#Carmageddon for Rental Car Companies: Wolf Richter on WRKO Boston

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Shares of global rental car conglomerate Hertz have plunged over 76% since last July, including Tuesday’s dive after its “earnings” fiasco. On Wednesday, shares fell 2.4% to $12.48. Liquidity problems loom on the horizon and its business model is threatened by disruptions, including rideshare companies.

Corporate customers and tourists are switching their ground-transportation dollars to rideshare companies, particularly Uber. This shift also dents sales for automakers and pressures prices down in the used car market, at the worst possible time, just when the US is sinking deeper into a “car recession.”

Here I am with hosts Barry Armstrong and Chuck Zodda, on Boston Business Radio WRKO, Financial Exchange Network, taking it from there:

#Carmageddon and Uber did it. But for Carl Icahn, it just doesn’t let up. Read… Hertz Gets Crushed after “Even Worse than Expected” Loss




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  39 comments for “#Carmageddon for Rental Car Companies: Wolf Richter on WRKO Boston

  1. Mike G
    May 11, 2017 at 2:00 am

    I avoid renting cars now, having been ripped off so shamelessly with BS extra fees and charges bloating their quoted reservation price. They rival the airlines in their mentality of screwing over their customers.

  2. Kevin Smith
    May 11, 2017 at 2:55 am

    Best way to rent cars for me is to use Costco’s website.

    To avoid the double ripoff of rental car then $40-$60/night hotel parking, we’ve recently used Uber a lot.

    • Mickey
      May 11, 2017 at 1:01 pm

      agree on the hotel issue-Uber/LTFT just made traveling easier and less costly and stressful.

      however, since Ubers business strategy is low price I am not sure how long that lasts.

      Competing on low price is not normally a sustainable strategy.

      • Mike Earussi
        May 11, 2017 at 1:49 pm

        Under pricing your competition is done for the purpose of putting them out of business. Then once they’re gone you can raise rates to whatever you need to to turn a profit. Once Hertz, and similar competitors, are out of business, watch Uber raise their prices a lot.

        • Spanky Bernanke
          May 11, 2017 at 9:59 pm

          Ah, but by that point, an emerging competitor has a better, more efficient strategy (and can usually get the dumb money to capitalize your infrastructure with low interest). Been looking for a crossover to keep these blasted kids outta my ear and Enterprise has a buy-a-rental program for their 2-year old fleet vehicles. They won’t stop harassing me. I just don’t see how they will turn these when all the sub-primal Lexus and BMWs hit the repo circuit??? (BTW-Syria already has enough used vehicles sent by way of cash-for-clunkers to mount 50 cal. to)
          Great interview, Wolf!!

  3. marco
    May 11, 2017 at 5:41 am

    USA land of the rip-off …. and now healthcare ..

    Absolute criminal racketeering – (Cuba’s life expectancy = USA at 1/25 the cost !!!!!! ). Cuba’s infant mortality rate is WAY better than scandal USA’s –

    at $400 per person vs $10,000 per person annually

    Why is nobody in jail for this ?

    • Meme Imfurst
      May 11, 2017 at 7:12 am

      Because Americans are indifferent…..period.

      I tell people that the CEO of United Health gets 250,000 per day income up from about $60k pre day in 6 years and all I get are shoulder shrugs,

    • Boatman
      May 11, 2017 at 9:43 am

      I’d venture to say because a large potion of the population is not educated for such information.

      Actually, now that I ponder it with my pinky for a bit, perhaps it is more that the population is no longer taught now to think critically…the one thing that defined the country years ago and the massive amounts of innovation that occurred. Training nowadays seems to be largely oriented around following rules and not disturbing the status quo.

      • BradK
        May 11, 2017 at 11:21 am

        Prodding the masses towards “…following rules and not disturbing the status quo” is referred to as conditioning.

        Long live Ingsoc.

      • TJ Martin
        May 11, 2017 at 11:50 am

        ” it is more that the population is no longer taught now to think critically ”

        … from home life to K-12 all the way to Graduate school , the work place and beyond ..

        …You nailed it ! Critical thinking skills are a thing of the past here in the US what with our addiction to Cult of Personality and celebrity addled by an excess of info/entertainment , obsessed with convenience to the detriment of all else ( including our health ) blinded by homogenization and consumed by our own consumerism.

        Add to that 50% of Americans inability to read above an 8th grade level – 50% of households never buying / reading a book in a year – 45 million being functionally illiterate * – et al – ad nauseam and ..

        Voila .. the volitional Collective Stupidity of America ..

        *NIL , NCAL , US Census Bureau

        • Dave Kunkel
          May 11, 2017 at 4:08 pm

          Our 7 grandchildren grew up at our house, for the most part, while their parents worked. From an early age, our family motto has been, “Normal sucks, and weird is good!”

          The grandkids really embraced this motto. It fostered their critical thinking and ability to resist peer pressure.

      • intosh
        May 11, 2017 at 1:11 pm

        Critical thinking. That is indeed a very very rare faculty nowadays. The consumption culture and culture in general (movies, TV, print) have done the indoctrination very effectively. It’s a powerful one-two punch: the former makes people very busy and the latter brainwashes them with fast-food culture/”education” suitable for the busy life.

