Embattled car rental giant Hertz Global Holdings Inc. hopes to turn around its fortunes by adding more midsize and large vehicles to its fleet in the first half of the year, senior executives said. It also may be unloading more of its smaller cars.
Hertz, which also operates the Dollar and Thrifty brands, is under pressure to return to the black as it competes with ride-sharing services such as Uber and Lyft. The company lost $440 million in the fourth quarter and $491 million in 2016, the second year of the last three that Hertz was in the red.
Hertz CEO Kathryn Marinello said the company's poor financial performance is the result of issues with its fleet and with service. The company is moving to change its vehicle mix to better reflect consumer demand for larger vehicles, Marinello said.
"We've been spending time evaluating our fleet mix both from a car class and a quality standpoint. In terms of car class, we expect to have the fleet better balanced between compact, mid and large vehicles ahead of the third quarter," Marinello said on a Feb. 27 call with investors and analysts.
Hertz's decision could have ramifications for automakers in a U.S. market that favors light trucks. Fleet sales among the seven largest fleet players fell 6.7 percent in January after gaining 4.1 percent in 2016, according to the Automotive News Data Center.
Hertz has already begun trimming its small-car holdings. At the end of 2016, compact cars were down 2.5 percentage points from a year earlier as a percentage of Hertz's fleet, CFO Tom Kennedy said during the conference call. In a government filing, Hertz said that in 2016, "we did accelerate the disposal of a portion of the compact vehicle category that we acquired as part of the 2015 fleet refresh in order to reduce their percentage of the fleet mix."
Compacts accounted for 20 percent of Hertz's fleet at the end of 2016, spokeswoman Leslie Hunziker said. The company hopes to bring that down to between 17 and 18 percent this year, she said.
Hertz has picked up on the trend toward larger vehicles through its new Ultimate Choice service, which lets customers choose their car before driving off, Kennedy said. Hertz will expand Ultimate Choice to 30 U.S. airports by mid-2017, he said.
"As the customers go and pick themselves, we're also finding the cars that they like the best. And the cars that are remaining -- we maybe don't need any more of those," Marinello said.