car rental giant, Hertz, reported a loss of $1.36 per share in the fourth quarter, which was worse than the 76-cent loss analysts had projected. The company swung from a 70-cent profit in the previous quarter and a 50-cent profit a year ago. The drop into the red follows Hertz's decision to sell 20,000 Tesla EVs, about one-third of its electric fleet, as it lost money renting them out. CEO Stephen Scherr said in an interview that the company also plans to cut $250 million in other costs, which may include layoffs, with a total restructuring that should show better results starting in the second half.
Scherr said that the company took on more EV exposure than the market could handle and that the decision to pivot on EVs in the fourth quarter sets them up for a transitional year that's achievable. They will emerge a better company in 2025, he said.
Hertz's shares fell 5% on Tuesday morning, and the stock has dropped 21% this year as of Monday's close. The company's course correction on EVs is a blow to Scherr and the company's strategy of becoming an early adopter of EVs. This move was undermined by high repair costs, a series of price cuts by Tesla, and an industry-wide slowdown in sales growth of battery-electric models.
Hertz is one month into a 12-month plan to sell off the 20,000 Teslas, resulting in a $245 million charge last year. Scherr said that longer term, EVs will be the direction of travel, but for now, not all consumers are ready to make the switch.
The company saw pressure in other areas as well. Used-vehicle prices fell 10% in the quarter, which resulted in depreciation per unit in its gasoline-powered fleet rising to $350 a vehicle per month, up from $282 in the third quarter of last year. Interest rates hit profits as well, with fleet interest expense soaring to $91 a vehicle in the fourth quarter, up from $55 a vehicle in the fourth quarter of 2022.