Hertz Names New CEO in Midst of Effort to Avoid Bankruptcy
(Bloomberg) -- Hertz Global Holdings Inc. promoted the head of its North American car-rental operations to lead the company as its chief executive officer leaves in the midst of efforts to ward off bankruptcy.
Paul Stone, a Hertz executive vice president and chief retail operations officer, becomes CEO immediately after the resignation of Kathryn Marinello, according to a statement. The company has until May 22 to restructure lease payments with bondholders and has cast doubt on its ability to pay debt obligations and continue as a going concern.
Marinello, 63, was in the top job for just under 3 1/2 years, and Stone, 50, will be Hertz’s fifth CEO since 2014. He spent almost three decades at Walmart Inc. and was chief retail officer at outdoor-gear retailer Cabela’s Inc. before joining Hertz in March 2018.
Hertz shares surged as much as 17% and were up 12% as of 9:55 a.m. in New York. The stock has plunged more than 80% this year.
Before the coronavirus pandemic hit and sent the travel business into free fall, Hertz had been gaining some traction under Marinello. Just a week ago on a call with analysts to discuss first-quarter earnings that were worse than expected, the company touted its run of 10 straight quarters of revenue growth and nine straight quarters of higher earnings before interest, taxes, depreciation and amortization.
Marinello inherited a company in trouble when she took over in January 2017. Her predecessor, John Tague, tried unsuccessfully to raise prices and lost market share. Under both Tague and earlier CEO Mark Frissora, Hertz under-invested in vehicles.
After taking the top job, Marinello set out to freshen Hertz’s fleet by getting rid of unwanted compact cars and family sedans that depreciated faster than more popular crossovers and SUV models. Those efforts resulted in better pricing at the rental counter and in the used-car market, but also saddled Hertz with more debt than rival Avis Budget Group Inc.
When business collapsed due to Covid-19 travel restrictions starting in March, Hertz found itself cutting costs to save cash and make its hefty debt and lease payments. The company got a forbearance on May 4 to avoid liquidation of its cars. Since then, Hertz has been negotiating with lenders to restructure its finances in court or, if need be, potentially file for bankruptcy protection.
Stone brings experience running the U.S. rental business, which makes up almost 80% of Hertz’s revenue and will be vital to turning the business around.
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