
The Story of Hertz Going Bust - indigodaddy
https://www.bloomberg.com/news/articles/2020-05-24/o-j-accounting-fraud-and-icahn-the-story-of-hertz-going-bust
======
stevetursi
I am Hertz Alumni, 2011-2016. We had a great group of engineers and product
people, many of us far too talented to be in company like what hertz turned
into. We were under the leadership of an incredible division head and most of
the folks in our group felt a deep sense of loyalty to her. Nearly all of us,
including that division head, are gone now, mostly laid off. If you poll any
random Hertz alumnus, the story you're likely to hear is "we had a great team
and incompetent senior management."

To us, there is a quote in a different bloomberg article from last week [1]
which strikes us as accurate. Attributed to Maryanne Keller, who is referred
to in this article, it says:

> 'It’s a saga about gross mismanagement,” said Maryann Keller, a longtime
> auto-

> industry consultant who was on the board of Dollar Thrifty when Hertz
> acquired

> the company. “It could have been salvaged had he picked the right
> management,”

> she said, referring to Icahn.'

Icahn lost $1.6b. Thousands of us lost our jobs. But these C-suiters sailed
the company to bankruptcy over five years, each of them extracting 7 or 8
figure bonuses. The CIO who laid us all off, for example, received $6.5
million compensation that year [2]. (Sidenote, the work we were doing was
replaced with Accenture consultants, who couldn't handle it, screwing up so
bad they ended up in court [3].)

One former colleague of mine wrote a post on LinkedIn suggesting Icahn was the
unwitting victim of untenable debt situation, and while he may be correct that
the debt made it difficult, Icahn can read a balance sheet and he understood
the situation.

I can't speak about Marinello's performance, but I agree that the problem
dates back to 2014 or even earlier. People have a widespread belief that
Frissora was flying too close to the sun, driven by his aggressive
personality. Despite his flaws, he had a great team of people who kept the
business running, and it wasn't Frissora who fired them all. Nobody, it turns
out, was a fan of him. But everyone agrees he was far better than the gang of
unusually wealthy miscreants that Icahn replaced him with.

[1] [https://www.bloomberg.com/news/articles/2020-05-27/icahn-
fil...](https://www.bloomberg.com/news/articles/2020-05-27/icahn-files-13d-a-
on-hertz)

[2] [https://www.cio.com/article/3404205/how-much-do-cios-
really-...](https://www.cio.com/article/3404205/how-much-do-cios-really-make-
pay-packages-of-25-fortune-500-execs-revealed.html)

[3]
[https://news.ycombinator.com/item?id=19737070](https://news.ycombinator.com/item?id=19737070)

~~~
thoughtpalette
I had the unfortunate opportunity as an Accenture consultant to work on the
Hertz redesign. It was a shit show and hands down the worst project I've ever
been on. I left Accenture but not sure how much I'm allowed to talk about it.

Needless to say, leadership across ALL disciplines (mobile, front-end,
backend, etc) was a fucking joke and they didn't listen to the red flags we
brought up in literal sprint 1.

Sorry to hear about your Hertz experience.

~~~
compuguy
For the most part, all that I've heard of Accenture seems to match what you
are saying.

~~~
blaser-waffle
I believe the parent comment was talking about the shitshow that Hertz was,
not Accenture.

~~~
SomeoneFromCA
Both are bad. Every big "consulting" company sucks nowadays.

~~~
gundmc
I've had good experiences with Accenture in a staff aug role, but leading
projects have been disasters. Similar problems working with Deloitte.

That being said, I've had nothing but good experiences working with McKinsey.

------
autokad
hertz had a 'hackathon' (more like datathon?) at my university in 2013. They
gave us data (no PII but demographics such as age) along with other store
sales, etc. goal, take the data and draw some insights.

I showed them a chart on how the average age of their customer was going up
and they were failing to get newer and younger customers. I also showed search
trends on car rentals going down, and search trends on ride sharing going up.
They didn't like my presentation at all =|

~~~
save_ferris
What an incredible way for a company to signal that they only want sycophants.
Good on you for pointing out what probably should have been obvious to them.

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rb808
Honestly this is a good thing. There are too many big companies, not enough
small, we need more to fail - esp the type that have gone through lots of
mergers to reduce competition.

~~~
puranjay
While I agree with the sentiment, operating at scale does mean that consumers
often get lower costs.

Smaller players would also be far less likely to enter less lucrative markets.

~~~
tgsovlerkhgsel
Often, but not always - sometimes the benefits of scale are eaten up by an
oligopoly gouging customers. In New Zealand, the big rental companies were
much much more expensive than small local companies that were hard to find
because they didn't show up on the international aggregators.

And unlike the big companies, there were no hidden costs, no upsells, no
attempts to scam, no attempts to extort huge fees when trying to change the
rental, ... didn't even charge us for forwarding a traffic ticket which would
have totally been their right.

After my experience with Hertz (US) as a customer, the only reason why I'm not
100% happy with them going under is that I don't expect their large
competitors to be much better, and less competition means the others can
become even worse.

------
ashtonkem
I think the most “duhhh” moment was moving the headquarters. Of course they
lost a ton of experienced and qualified staff when they moved the headquarters
to Florida. Why wasn’t this seen coming?

~~~
robohoe
I don't want to reply with a blanket statement, but a lot of the times senior
management just doesn't understand how much work it takes to build complex IT
systems and how a great team can make it happen. They see IT as disposable and
expect anybody with some computer skills to be able to do complex work.

