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In the end Kathryn Marinello failed. She was at the helm for years where she could have positioned the company better. Blaming it on a 2014 misfilling and the
by wolco 6y ago
In the end Kathryn Marinello failed. She was at the helm for years where she could have positioned the company better. Blaming it on a 2014 misfilling and the wasted years cleaning it up only gives false cover. She didn't pay back debit when times were better because it would have affected her compension.
- LaundroMat 6y agoThen maybe the people who have decided the compensation structures are more to blame?
- 082349872349872 6y agoUS companies aren't supposed to pay back debt (in Hertz's case, how did 2005 affect the balance sheet?) because that would be an inefficient use of capital. US consumers are supposed to spend, not save, to stimulate the economy. US government is supposed to run a deficit, not a surplus. And yet the aggregate US net worth is positive: about 5x its GDP. What sector have I missed?
- eru 6y agoDespite the snark, you are partially right. Having debt in your capital structure indefinitely is a perfectly fine decision to make. If there's a political will to favour equity over debt, the lawmakers should first remove the tax benefits of debt over equity. See https://en.wikipedia.org/wiki/Tax_benefits_of_debt https://en.wikipedia.org/wiki/Tax_benefits_of_debt
- 082349872349872 6y agoThat wasn't snark. As an undergrad, I was taught that households should be positive, corporations negative, and public sector balanced on average, which would balance out. Either I'm missing a sector in the original analysis above (please tell me what it is), or the "common wisdoms" expressed there are false (and I should be more cynical), or...?
- ninkendo 6y agoYour tone is snarky despite your words being more or less correct. Correcting someone by saying you’re not using snark is just digging yourself a bit deeper I’m afraid.
- 082349872349872 6y agoThank you.
- eru 6y agoMostly agreed.
- teambayleaf 6y ago> Having debt in your capital structure indefinitely is a perfectly fine decision to make. We're hearing this argument a lot recently, but aren't we past that already in 1980s? As I recall, it was somewhat popular among companies to pile up leverages by buying a large potion of their own stocks. The reasoning was the same as today: it was supposed to benefit shareholders because a levereged BS has tax benefits. ... which subsequently resulted in those highly-levereged ("recap'ed") companies filing for bunkruptcy. So that hack was shunned by the time of 1990s. What does make this time different?
- eru 6y agoIf you have shares in enough companies, you don't particularly care if a few of them go bankrupt every once in a while, _if_ that trade-off makes you enough money on average. Mostly things haven't changed that much since the 1980s. The biggest difference is probably that individual investors are les likely to own specific shares, and more likely to own via an (index) fund. (That doesn't mean that any particular balance between equity and debt is the right one. Just that the occasional bankruptcy is not a nail in the coffin.)
- im3w1l-alt 6y agoDebt is how much (negative) money you have. Net worth also takes non-monetary assets into account. If you take out a loan to buy a house your debt increases but your net worth is constant.
- eru 6y agoAnd, of course, every debt is also an asset on someone else's balance sheet.
- 082349872349872 6y agoSo combined US assets are worth a great deal, enough so the declining equity position of (consumers+businesses+government) in those assets has not been significant. That makes sense. Thank you.
- itsoktocry 6y ago>So combined US assets are worth a great deal Aggregate US household net worth is now upwards of $100 trillion. That puts the $25 trillion in US National debt in perspective.
- mft_ 6y agoShe took over in Jan 2017 - three years isn’t much to pay back $20Bn of debt. Probably fairer to say that a decade of CEOs all failed.
- eru 6y agoWhy do you say Kathryn Marinello failed? Compensation incentives are there for a reason. Acting according to them just means fulfilling the shareholders wishes. (Unless the shareholders are idiots or impotent and the board set the wrong incentives.) Running a riskier strategy that fails under a pandemic is a perfectly cromulent business decision to make. Shareholders and creditors knew what they were in for. Not all gambles pay off. That doesn't mean taking on any risk whatsoever is wrong.
- Koolaboola 6y agoKathy Marinello, yet another Hertz ceo who surrounded herself with Yes people mainly her friends and former colleagues. She failed on so many levels. The main failure was her inability to bring in system updates and the low I.Q of her I.T staff who did not deliver the most basic upgrades and integration of Hertz systems unlike Hertz competitors like Enterprise and Avis, who will ride out the covid downturn. The company was overloaded with clueless management and usless team leaders, in some cases in accounts, there was two managers for one employee. Also her use of H.R as bully boys and girls meant there was a huge turn over of employees. her disdain for older men ( those with knowledge of the industry) Michelle Tarride was made clear in his unceremoniously dismissal, getting rid of old dogs was the term used by his replacement. The covid downturn was not the reason for Hertz downfall the reason was A one Kathy Marinello, who just like Stalin killed off the older generation of those with knowledge in the company.
- ramraj07 6y agoSo by that logic the shareholders and board members _were_ idiots then.
- xapata 6y agoMaking a bet and losing doesn't imply idiocy. What were the odds? What was the potential payoff?
- eru 6y agoYes, exactly. Though it's not just odds and payoff, but also risk appetite. There's something like risk-aversion, and a corresponding risk-return-tradeoff. But unless we have evidence to the contrary, we can assume that the shareholders are broadly risk-neutral. Especially since lots of shareholding these days is via widely diversified index funds, who don't need to care whether a any single company they hold goes bankrupt as long as the expected value of gambles they take are positive.
- LatteLazy 6y agoI don’t know if that’s fair. Hertz floundered for over a decade with leveraged buyouts, failed mergers, market missteps and accounting falsehoods. She got 9 quarters to turn that around, she was headed in the right direction, but it was too little too late.
- blargmaster33 6y agoWamen CEOs can do no wrong! Must be a man's fault!
- tonetheman 6y agoYeah nope. Did you read the article at all? The string of bad choices before that is what did it...