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Back in March, economic development specialist Omar Hassan warned that the coronavirus would “bankrupt more people than it kills.” It appears he was right.
Hertz Global Holdings, the parent company of the largest car rental company in America, reportedly filed for bankruptcy protection Friday because it’s unable to pay off its debts amid the panic sparked by the coronavirus.
“The firm, whose largest shareholder is billionaire investor Carl Icahn with a nearly 39% ownership stake, is reeling from government orders restricting travel and requiring citizens to remain home. A large portion of Hertz’s revenue comes from car rentals at airports, which have all but evaporated as potential customers eschew plane travel,” Reuters reported.
Just add @Hertz to the long list of victims of the #coronavirus lockdown.
How many trillions of dollars of economic destruction does the blanket lockdown have to incur before the “solution” is worse than “problem”? https://t.co/dw8UWNLddd
— Prof. Steve Hanke (@steve_hanke) May 22, 2020
“With the severity of the Covid-19 impact on our business, and the uncertainty of when travel and the economy will rebound, we need to take further steps to weather a potentially prolonged recovery,” Hertz CEO Paul Stone reportedly said in a statement.
By the end of 2019, Hertz reportedly boasted $19 billion in debt. But according to John Healy, an analyst and managing director with Northcoast Research in Cleveland, the company could have weathered the storm had it not been for coronavirus panic.
“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,” he said in a statement to The New York Times.
“Though it had piled up $17 billion in debt, Hertz, which also owns the Dollar and Thrifty brands, was reporting healthy sales at the start of 2020. The company’s revenue rose 6 percent in January and February,” the Times further noted.
The company’s first missed creditor payments reportedly came in late April.
Hertz is not alone in filing for bankruptcy. Apex Parks Group, Art Van Furniture, Cinemex Holdings, Diamond Offshore Drilling, FoodFirst Global Restaurants, Gold’s Gym, Intelsat, J.C. Penney, J. Crew, Neiman Marcus, Pier 1 Imports, Stage Stores, True Religion and Whiting Petroleum have all also filed for bankruptcy.
In most cases, the companies “were already showing signs of financial duress,” according to the business forecasting service Kiplinger, though again, these companies could have likely weathered the storm had it not been for the ensuing panic.
“Coronavirus’s economic danger is exponentially greater than its health risks to the public,” Hassan, the co-founder of UK MENA Hub, warned in early March.
“If the virus does directly affect your life, it is most likely to be through stopping you going to work, forcing your employer to make you redundant, or bankrupting your business.”
Two months later, his warnings seem prescient, though in Hertz’s case, at least it still remains in operation. The same may not be said of thousands of small businesses.
According to Patch, as of late May, more than 100,000 businesses in New York alone had been forced to shutter permanently because of coronavirus panic.
And according to a survey conducted by Main Street America last month, a total of 7.5 small businesses remain at risk of shutting down if the panic doesn’t subside soon.
View the results of the survey below:
“The MSA survey indicates that millions of small businesses will be at great risk of closing permanently if the crisis continues for several months,” it reads.
“Of the nation’s approximately 30 million small businesses, nearly 7.5 million small businesses may be at risk of closing permanently over the coming five months, and 3.5 million are at risk of closure in the next two months.”
It’s already been a month since the survey was published. Meanwhile, the number of coronavirus-linked deaths in the United States has yet to hit 100,000.
Over in LaGrange County, Indiana, on Friday one local Dodge retailier announced that it was closing for good.
“LaGrange Country Dodge, the last Big Three car and truck dealership still operating in LaGrange County, has closed its doors,” The News Run reported late Friday.
“A spokesman, who refused to be identified, met several people at the door of the business Thursday afternoon and told them that the Dodge dealership is now permanently closed.”
In Lexington, Kentucky, meanwhile, a local TGIFridays closed for good … on Friday.
And over in Seattle, so many restaurants have closed that it’s not even possible to list all of them, though here’s a sample: Adana, Specialty’s Cafe and Bakery, Bavarian Meats, Biscuit Bitch: Pioneer Square and White Center, etc., etc., etc.
All this is happening as some are calling for an end to the ongoing coronavirus panic:
Social distancing is fine.
Masks are fine.
Closing small businesses out of complete unfounded panic based upon worst-case scenario “models” is NOT fine.
Governors taking our rights by fiat like Kings is NOT fine.
Wrecking the economy from FEAR is NOT fine.
— Bill Mitchell (@mitchellvii) April 7, 2020
90% of those that are infected with coronavirus are asymptomatic. This means that they don’t even know that they have the disease because they do not show any symptoms.Only 10% of those infected show symptoms & only 1% of those that do end up dying. Stop the panic but stay safe!
— Femi Fani-Kayode (@realFFK) April 13, 2020
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