Auto recalls affecting car rental firms across U.S.
Published By : 21 Aug 2014 | Published By : QYRESEARCH
Car rental companies across the U.S. have taken a hit as more and more car manufacturers have been recalling units this year. This has caused a shortage of vehicles at car rentals affecting the overall industry in the country.
The latest car rental to be hit is Hertz Global Holdings Inc. Stocks of the company plunged 13% on Wednesday when it withdrew its profit guidance for the year. The Florida-based firm blamed it on the cost of recalls and accounting errors within the company.
The move has caused a stir within the organization. Longtime activist investor Carl Icahn disclosed an 8.48% stake in Hertz in a regulatory filing on Wednesday, and also his “lack of confidence in the management”. He said he wanted to talk to the management and board regarding accounting issues, shareholder value, underperformance compared to rival companies, and operational failures in the car rental firm. After the Icahn stake was disclosed, shares of Hertz fell 3.9% to $30.33.
Another Hertz Global Holdings Inc. investor Fir Tree Partners has urged the company board to replace CEO Mark Frissora. Fir Tree holds over 3% of the company’s stocks (13.8 million shares) and has said that they disapprove of Frissora’s running of Hertz. Other investors who hold more than 4% stocks have also expressed their desire to replace the existing CEO.
The U.S. car rental market is dominated by Enterprise Rent-A-Car, followed by Hertz and Avis Budget Group Inc. The three together hold 90% of the control of the U.S. market. General Motors Co. cars account for 28% of Hertz’s fleet in the country and with GM recalling millions of cars this year, it has hurt Hertz more than Avis.