Have you been inside a Hertz office lately? I was, last month, at Los Angeles International Airport. It didn’t feel like a successful business. It wasn’t like stepping into, say, an Apple store, agleam with brushed steel and white walls and pleasant, impeccably groomed salespersons. It wasn’t even like stepping into a Starbucks. It was like stepping into a soup kitchen for the homeless: short-staffed, shabby decor, long lines, unhappy customers. A clerk told me to fetch my car from a separate office a couple of miles away (“Take an Uber”); the industrial-looking building I was sent to didn’t have any kind of sign indicating whom I was doing business with. The sole attendant on the premises said it didn’t matter that I’d booked a reservation. There were no cars. The managers had overbooked, he said, and whenever they do that, they go home and leave me to handle irate customers like you. I felt sorry for him.
Yes, Covid-19 has created supply chain problems for Hertz and other rental car companies, and also a labor shortage that makes it hard for Hertz to staff back up. Still, it was hard to reconcile my customer experience with an enterprise that’s so successful its profit margin is 39 percent and so flush that it’s buying back its own stock. Profits were up not because Hertz was renting more cars; they were up because Hertz was renting fewer cars, pricing them, according to an analyst cited by Warren, 147 percent higher than before the pandemic.
The supply chain snafu drove up the price of cars, but, as Warren further pointed out, Hertz’s pricing for what it called “the elements in vehicle rental pricing that management has the ability to control” was up 44 percent over the previous year. Hertz wasn’t enjoying financial success in spite of its seedy rental offices, its loss of half its workforce, its inability to furnish many rental cars, and the outrageously high price it commanded for those few rental cars that were available. It was enjoying financial success because of these things. It was acting very much like a corporation owned by two finance companies.
What’s happening at Hertz is emblematic of what’s been happening at American corporations. Some people look at this picture and conclude that corporations’ increased concentration and rising profits demonstrate they’re becoming more powerful than ever. That’s true. Other people look at corporations’ indifferent treatment of all personnel except those in the C-suites, their disinclination even to pretend that they provide customer service until someone makes a stink on social media, and their desperation to please shareholders and conclude that corporations have become pitifully weak. That’s also true.
macbookwhoa on December 8th, 2021 at 18:19 UTC »
There isn't a simple explanation for the way the world is today vis a vis the government, the financial sector, and corporations, except there is:
For most of the twentieth century, corporations followed a model described by Adolf Berle and Gardiner Means in their 1932 book, The Modern Corporation and Private Property, wherein managers didn’t much care what the shareholders wanted. They didn’t have to. By the 1970s, conservatives like Milton Friedman judged this unaccountability a scandal and said a corporation’s sole responsibility was to its shareholders. In the 1980s, President Ronald Reagan made Friedman’s critique the policy of the U.S. government. In doing so, he put corporations at the mercy of the financial services industry. One reason it’s so easy these days to take a corporate CEO from one industry sector and plug him into another is that CEOs today are all essentially bankers, interested mainly in raising the company’s stock price (and therefore their compensation packages).
JaD__ on December 8th, 2021 at 16:58 UTC »
Can’t specifically speak to Hertz’s financial results, as I don’t really pay a lot of attention to the sector, but once deep into the pandemic, y/y vehicle rental rates quintupled in my part of the world. The implications for operating and financial leverage, which on the upswing favors levered companies with high fixed costs, would have been visceral.
The vehicle rental companies were very quick to gouge customers enact corporate policies that optimized profitability in light of the pandemic’s implications.
The impact of supply shortages on used vehicle prices was gravy.
theclansman22 on December 8th, 2021 at 16:35 UTC »
This explains it(https://en.m.wikipedia.org/wiki/Financialization )to help increase shareholder value, the best thing a company can do is saddle itself with debt and reduce outstanding shares. It’s why after the 2017 Trump tax scam where corporate taxes were cut, instead of seeing an increase in investment in the economy we saw record stock buybacks. Instead of going for genuine growth companies found tricks to increase their returns. Not a sign of a healthy economy in my opinion.