        You can see this same phenomenon, perhaps even worse, in places like Hong Kong and South Korea where people there are totally obsessed with material consumption, much more so than North Americans. When you talk to them, the lack of general culture and knowledge is very evident; most are culturally and politically illiterate. Group-think is prevalent. Facebook, WeChat obsession only make this worse.

        • Mike Earussi
          May 11, 2017 at 1:53 pm

          When you raise children on junk food, junk TV/video games and junk education, why should it surprise you that their brains are also junk.

        • Mike G
          May 11, 2017 at 6:42 pm

          I noticed this with Asians from HK and Singapore I knew from college. Very adept at pulling higher grades than I, but trying to engage business students in conversations about economics/business I found most (with some exceptions) had few thoughts of their own to indicate more than shallow knowledge of the subjects they were studying. Their education systems produce impressive numbers in international comparisons, but it appears they were never encouraged to think critically or express original thoughts — just rote memorization and regurgitation.

        • intosh
          May 11, 2017 at 9:58 pm

          It’s a modern society with a profound lack of sophistication. Sophistication is the word that always spring to my mind when I meet this type of people (and I meet them all the time). Their facade is modern but their spirit lacks depth and sophistication. Many of them are educated, work hard and have a respectable job. But they seem totally oblivious of the indoctrination that they’ve been subject to. Perhaps they are just too busy and tired to care. Perhaps they know something I don’t? Perhaps they understood that it’s futile to go against the current? Perhaps they believe they are better off not knowing — as the saying goes, ignorance is bliss.

          As for the Asian education system, it certainly plays a role. But I noticed that many Asians who were born and who grew up in Western countries exhibit the same “problem”. So I think the root cause is the mentality that has been forged by their history. It’s a bunch of hard working and intelligent people who have been deprived of material comfort for a long time. Now that they finally are offered the opportunity, they fully embraced it and abused it, to the point of being drunk in obsession of the material wealth. Not only that, the competitive factor against others Asians, peer pressure, amplifies this obsession; each one trying to show the other that he made it too or that he made it farther. Meanwhile, the generations that preceded them have been subject to oppressive regimes, which suppressed their natural curiosity and independent thinking but at the same time, hardened their pragmatism (it’s more rare to find Asians study philosophy, psychology, sports, art, literature; rather, they would like choose science, engineering, finance, law and medical because it likely pays more and has more opportunities, even if they don’t necessarily like the field). So I think it’s the combination of these two factors that make this trait seem so prevalent with Asians.

          (I am Asian myself.)

        • May 11, 2017 at 11:59 pm

          You have painted this with one of the broadest brushes I have ever encountered. It’s a generalization that is just mind-boggling. Are you extrapolating from yourself and two of your buddies to 3 billion people?

          Just as an example… Japan has an incredibly creative and artistic culture. Films, literature, food, industrial design, art, you name it… Just go there and look at it. My wife is a result of his, as is my mother in-law, doll artist Tokomo Ikeda. Here is one of her works:

          tomoko-ikeda-1

          You can see more her work here: http://tomoko-ikeda.com/english/

      • Randolph
        May 11, 2017 at 11:19 pm

        Then they sell the fantasy of “save the earth”, “change the world” and the biggest trigger word of them all: “disruption”.
        None of it is real but the youngsters are raised to believe it is.

    • wkevinw
      May 11, 2017 at 9:59 am

      I agree that the health care system is way too costly in the US. However, be very careful about believing stats on foreign countries. I can tell you from first hand experience that there are huge holes in these statistics, from purposeful under-reporting to differences in the way the raw data are collected.

      Most people would prefer health care in the US over almost all other countries, if they can afford it.

      • Smingles
        May 11, 2017 at 11:10 am

        “Most people would prefer health care in the US over almost all other countries, if they can afford it.”

        Most people can’t, so it’s a bit of a non-sequitur, no?

        I mean, most people would prefer eating at 5-star restaurants over eating at McDonalds, if they can afford it. And?

        • Mickey
          May 11, 2017 at 1:04 pm

          we have 74 million on Medicaid, 11 million on subsidized Obamacare and 68 million on Medicare.
          thats darn near 1/2 the US populaion and if that does not sound an alarm, nothing will.

      • Mike G
        May 11, 2017 at 6:46 pm

        For people with experience of both other western countries’ health systems and the US system, you will find a large majority prefer the other countries’ systems.

        GHW Bush made a thoughtless comment years ago that he know the US system was the best because his rich Arab sheik buddies came to Texas for their heart operations. That’s great — for everyone with Arab sheik money.

      • KFritz
        May 11, 2017 at 10:07 pm

        …and the United States’ statistics are as pure as the driven snow, huh?

    • intosh
      May 11, 2017 at 12:08 pm

      This is sadly how most business are done nowadays. Lots of bait-and-switch, false advertisement, hidden costs, etc. Of course, this happens in business-to-business dealings as well. Sales are done not based on what product/service is best but by how much one can grease the other party or how good one is at BSing. This is inevitable when the prevailing mentality is ever-faster-growing-profits-by-all-means. Predatory business where honor, craftmanship and professionalism are long gone.

