Hertz’s Cancels New Car Orders To Help Forego Bankruptcy: Automakers Will Feel The Hit

Hertz Global Holdings (HTZ) continues to show signs that a possible bankruptcy filing Is coming as the company looks to preserve liquidity and has reportedly canceled 90% of its new car purchases for 2020.

The decision to implement the cost-cutting measures comes as Hertz announced its Q1 2020 earnings report citing a larger than expected net loss of $356 million.

The car rental company also warned of its financial position, saying in the report that it is “reviewing all available options to preserve liquidity, however, there can be no assurance that the Company will be able to successfully negotiate any relief past May 22, 2020.”

“The coronavirus created a major disruption as the global travel market and the used-car market effectively shut down,” Kathy Marinello, CEO at Hertz, said in a statement. “We have to be pragmatic about the timing of an economic rebound, including a second wave of the virus in the fall. So we are focused on safeguarding liquidity.”

Not only could Hertz find itself in Chapter 11, but the auto industry could take a significant hit as car rental companies forego new vehicle purchases, which amount to 10% of U.S. auto sales or 1.7 million vehicles a year, Bloomberg reported.

General Motors was the largest supplier of vehicles to Hertz last year, making up about 21% of its car fleet, followed by Fiat Chrysler with an 18% share and Ford making up a 12% share of the company’s sales, according to a regulatory filing (via Bloomberg).

Shares of Hertz stock were down 5.4859% as of 2:59 p.m. EDT on Tuesday.