Hertz Global Holdings Inc. announced it and certain of its U.S. and Canadian subsidiaries have filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.

Hertz reported the impact of COVID-19 on travel demand was “sudden and dramatic, causing an abrupt decline in the company’s revenue and future bookings. Hertz took immediate actions to prioritize the health and safety of employees and customers, eliminate all non-essential spending and preserve liquidity.” Hertz added that “uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales, which necessitated the action. The financial reorganization will provide Hertz a path toward a more robust financial structure that best positions the company for the future as it navigates what could be a prolonged travel and overall global economic recovery.”

Hertz’s franchised locations, which are not owned by the company, also are not included in the Chapter 11 proceedings. All of Hertz’s businesses globally, including its Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen subsidiaries, are open and serving customers. As of the filing date, the company had more than $1 billion in cash on hand to support its ongoing operations. Depending upon the length of the COVID-19 induced crisis and its impact on revenue, the company may seek access to additional cash, including through new borrowings, as the reorganization progresses.

The most popular car in America for the first half of 2020 is the Toyota Camry, according to Pretected.com, one of the largest insurance comparison websites in the United States.

The Camry is followed by the Honda Accord in second place and the Ford F-150 in third.

Although the two most popular models come from overseas, Pretected also named the top 10 most popular car makers overall in America for 2020.  Chevrolet led the list, followed by Ford, Toyota, Nissan, Honda, Dodge Hyundai, Kia, Jeep and GMC.

BMW widened the gap with its competitors, continuing its reign as No. 1 most considered luxury brand by consumers, a position it has held for the past three years, despite some close calls, according to the Kelley Blue Book Brand Watch Report for Q1 2020.

The top five luxury brands were: BMW, Audi, Lexus, Tesla and Mercedes-Benz.

The Brand Watch Report is a consumer perception survey that also weaves in consumer shopping behavior to determine how a brand or model stacks up with its segment competitors on a dozen factors key to a consumer’s buying decision.

BMW gained shopping consideration as a brand. The entry-luxury 3 Series sedan, supported by conquest and loyalty lease specials offered in the quarter, moved up three ranks in shopping consideration. The X5 SUV climbed as well. BMW also garnered buzz with the launch of the new 2 Series and the minor changes made to its 5 Series.

Audi Q5
Audi Q5 

Audi and Lexus maintained their spots immediately behind BMW in the quarter. However, Lexus’ shopping consideration dipped from 2019’s Q4 and below Audi’s, due to lower consideration for Lexus’ volume-leading RX SUV. Audi held onto its share of new luxury vehicle prospects, despite declining interest in the Q5 SUV.

Tesla broke into the top 5 for most considered luxury brands, edging past Mercedes-Benz. Despite a dip in its shopping consideration, the Model 3 maintained its hold on the No. 1 shopped luxury vehicle, a spot it has held for four consecutive quarters.

Several auto industry leaders are balancing current optimism with future uncertainty as the country opens up again.

The COVID-19 pandemic remains a challenge to the industry.

During a recent webinar, Ernie Garcia, chairman and CEO of Carvana, said, “I feel like I’m at a time where I’ve never been less certain about what the next couple of months look like.”

He said, “So many things are going in the right direction,” from wholesale volumes to wholesale prices and retail volumes.

“The ABS (asset-back securities) markets are firming up, which suggest good things for the credit markets.”

Information coming out of other countries looks good – in terms of recovery from the coronavirus and shifts toward more personal transportation – which bodes well for Carvana, he said.

“I think all the information you look at, looks incredibly positive,” Garcia said.

Sandy Schwartz, CEO of Cox Automotive, agreed that things are looking up.

“First of all, there is pent-up demand,” he said. Dealers are ramping up their inventory to 70 or 80 percent of their pre-COVID-19 numbers in the month of May, to “maybe even” matching what they did a year ago.

Schwartz said encouraging signs are coming earlier than he thought in the retail landscape.

Doug Ekizian, managing director, PwC Consumer Finance Group, said the past several weeks have shown a boost in retail car sales, especially on the used side.

But he pointed out the long-term forecast is still murky.

“This recovery is going to be much different than previous economic downturns,” he said.

The recovery will look differently based on geography, and Ekizian is looking at local healthcare data, local hospitalizations and local government policymaking to help forecast the pace of recovery. These areas will have an influence on consumer demand, he said.

