Icahn-Backed Hertz Swaps Out CEO After Run of Earnings Misses
(Bloomberg) -- Hertz Global Holdings Inc., the struggling rental-car company backed by investor Carl Icahn, replaced its chief executive officer in a bid to stop a run of disappointing earnings.
John Tague will retire Jan. 2 as part of a realignment that includes the departure of Hertz’s three longest-serving directors, and Kathryn Marinello -- most recently a senior adviser to Ares Capital Management -- will take over the next day, Hertz said in a statement Tuesday. Hertz, which has lost more than half its value this year, slipped 3.4 percent at 9:56 a.m. Wednesday after surging Tuesday on speculation Icahn was taking it private.
“Shareholders have been very frustrated and vocal about the disappointing performance this year and a change at the top” should help reset the company, Christopher Agnew, an analyst at MKM Partners LLC, wrote in a note today. The largest publicly held U.S. rental-car company missed analysts’ earnings estimates in all but two quarters since 2013.
Icahn, who more than doubled his stake in Hertz to 35 percent last month after a wide earnings miss drove the shares down, said he backs the choice. With Marinello, Hertz gains a new boss who has been a CEO before and serves on several boards, including those of General Motors Co. and truckmaker Volvo AB. She served as the CEO at two companies -- Stream Global Services Inc. and Ceridian Corp. -- between 2006 and 2014 after running GE Capital’s Consumer Financial Services business.
“I am excited about Hertz and its prospects with Kathy at the helm,” Icahn said in the statement. “She was extremely well-regarded at GE and successfully turned around Ceridian and Stream.”
Tague will get a severance payment of $3.68 million and no bonus for 2016 or 2017, Hertz said in a regulatory filing yesterday. Marinello will have an annual base salary of $1.45 million.
Tague, a former airline executive, took over in 2014 after former CEO Mark Frissora stepped down in the wake of accounting problems at the company and shortly after Icahn took a large stake. Tague was chosen over rental industry veteran Scott Thompson, who ran Dollar Thrifty before it was bought by Hertz. Several years of financial reports were restated.
The company’s latest earnings miss happened because used-car prices were falling, revenue was slumping and fixing the operations was proving difficult, Tague said at the time. “I underestimated the depth and the breadth and the complexity of the transformation we are now undertaking at this company,” he said on a conference call. “We are behind schedule and we are challenged earlier than we thought.”
Hertz lost market share as the company tried to increase prices, said Maryann Keller, an independent auto consultant and former board member of Dollar Thrifty Automotive Group, which sold to Hertz in 2012.
“He made the assumption that the rental business is an oligopoly,” Keller said. “He thought they could raise prices and charge fees like the airlines. It’s a competitive business.”
Hertz also said three directors have chosen to leave the board: Nonexecutive Chairman Linda Fayne Levinson, Carl Berquist and Michael Durham will depart Jan. 2. Henry Keizer was elected to replace Fayne Levinson as nonexecutive chairman. After the departures, Hertz will have only seven directors.