Hertz, one of the four largest car rental companies globally, is getting a new CEO due to rising electric vehicle (EV) costs and the failure of its bet on EV rentals.
According to a statement released by the rental car company on Friday, Stephen Scherr, 59, is stepping down as CEO after leading Hertz for more than two years following a thirty-year tenure at Goldman Sachs Group Inc.
Electric Vehicle's Resale Value Sharply Declining
Scherr, who joined Hertz in 2022 after holding the position of chief financial officer at Goldman Sachs, would resign following a challenging venture into electric vehicles (EVs), inheriting a commitment to purchase 100,000 Teslas from his predecessor, Mark Fields. Subsequently, Hertz agreed to acquire 65,000 vehicles from Polestar. According to Bloomberg, Scherr propounded the EV strategy, committing Hertz to procure 175,000 EVs from General Motors over five years.
Hertz announced its strategic decision to sell about 20,000 electric vehicles (EVs) from its US fleet earlier this year, which accounts for about one-third of its global fleet, and invest in gasoline-powered cars instead to reduce the number of lower-margin rentals and cut down on EV damage expense-related. Additionally, Tesla's significant discounts on its vehicles led to financial losses for Hertz by holding onto them.
Hertz's Previous Pride in EV Investment
Hertz, previously praised by the Biden administration for its investment in electric vehicles as part of the president's climate agenda focusing on widespread electrification of transportation, reported its largest quarterly loss last month since 2020 following its shift away from electric vehicles.
Scherr joined Hertz while emerging from bankruptcy. However, his resignation is partially attributed to a failed investment in electric vehicles, where it once ordered 100,000 vehicles from Tesla in a gamble that ultimately proved unsuccessful.
Tesla's Price Cut Affecting Resale Value of EVs
Tesla reduced prices, causing a sharp drop in the resale value of electric cars. Hertz, like many rental car companies, sells its used vehicles. Hertz revealed plans to sell its electric cars in January due to weak demand, significant depreciation costs, and expensive repairs. This led to a two hundred forty-five million dollars charge and the company's most considerable quarterly loss in years.
Hertz shares dropped by two percent in after-hours trading last Friday after Scherr's departure from the company was confirmed.
Gil West Replacing Hertz's CEO
West, his replacement, previously worked at General Motor's Cruise and Delta Air Lines and was noted for his significant involvement in Delta's merger with Northwest several years ago.
Delta CEO Ed Bastian praised Gil as a superb operator, highlighting their long collaboration. He described Gil as an innovator, technologically savvy, meticulous, curious, and someone who enjoys challenges, which are all great attributes.
Hertz said Scherr would aid in the CEO transition until he departs from the company and its board on March 31.
