North America that they were losing their jobs. An additional 4,000 employees were furloughed.
Earlier this year, a group of investment firms acquired Hertz out of bankruptcy in a deal that eventually included Apollo Global Management, an alternative asset manager. Hertz, which also operates the Dollar and Thrifty brands, successfully emerged from bankruptcy in late June 2021.
By October, Hertz reported a record adjusted profit and corporate margin. Hertz said that although rental car volumes are below 2019 levels, this was offset by “improvements in pricing power.”
In her letter, Warren cited an analyst at Jefferies who estimated Hertz was charging a daily median rental price of $114.49 in August — up by 147% from pre-pandemic levels.
“You owe your customers and the public an explanation for this $2 billion buyback,” Warren wrote in the letter to Hertz interim CEO Mark Fields, “and whether it is in the best interests of the long-term health of the company and its consumers.”
Hertz said late Monday that it had received Warren’s letter and intends to respond.
When Hertz announced its buyback plans in late November, the company said the repurchase program would allow for “ongoing and profitable investment in the business” while utilizing “moderate” balance sheet leverage.
Car rental rates spike nearly 40%
The criticism from Warren is part of a broader pushback from progressives amid historic levels of inflation by calling out what they view as corporate greed and excessive corporate concentration.
Warren recently slammed energy companies for exporting record amounts of natural gas despite surging prices, even though it is perfectly legal to ship liquefied natural gas overseas.
President Joe Biden has similarly called on the Federal Trade Commission to investigate whether illegal conduct is driving up gas prices — a move that the oil industry criticized as a “distraction.”
Of course, rental car rates have been rising sharply industrywide, not just at Hertz.
Car and truck rental prices surged by 39.1% in October from the year before, according to government statistics.
The sticker shock is a reflection of multiple factors, including strong demand as the economy recovers from Covid and weak supply amid the computer chip shortage. The lack of computer chips has caused auto companies to shut down production, limiting the supply of cars for rental car companies to beef up their fleets.
This has driven a windfall for the car rental industry. Shares of Avis Budget ( have surged more than 600% in 2021. The company recently reported sales nearly doubled from a year ago and )net income skyrocketed 1,400%.
‘Weakens capital reserves’
Hertz said its $2 billion buyback program will come after the company completes a deal to buy back all of its Series A preferred stock, most of which is owned by private-equity giant Apollo Global Management.
The buyback “weakens capital reserves as the country faces a new scare from the Omicron coronavirus variant that again threatens the travel industry,” Warren wrote, “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 by December 17, including what impact the buyback will have on the company investing in its business, when it will return to pre-pandemic rental car inventory and whether Hertz considered reducing customer prices instead of buybacks.