Jobless claims and at-risk industries will also have an effect on the direction of the post-COVID-19 recovery.

“I also feel like it’s important to keep an eye on what’s possible on the downside,” Garcia said.

Concerns about a permanent solution to the virus, a potential second-wave of infections and the effect of the stimulus and unemployment benefits, which are more generous than normal, muddy any predictions.

“I think it’s pretty hard to have a firm view of what’s coming,” Garcia said. “But all the signs are pretty optimistic today.”

Sandy Schwartz, CEO of Cox Automotive
Sandy Schwartz, CEO of Cox Automotive

Schwartz acknowledged the challenges ahead.

“The question is going to be, can we sustain (this recovery)?” Schwartz said.

Two areas will be big factors. Will new-car dealers have the right inventory and will used-car dealers have “the right inventory at the right price,” Schwartz said.

On the new-car side, inventory will likely be “stretched a little bit,” he said, with some effect from the factory shutdowns during the coronavirus.

Schwartz said the demand won’t be as much of an issue as affordability on the used-car side.

“It’s really going to depend on how jobs come back and whether people can afford cars,” he said.

Garcia said the 2008-2009 recession taught him that “when the economy has to retool, it takes time.”

He said questions remain about the future of the services sector, how much businesses will have to retool and potential longer-term unemployment, he said.

All agreed that businesses will have to adapt – as they always do – to survive.

Dealers, like other businesses, will have to operate differently. From digitalization to inventory acquisition, the dealers who learn from this crisis are the ones who are going to survive, Schwartz said.

The crisis has revealed an “amazing” adoption of digital tools among retail dealers, Schwartz said.

At the start of the crisis, Cox Automotive had about 1,000 Autotrader dealers who had ‘true digital tools.”

In the wake of the outbreak, the company has helped outfit 10,000 dealers with more digital tools that they are now using.

“This is something we’ve been talking about for a while,” Schwartz said. “People know now that we’re never going back to where we were.”

He said there are lot of innovative dealers who will adapt to the times – and they have to do it.

“We are not going back to the way things were,” Schwartz said.

Carvana Vending Machine Tempe Arizona
Carvana Vending Machine Tempe Arizona

Garcia said Carvana – which has rebounded much more quickly than other auto businesses – likely benefited from being able to operate digitally when other dealers couldn’t.

Since then, Carvana is drawing in customers who are exploring different ways of shopping.

Also, where some customers may have been risk-averse to shopping online in the past, now the risk is reversed. Today, online may seem safer than in person, Garcia said.

Schwartz agreed that consumers want to do as much of the retail car deal online as they can.

“People want to go deeper into the process without having to touch, talk, look at or shake hands,” he said.

But Schwartz and the others expect more difficulties.

“This recovery is going to be different from any other economic recovery,” Ekizian said.

After looking at potential recoveries from the faster V-type recovery to a slower U-shaped recovery, this may turn out to be a W-shaped recovery, he said.

“We are nowhere near through the difficult times we’re going to have,” Schwartz added.

Garcia, however, said businesses can succeed coming out of this.

“In a moment like this, everyone opens their mind a little bit to (the idea of) change,” Garcia said. “Something that’s good which has come from this is that everyone is reevaluating everything they’ve done.”

He believes that “many, many years of progress can be jammed into the next 18 months.”

So much of progress come from just stopping and asking the question, “why am I doing this thing that has become a habit I do every single day?” Garcia said.

The moments when we question our habits don’t come every day, he said.

“I think that’s very healthy and a lot of good can come from it.”

 

 

Michigan Gov. Gretchen Whitmer issued a new executive order allowing appointment-only auto sales beginning May 29.

The executive order was released in conjunction with a press conference on May 21:

“Today, Governor Gretchen Whitmer signed executive order 2020-96 to reopen retail businesses and auto dealerships by appointment statewide on Tuesday, May 26, as part of her MI Safe Start plan. The governor’s executive order also lifts the requirement that health care providers delay some nonessential medical, dental, and veterinary procedures statewide beginning on Friday, May 29. And the order authorizes small gatherings of 10 people or less starting immediately, as long as participants practice social distancing.

“The data shows that Michigan is ready to phase in these sectors of our economy, but we must stay vigilant and ensure we’re doing everything we can to protect ourselves and our families from the spread of COVID-19,” Whitmer stated.

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