~~~
ashtonkem
That makes sense for IT networks, annoying as it may be. But the article makes
it clear they lost quality leaders as well, and the CEO should have fully
understood and appreciated the impact that would have.

------
elliekelly
What is the ten-year survival rate for companies after a leveraged buyout? It
has to be near zero right?

~~~
namdnay
You only hear about LBOs that fail. There are dozens that work every year

~~~
ipnon
Do you know of any data referring to the success to failure ratio of leveraged
buyouts?

~~~
namdnay
The easiest way to do this is to look at the performance of LBO funds. It's up
and down, returns are pretty poor compared to the stock market, but still
positive, so that means they're getting back more cash than they are putting
in - which means more success than failure, especially as success means +20 to
+40% whereas fail means -80 or -90%

------
wolco
In the end Kathryn Marinello failed. She was at the helm for years where she
could have positioned the company better. Blaming it on a 2014 misfilling and
the wasted years cleaning it up only gives false cover. She didn't pay back
debit when times were better because it would have affected her compension.

~~~
eru
Why do you say Kathryn Marinello failed?

Compensation incentives are there for a reason. Acting according to them just
means fulfilling the shareholders wishes. (Unless the shareholders are idiots
or impotent and the board set the wrong incentives.)

Running a riskier strategy that fails under a pandemic is a perfectly
cromulent business decision to make. Shareholders and creditors knew what they
were in for.

Not all gambles pay off. That doesn't mean taking on any risk whatsoever is
wrong.

~~~
virgilp
> Unless the shareholders are idiots or impotent and the board set the wrong
> incentives.

That's quite a big leap. Humans are exceptionally good at gaming objective
metrics if that's all that matters... setting the right incentives is by no
means something any non-idiot can do; it's in fact exceptionally rare to find
people able to set right incentives for an entire organization (or for it's
leadership; if the leadership doesn't inherently have the right motivation, I
don't actually think you can fix that via a set of incentives; probably the
best you can do is constantly-modifying incentives, tracking aggressively any
sign of misaligned motivation etc)

~~~
appleflaxen
> Humans are exceptionally good at gaming objective metrics if that's all that
> matters

I think that's OP's point: the board should understand that, and set them
appropriately.

~~~
virgilp
And my point is that's basically impossible to "set them appropriately", and
one shouldn't throw around strong words such as "idiots or impotents" for
those failing to do so. Did the board fail in its mission? Obviously. But do
only the idiots fail?

------
rb808
> The company also found that Dollar Thrifty had let the tires on its cars get
> thinner than Hertz allowed, and many had to be replaced at a cost of $30
> million

I always wonder if its worth going cheaper or more expensive when renting
cars. Stuff like this is interesting, I wonder how many other corners are cut
at the cheaper places.

~~~
hylaride
I've always rented from Hertz because they've historically been the least
hassle, if more expensive than Enterprise.

I live in downtown Toronto and don't own a car. I use car sharing for local
needs, but the traditional car rental companies for when I need to leave the
city. Enterprise has been consistently terrible. On multiple occasions I've
had to wait hours past my scheduled pick-up time due to either understaffing,
overbooking, and/or due to other events. Enterprise apparently has a deal with
insurance companies where they loan cars after accidents. I once had to wait
12 hours for a car as they were over-booked due to accidents after a snow
storm. One time I was rear-ended in an enterprise-rented car. The other
person's insurance dealt with the damages, but _18 months_ later they called
me up, demanding payment for the time the car was in the shop.

I used to rent from national/alamo as they would rent to me w/o mandatory
extra insurance when I was under 25. They were bought out by enterprise and
almost immediately went downhill.

Hertz has always had a car available when promised. I can also take the
rentals across the border to the US w/o extra fees. Twice they had to upsize
my car for whatever reasons and they gave me a discount to deal with the
greater fuel consumption.

As somebody who is a loyal Hertz customer, I worry what the company will look
like after the bankruptcy.

~~~
namdnay
I can’t remember if I’ve ever seen Sixt in North America? They’re definitely
one step above the rest here in Europe

~~~
rconti
They're a step above in the US as well. I rent from them whenever possible.
Their vehicle selection is relatively small, they have few outlets, and I
can't say they have the best (or most uniform) service.

But they're the only agency that actually rents cars I have any desire to
drive.

I got a brand new full-size Volvo S90 sedan for what all the other agencies
charge for a janky Corolla or something. And this wasn't a lucky upgrade
scenario, they just had better cars at lower prices when booking.

~~~
decafninja
Rented a Jaguar F-Type from Sixt during a trip to Miami. Service was great,
car was awesome, and I paid around the same I would have for a 4cylinder
Mustang from somewhere else.

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nick_kline
The article uses the term 'bitfd' which apparently means "burn it the fuck
down".

------
dzonga
why is Carl Icahn, always involved in dirty takeovers n putting the wrong
managers.

------
ipnon
Turo[0] immediately crossed my mind upon finishing the article. I have never
used a traditional car rental service and plan to avoid them.

[0] [https://turo.com/](https://turo.com/)

~~~
smachiz
I'm not sure how that's your takeaway here.

Hertz's troubles seem pretty unrelated to the experience as a consumer.

While Turo is great for your weekend trip or whatever, it is not at all good
for a business traveler.

~~~
autokad
the business traveler began using other things. its this same mentality ('it
doesn't relate, business <insert here> are our customers and they wont go
away') that gave a false sense of security to blackberry.

