Rental car company Hertz recently announced that Stephen Scherr will step down as Chief Executive Officer and Gil West, former Chief Operating Officer of Delta Airlines and GM's Cruise unit, will replace him. West will assume the Chief Executive role on April 1.
The news comes as the result of Hertz’s unsuccessful run in the electric vehicle (EV) market, Bloomberg and other news outlets report. Scherr bet big on EVs when he took over as CEO — Hertz planned to order 100,000 Tesla vehicles and placed large orders with EV manufacturer Polestar (65,000 vehicles), which China’s Geely owns, Volvo Car and GM (175,000 EVs).
The bets didn’t pay off, however. Tesla started to lower its prices in an effort to keep growing vehicle sales. The move decreased the resale value of Tesla’s Model 3 sedans and Model Y crossovers — just as Hertz had added tens of thousands of those EVs to its fleet, Bloomberg reports.
Hertz then had to sell 20,000 EVs, which comprised about a third of its fleet. Hertz announced its plans to sell its EVs in January due to decreased demand, costly depreciation and expensive repairs. The rental car company took a $245 million charge and reported its largest quarterly loss since the COVID-19 pandemic.
“If you're a rental car company that only keeps vehicles for a year or so and the resale value of those vehicles drops by a third or more, that's a real problem,” Inc. com tech columnist Jason Aten wrote. “Hertz was counting on selling them at a specific price and built that into its strategy. A sudden change like Tesla’s price cuts means that Hertz’s only remaining option is to sell off its vehicles sooner before it loses even more money.”
“We continued to face headwinds related to our electric vehicle fleet and other costs throughout the quarter,” Scherr said in the company’s 2023 fourth quarter earnings report. “We have taken steps to address those challenges, and heading into 2024, we are confident that our planned reduction in EVs and cost base, along with the ongoing execution of our enhanced profitability plan, will enable us to regain our operational cadence and improve our financial performance with increasing effect into 2025.”
Unfortunately, those steps haven’t proven to be effective. After announcing it would sell a third of its EV fleet, Hertz said it plans to put some of the money to purchases internal-combustion engine vehicles after witnessing lower demand for EVs and enduring higher operating costs, The Wall Street Journal reports.
“Ultimately, the lesson here isn’t that EVs are bad or that you shouldn't buy Teslas,” Aten wrote. “No, the lesson here is that if you’re a leader, you’re ultimately accountable for the decisions you make. Hertz has lots of problems, but I do think it’s worth pointing out that the exit of the CEO is the right thing here. I think it’s good to point out whenever a leader is accountable for their decisions, because far too often that's not how it works out.”
West and Scherr will work together over the next several weeks to ensure a smooth transition, Hertz said.
“We are thrilled to have Gil join Hertz as Chief Executive Officer,” Tom Wagner, Vice Chair of the Hertz Board of Directors said in a statement. “Gil's experience as a successful leader in operationally intensive businesses will further strengthen the company’s world class team of over 27,000 global employees who work tirelessly to deliver outstanding service to customers daily. We are appreciative of Stephen’s contribution over the last two years, including on a number of key strategic initiatives, which Gil will now lead in their continued execution.”
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