Rental car company Hertz Global Holdings Inc. is slashing its work force by an additional 4,000 jobs worldwide as it further cuts costs to contend with deteriorating demand and vehicle values. Hertz expects to save $150 million to $170 million this year and take a related fourth-quarter charge of $20 million to $25 million, the company said Friday.
This is only the latest round of job cuts for the rental car company, which eliminated 1,400 employees this fall. The new reductions will bring staffing to 32 per cent below its levels in August 2006, Hertz said.
According to CapitalIQ, the company currently has about 29,350 workers in total, who operate about 8,100 locations in 144 countries.
The company said this round of cuts, which will take place in its fiscal 2008 fourth quarter and first quarter of 2009, will come in its car and equipment rental operations as well as corporate and support areas. The reductions will occur across all regions.
"Volume, pricing and residual values continued to decline during the most recently completed quarter, and we cannot predict when our markets will improve," said chairman and chief executive Mark P. Frissora in a statement.
He said Hertz is still committed to its global airport and off-airport car rental and equipment rental businesses and will add the "necessary resources" when operating conditions get better.
The rental car industry has a faced a perfect storm of challenges in the past year as airlines have reduced flights, consumers and businesses have cut back on travel spending and vehicle values have dropped.
In November Hertz suspended its financial guidance and said it no longer expects to meet annual earnings targets set in August.
At the time, Hertz projected 2008 adjusted earnings between $340 million and $375 million, or $1.05 to $1.15 per share. It anticipated revenue between $8.7 billion and $8.8 billion.
Analysts surveyed by Thomson Reuters now expect 2008 earnings of 63 cents per share on $8.81 billion in revenue.
Rivals Avis Budget Group Inc. and Dollar Thrifty Automotive also are struggling. Avis has announced a management salary freeze and cut more than 2,200 jobs as part of a drive to reduce annual costs. In October, Dollar Thrifty said it had cut its work force by 6 per cent, or 400 jobs.
Hertz's finances have been considered more stable than its rivals, due to the company's large equipment rental division, which accounts for roughly half its earnings and provides it with more cash flow than pure rental car companies.
Hertz's liquidity was about $4.9 billion as of Dec. 31, 2008. Frissora said Hertz estimates fourth-quarter total net cash flow of about $1.75 billion.
Shares of Hertz fell 12 cents, or 2.2 per cent, to close at $5.27 on Friday. During the past 52 weeks, the stock has fallen from a high of $15.32 last February to bottom at $1.55 in November.
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