Hertz Swaps CEOs Amid Electric Vehicle Turbulence and Low Resale Prices

It is being said that Hertz Global Holdings Inc. may replace its chief executive officer (CEO) following a failed bet on electric vehicles that it began reversing in recent months.

Stephen Scherr, who led the company for just over two years after a long tenure at Goldman Sachs Group Inc., has decided to step down, the rental car company announced late Friday. Gil West, the former COO of General Motors Co.’s Cruise Robotaxi division, will take over for him. West will also join the board of directors on April 1, as confirmed by the statement.

Scherr, aged 59, joined the company a few months after its emergence from bankruptcy and spearheaded bold investments in electric vehicles. With new owners Knighthead Capital Management and Certares Management, the company made headlines by announcing plans to purchase 100,000 vehicles from Tesla Inc., propelling Tesla’s market capitalization above $1 trillion at the time.

However, the company’s commitment to electric vehicles continued after Scherr took the helm, with significant orders placed with Polestar, owned by China’s Geely and Sweden’s Volvo Car, and GM. Despite these efforts, the company ended up acquiring only a small number of vehicles from these manufacturers, according to a spokesperson.

These investments turned sour last year when Tesla slashed prices across its lineup, leading to a drop in the resale value of Hertz’s used Model 3 sedans and Model Y crossovers, which had been added to its fleet in large numbers.

By December, it had begun offloading 20,000 electric vehicles, representing about a third of its electric fleet. Germany’s Sixt SE, a major car rental player in Europe, went even further, announcing plans to phase out Teslas from its fleet entirely.

The company cited weak demand, high depreciation costs, and expensive repairs as reasons for its decision to sell off electric vehicles. The company, based in Estero, Florida, is said to have charged $245 million and reported its largest quarterly loss since the pandemic. Meanwhile, the standard trading that the company did on Friday saw the shares of the company fall by 2%.

Following Scherr’s departure, West will take the reins. Before joining Cruise in 2021, West held the same position at Delta Air Lines, Inc., where he played a key role in integrating Northwest Airlines and improving efficiency and performance.

Tom Wagner at Knighthead and Greg O’Hara at Certares had identified West as a potential CEO candidate even before the company’s acquisition was finalized. They approached him about leaving Cruise, but GM was reluctant to let him go due to its ambitions in the robotaxi space. Consequently, Mark Fields, former CEO of Ford Motor Co., was installed as the company’s interim CEO until Scherr was appointed in February 2022.

After leaving Cruise, West was approached again by Wagner and O’Hara, who were confident in his firsthand experience with electric vehicles and understanding of the challenges of electrification. They also appreciated the proximity of West, a resident of southwest Florida, to Hertz headquarters.

West becomes the latest in a series of the company’s CEOs, tasked with revitalizing the company and enhancing its competitiveness against rivals like Enterprise Holdings Inc. and Avis Budget Group Inc.

Before Knighthead and Certares took over the company, billionaire investor Carl Icahn struggled to revamp the century-old business as its controlling shareholder. Hertz has faced previous challenges, including under the leadership of John Tague, who served as CEO from 2014 onwards. Tague inherited an aging fleet and made investments in passenger cars while consumer preferences shifted towards SUVs. He lasted just over two years in the role.

Scherr will assist with the CEO transition until he departs from the company and its board on March 31.

Tom Wagner at Knighthead and Greg O’Hara at Certares had identified West as a potential CEO candidate even before the Hertz acquisition was finalized. They approached him about leaving Cruise, but GM was reluctant to let him go due to its ambitions in the robotaxi space. Consequently, Mark Fields, former CEO of Ford Motor Co., was installed as Hertz’s interim CEO until Scherr was appointed in February 2022.

Wagner and O’Hara contacted West once more after he had left Cruise, believing that his first-hand knowledge of electric cars and comprehension of the difficulties associated with electrification would be sufficient. They also valued West’s closeness to Hertz’s corporate headquarters—she lives in southwest Florida.

As the most recent CEO of Hertz, West has the responsibility of rejuvenating the organization and boosting its competitiveness vis-à-vis competitors such as Enterprise Holdings Inc. and Avis Budget Group Inc.

Before Knighthead and Certares took over Hertz, billionaire investor Carl Icahn struggled to revamp the century-old business as its controlling shareholder. Hertz has faced previous challenges, including under the leadership of John Tague, who served as CEO from 2014 onwards. Tague inherited an aging fleet and made investments in passenger cars while consumer preferences shifted towards SUVs. He lasted just over two years in the role.

Scherr will assist with the CEO transition until he departs from the company and its board on March 31.