    • KDMaz
      May 11, 2017 at 7:57 pm

      Might want to read “The Myth of Cuban Health Care.” It’s dated 2007 but does explain a few things.

      http://www.latinamericanstudies.org/cuba/health-myth.htm

      • KFritz
        May 11, 2017 at 10:04 pm

        Further up in the comments there’s a series of complaints about a lack of critical thinking skills. Applying basic skills to the article yields results. The url of the article is “latin american studies,” but it’s a reprint from National Review, not from a Latin American oriented organization of any kind. The article is best characterized as an op-ed opinion screed of unverified/unverifiable anecdotes held together but a theme of anti-socialism. (I am not a socialist.) I’ll leave it to other readers to use critical thinking skills to analyze the motive for using that link in this discussion.

    • Dave
      May 12, 2017 at 5:02 am

      Marco,

      I would like to point out that in Cuba if a child does not live through the first few weeks of birth(i forget exactly how many) they do not count it as an official baby death. Whereas in the US it is an official birth if they emerge with a heartbeat and then die within the first hour an official death.

      Also in Cuba the doctors are pressured to induce abortions for problematic pregnancies as well.

      I am an inner city ICU nurse and acknowledge there are many problems with US healthcare, but to compare our open and transparent system with a country which FAMOUSLY manipulates all sorts of data due to their totalitarian mindset is a weak starting point.

    • T.J.
      May 12, 2017 at 8:13 pm

      Other nations don’t report infant mortality with the integrity we do. They don’t count premature births, etc.
      Cuba nowhere near as obese as America, either. It just isn’t a fair analogy.

    • foobar
      May 13, 2017 at 8:56 am

      Cuba does not measure infant mortality the same way. Only one year olds are considered live births there.

  4. Meme Imfurst
    May 11, 2017 at 7:18 am

    This town I live in wants to outlaw cars and trucks all together…..except UBER.

    So, lets see if I have this right….hundreds of tractor trailer truck sit outside of town and UBER cars drive up and load with cases of beer and eggs for the grocery.

    This country is having its’ brains cooked by cell phones, one call at a time.

    • Carlisle_DBA
      May 11, 2017 at 8:29 am

      What town would that be? I did a “search of the literature” with the appropriate keywords of ‘town ban cars except uber’ and came up empty

      • Smingles
        May 11, 2017 at 11:12 am

        I tried as well, and nothing. I call BS.

        • alex in san jose
          May 11, 2017 at 8:41 pm

          I couldn’t find anything either.

  5. DK
    May 11, 2017 at 8:58 am

    The “share economy” probably means less production of things as utilization of existing things increases. I’ve heard that air bnb is really cutting into the hotel business. What else is out there that could be shared?

    • gary
      May 11, 2017 at 9:44 am

      wives.

  6. economicminor
    May 11, 2017 at 10:59 am

    I’m wondering if the car rental business is this slow, are people not traveling as much? What’s going on with the hotel /motel business?

    • Mike G
      May 11, 2017 at 6:58 pm

      Anecdotally I’ve noticed hotel/motel prices in CA are significantly up in the last couple of years and they sell out earlier. I think more people are taking road trips since gas prices have moderated — or maybe they’re fed up with the Chicago Stockyard experience that flying has become.

  7. michael Engel
    May 11, 2017 at 12:03 pm

    Car + rental cos new headwind isn’t just subprime borrowers, or Uber.
    High oil prices are the new headwind, a much strong wind in your face. It will slow them down and of course, the rest of the economy, the US and the global economy.
    The winner : Mr. Rasputin on the Neva, a gift sent to him before his election. He will be getting plenty of gifts in 2018.
    As far as Kuba, it entered a shock after the Russian abandonment.
    They moved into green energy (no oil), organic food (no chemical industry)
    and a lot of education, especially in the medical field.
    Their best export : doctors expedition force all over the world

    That’s how they get foreign currency.

  8. mike g.
    May 12, 2017 at 8:03 am

    Just south of Chicago, VW has 1000’s of diesel’s sitting waiting to be repaired or crushed. They are located at a horse race track.

  9. Tom G
    May 15, 2017 at 8:34 pm

    The car rental companies have raised prices to the point where it’s frequently uneconomic to rent a car. I live on the East Coast, and when I spent three months in California, it was cheaper to ship my car 3000 miles each way than it was to rent a car in California for three months.

    We won’t even talk about the experience of flying into a major airport and watching the quoted car rental rate DOUBLE after they add in the taxes, airport fees, environmental fees, and vehicle registration fees. And that’s assuming you bring your own insurance and don’t have to purchase the absurdly overpriced “collision damage waiver.”

    Then there’s the scam of trying to call a Nissan Versa a “mid-sized” car. After that stunt, I don’t plan on renting from Dollar/Thrifty in the future.

    I haven’t rented a car from Hertz in probably three or four years, mostly because they’re typically 50% to 100% higher than their competition.

Comments are closed.