The New York Times has offered its readers another pandemic-wreaks-havoc-on-the-economy story in an article with this shocking headline: “Hertz, Car Rental Pioneer, Files for Bankruptcy Protection.” The initial emphasis of the article focuses on the general economic devastation wrought by the coronavirus pandemic rather than the specifics of Hertz’s dilemma.

A simple quote from an analyst appears to explain away the whole drama, placing the blame clearly on the pandemic. “They were doing quite well, but when you turn off the revenues and you own all these cars and all of a sudden the cars are worth less it’s a very tough business,” John Healy tells The Times. That’s as easy to understand as the grief felt by any number of mom-and-pop businesses on Main Street.

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But as the article develops, complexity emerges. The mystery begins to deepen when we learn this astonishing fact: “Hertz said late Friday that it would use more than $1 billion in cash on hand to keep its business running while it proceeds with the bankruptcy process.” Not many mom-and-pop stores have $1 billion in cash to weather the storm and guide them back to port.

Still, the economics of defending what have suddenly become overblown assets in a world that is quite possibly shifting away from the automobile culture of the 20th century means that, even if you have cash today, you may be in deep trouble tomorrow. That would be an interesting theme to explore, but the article doesn’t delve into that side of the story.

Instead, we learn some interesting facts. “Hertz also said that it had sought aid from the federal government, but that funding for its industry ‘did not become available,’” The Times reports. In other words, Hertz is one of those rare wealthy companies that failed to get a generous handout targeting the rich from a government whose first response to the crisis was to bail out those who were least existentially imperiled by the shutdown of the economy. That opened the door to Hertz’s second-best solution: declaring bankruptcy. If the government won’t pay, make sure your creditors will pitch in to preserve your ownership of the goose that in the past laid so many golden eggs.

After all, when you’re that important and your brand is that famous, there are limits on the sacrifices you can allow yourself to make. For example, before declaring bankruptcy, Hertz “had cut pay for senior leaders in March, too, but reversed that decision recently.” Furloughing half the workforce makes sense. Reducing the pay of directors for more than a month is dangerous heresy.

Delving further into the Hertz saga, the article then digs up some real dirt from the past. It starts innocently enough as a brave success story: “Hertz had struggled in the years after the financial crisis of 2008 but had begun to turn around recently” thanks to its policies aimed at cutting costs and reducing its debt.

Halfway through the article, we get the first real hint of the truth about a period of darkness in the company’s stormy past. “When Ms. [Kathryn] Marinello took the helm of Hertz in early 2017, she inherited a troubled company.” There is a villain in the story, comparable to Shakespeare’s hunchback King Richard III before he was dethroned by the first of the Tudor kings, Henry VII. His name is Mark Frissora, the CEO from 2012 to 2014. The article exposes his multiple crimes. But one defender, Stephen Cohen, whom The Times identifies simply as “a spokesman,” stepped up to justify Frissora’s reign: “During his tenure at Hertz, Mark presided over substantial value creation and operational improvements.”

Here is today’s 3D definition:

Value creation:

In the economic hyperreality of brands that are “too iconic to fail,” any action that appears to reinforce or increase the public’s perception of the force of the brand, even if that action makes no economic sense or contributes to compromising the company’s future

Contextual Note

The New York Times article delves into some of the details of the company’s shady dealings: “Hertz had overstated income before taxes by $235 million, the Securities and Exchange Commission said last year. The company agreed to pay the regulator $16 million to settle fraud and other charges.” It also mentions “a string of accounting errors.” At no point does the reporter, Niraj Chokshi, wonder why Hertz’s managers would overstate income and encourage or at least allow accounting errors, though the answer is well known to observers of Wall Street. The aim is to boost the stock price which, in turn, increases the compensation of senior management.

The article does hint at that explanation when it reveals that “Hertz sued Mr. Frissora and other former senior managers, seeking to recover at least $56 million in compensation and arguing that they had pressured subordinates to meet financial goals, which they did through the misleading accounting.” But The Times has already informed us that, like Brutus in the words of Mark Antony, Frissora “is an honorable man” who “presided over substantial value creation.”

Historical Note

For most of the 20th century, Hertz was not only the leader in the car-rental market, but its name was synonymous with the idea of renting a car in the US. In the 1960s, its closest rival, Avis, made spectacular headway in the market with the daringly self-deprecating advertising slogan, “We try harder.” It boldly acknowledged Hertz’s dominant position as No. 1 and found a way of making the assertion “We’re No. 2” to mean precisely the opposite of “we’re second best.”

Avis’ now-legendary advertising strategy aimed at convincing the public that because it was No. 2, it would be more in tune with its customers’ needs and provide better customer service. In 2013, 50 years after the campaign, Seth Stevenson, writing for Slate, recounted the sequence of events: “From 1963 to 1966, as Hertz ignored the Avis campaign, the market-share percentage gap between the two brands shrunk from 61-29 to 49-36. Terrified Hertz executives projected that by 1968 Avis might need a new ad campaign—because it would no longer be No. 2.”

Though also suffering from the crisis while managing everything far more skillfully, Avis was not far behind as it maintained its No. 2 position (turnover was $8.66 billion to Hertz’s $9.5 billion). With Hertz’s current woes, Avis may finally become No. 1. And as The Times article tells us, lamenting Hertz’s decline, “The company’s future is uncertain, though most analysts are optimistic that it can emerge from bankruptcy after restructuring its debt.”

Even before the coronavirus pandemic, US capitalism had begun to see some of its former market leaders not just fail but, despite their iconic brands, disappear. Kodak stands as the prime example as it failed to perceive and anticipate the consequences of the digital revolution and left the landscape in 2010, when it was removed from Standard & Poor’s 500 index. The omnipresent Woolworth’s was even cited in the lyrics of a popular song (“I can’t buy you anything but love”), but the store disappeared from American streets in 1997, as did the grocery brand A&P in 2015. Blockbuster, though its domination was of much shorter duration, disappeared very quickly in 2011. Sears Roebuck is a pale shadow of the once-dominant brand.

Avis will survive and so may Hertz. But if Hertz is no longer No. 1, will the company find the resources to “try harder”?

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.