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The Street
The Street
Veronika Bondarenko

Hertz Rent-a-Car Company Faces Another Scandal

Car-rental company Hertz  (HTZZW)  is once again in hot water after a year of navigating a false theft report lawsuit, rising car prices and recalls and a changing post-pandemic driving landscape.

This year has seen several large-scale recalls of many popular car models. In December, General Motors (GM) recalled more than 740,000 cars over issues with daytime running lights. Tesla (TSLA) recalled over 1.1 million cars in September over window closures while reports of car fires prompted Ford (F) to recall nearly half a million cars in the same year.

These are just some examples of the many more widespread auto recalls at a time when a global semiconductor shortage and supply chain disruption is already limiting the number of new cars leaving factories. Some estimates found that global carmarkers produced 8 million fewer cars than planned in 2022.

'Without Having Performed Required Safety Recalls'

While this has sent the price of both new and used cars skyrocketing, it is still not a reason to forgo safety. In a filing published on Tuesday, the National Highway Traffic Safety Administration (NHTSA) announced that it was investigating whether Hertz had still rented cars that had been subject to safety recalls.

"NHTSA is in receipt of information that indicates Hertz rented vehicles to customers without having performed required recall repairs," the agency said in a public filing. "Accordingly, we are opening this audit query to seek additional information concerning this issue."

Individual owners of recalled cars are customarily given time to replace them free-of-charge but not everyone performs this in a timely fashion. For a car rental company, this could also take away from a given car's availability while it is being replaced.

NHTSA said that the investigation concerns recalls over latches and locks on Ford Explorer and Nissan Altima  (NSANF)  cars that Hertz owned between 2018 and 2020. The investigation is currently looking for "additional information concerning this issue" to determine Hertz did anything wrong.

"The Safety Act requires, among other things, that a rental company shall not rent a vehicle subject to a safety recall unless the recall remedy has been performed," NHTSA said in reference to a 2015 law for rental companies with over 35 vehicles.

Hertz told TheStreet that it was "looking forward to working with NHTSA on the review."

"We take the safety of our customers seriously and manage the Hertz fleet of approximately 500,000 cars around the world with that as our principal objective," a company spokesperson said. "Our policies require us to remove from our rentable fleet vehicles that are under a safety recall, consistent with applicable law."


A Year Of Problems and Bad PR For Hertz

Earlier this month, Hertz agreed to pay $168 million to settle claims of filing false theft reports on customers and in some cases even causing them to spend time in jail and slapped with felony charges for non-existent offences. The lawsuit claimed that, in many cases, the car could not be located due to poor record-keeping on the part of Hertz.

"As I have said since joining Hertz earlier this year, my intention is to lead a company that puts the customer first," chief executive Stephen Scherr said of the settlement. "In resolving these claims, we are holding ourselves to that objective."

Hertz stock is down 32% year-over-year and nearly 40% since the start of 2022. But things also haven't been all bad for the car-rental company as it tries to navigate and adapt the changing future of cars. Back in September, it ordered over 175,000 electric cars from General Motors cars like Chevrolet, Buick, GMC and Cadillac. Hertz also announced plans to buy 65,000 EVs from Swedish electric car maker Polestar (PSNY).

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