HERTZ Global is replacing its chief executive officer in the wake of a disastrous bet on electric vehicles (EVs) that the company began unwinding in recent months.
Stephen Scherr, who ran Hertz for just over two years after three decades at Goldman Sachs Group, has decided to step down, the rental-car company said on Friday. It is replacing him with Gil West, the former chief operating officer of General Motors’ Cruise robotaxi unit. West also will join the board of directors on Apr 1, according to Hertz’s statement, which confirmed an earlier Bloomberg report.
Scherr, 59, joined Hertz several months after it emerged from bankruptcy and started making splashy wagers on EVs. Under new owners Knighthead Capital Management and Certares Management, the rental company announced plans to order 100,000 vehicles from Tesla, sending the automaker’s market capitalisation soaring past the US$1 trillion mark at the time.
Hertz doubled down on EVs in the months after Scherr took over, placing big orders with Polestar, the electric-car maker owned by China’s Geely and Sweden’s Volvo Car, and GM. The company ended up buying a small number of cars from the two companies, a spokesperson said.
Those bets went awry last year, when Tesla slashed prices across its lineup to keep growing vehicle sales. This hammered the resale value of used Model 3 sedans and Model Y crossovers just after Hertz had added tens of thousands of those vehicles to its fleet.
By December, Hertz started selling off 20,000 EVs, or about a third of its EV fleet. Germany’s Sixt – a leading car-renter in Europe – is taking even more drastic measures, phasing Teslas out of its fleet entirely.
Hertz announced its EV sell-down plans in January, citing lacklustre demand, costly depreciation and expensive repairs. The Estero, Florida-based company took a US$245 million charge and reported its biggest quarterly loss since the pandemic.
Shares of Hertz fell 2 per cent after regular trading in New York on Friday.
Scherr’s successor, West, was one of nine Cruise executives that GM dismissed at the end of last year after California regulators accused the company of withholding information about one of its self-driving vehicles striking and dragging a pedestrian.
Prior to joining Cruise as COO in early 2021, West held the same position at Delta Air Lines. There, he played an instrumental role in the integration with Northwest Airlines and was credited with improving efficiency and performance.
“Gil is a fantastic operator. We worked side-by-side for a dozen years,” Delta CEO Ed Bastian said an interview. “He’s an innovator, he loves technology, he’s meticulous, he’s curious and he loves a challenge – all great attributes.”
Even before they completed the Hertz acquisition, Tom Wagner at Knighthead and Greg O’Hara at Certares had identified West as a CEO candidate and approached him about leaving Cruise, according to two people with knowledge of those discussions who asked not to be identified. But GM, which had big plans for robotaxis at the time, did not want to let West go. So the investors installed Mark Fields, who had run Ford Motor, as Hertz’s interim CEO and conducted a full CEO search, settling on Scherr in February 2022.
Once he had left Cruise, Wagner and O’Hara approached West again, confident that by virtue of his firsthand experience with EVs and appreciation for the pitfalls of electrification, he would be a better fit. And they liked that, as a resident of south-west Florida, he would not have far to travel to Hertz headquarters, the people said
West will be the latest in a long line of Hertz CEOs tasked with turning the company into a more profitable player and stiffer competitor for closely held Enterprise Holdings and Avis Budget Group.
Before Knighthead and Certares swooped in to take Hertz out of bankruptcy, billionaire investor Carl Icahn struggled to put a shine on the century-old business as its controlling shareholder. Misreading the car market has cost Hertz in the past, including under John Tague, the former United Airlines COO whom Icahn installed as CEO in 2014.
Tague inherited an ageing fleet from ousted CEO Mark Frissora and went long on passenger cars as consumer tastes were shifting to sport utility vehicles. He lasted a little more than two years in the job.
Hertz said Scherr will assist with the CEO transition until he leaves the company and its board on Mar 31. BLOOMBERG
