The short version of Hertz Global Holdings Inc.’s bankruptcy story goes something like this: global pandemic obliterates the travel business and lands an iconic 102-year-old company in court to seek protection from creditors.

The long version is a fable about what happens when a company relies on accounting and consolidation to keep shareholders happy. It’s a tale of lurching from one CEO to another and management teams failing to stay attuned to consumer tastes.

Enterprise Holdings Inc. and Avis Budget Group Inc. are suffering through the same COVID-19 drought, but Hertz’s own bad decisions and hard luck made it vulnerable at the worst time. One former top executive summed up its plight as a slow-moving train wreck.

On its Chapter 11 petition, Hertz listed US$25.8 billion in assets. It has over US$1 billion in cash and US$24.4 billion of debt. A company that began with a dozen Ford Model Ts and was taken for a spin by General Motors, Ford Motor and a group of private equity firms as parents over the decades now faces an uncertain fate that will be decided in a Delaware court.

O.J., Enterprise

No telling of Hertz’s history is complete without mention of perhaps the most disastrous end to a major celebrity-endorsement deal of all time.

Hertz was owned by Ford in the summer of 1994 when police pursued O.J. Simpson in a white Bronco SUV for the murder of his wife, Nicole Brown Simpson, and her friend Ron Goldman. As a Buffalo Bills running back two decades earlier, Simpson raced through airports and past children screaming “Go, O.J., go!” on his way into the company’s rental cars.

The television ads were effective at emphasizing speedy service and boosted business. While the relationship was less beneficial to the company as their 19-year link wore on, Hertz stood by Simpson’s side even after a January 1989 charge for assaulting his wife. She personally convinced then-Chairman Frank Olson to stick with the star, the Washington Post reported.

Hertz had some good years after the so-called trial of the century that ended in Simpson’s acquittal. But in November 1994, the same month that the jury was sworn in, the trade publication Auto Rental News ranked Enterprise its new No. 1 by fleet size and number of offices.

Private Equity Era

While Hertz was by some measures slipping in the rental industry pecking order, it was still earning tidy profits for an otherwise struggling Ford. The automaker sold the company in 2005 to two private equity firms and Merrill Lynch & Co.’s buyout unit for about US$15 billion.

The following year, Hertz poached the top executive at auto-parts maker Tenneco Inc., Mark Frissora, to be CEO and lead the company through a re-listing. Frissora cut costs, eliminated thousands of jobs and was paid handsomely. His US$19.2-million compensation package in 2006 was more than Ford awarded its CEO last year.

After weathering the global financial crisis, Hertz started pursuing a costly and drawn-out deal for Dollar Thrifty Automotive Group Inc. It tried buying the company for US$1.2 billion in 2010 but ultimately paid US$2.6 billion after a two-year bidding war with its rival Avis.

The deal boosted Hertz’s market share by rounding out its business-traveler stronghold with a greater presence in the budget-minded leisure segment. But the acquisition also added to Hertz’s debt pile, which already was substantial thanks to the earlier leveraged buyout. The company ended 2012 with US$20.8 billion in total liabilities.

Dollar Short

Problems abounded with integrating the two companies, according to Maryann Keller, a longtime auto-industry consultant who was on Dollar Thrifty’s board at the time of the acquisition.

The two had different computer systems that couldn’t talk to each other. Frissora lost some talented executives by moving the two companies, which had been based in New Jersey and Oklahoma, to a new headquarters in Florida.

Hertz hoped to combine airport lots for the three brands to save money, but wasn’t able to do so at many locations. The company also found that Dollar Thrifty had let the tires on its cars get thinner than Hertz allowed, and many had to be replaced at a cost of US$30 million. Neither problem surfaced during due diligence.

In the end, a merger that was supposed to save Hertz about US$100 million in the first year ended up costing it another US$70 million, two people familiar with the matter said.

Accounting Issues

As expenses related to the Avis acquisition dragged on earnings, Frissora sought other ways to keep profits up.

To tamp down on vehicle depreciation, the biggest source of costs for rental companies, Frissora tried keeping cars longer, some for as many as 50,000 miles, long past the industry norm of about 30,000, former executives told Bloomberg News. His plan was to put older vehicles into the fleets of the company’s budget brands: Dollar, Thrifty and Firefly.

Since cars depreciate most in their first year, holding on to them longer would slow the rate the company had to show on its books. But not enough of the older models made it out of Hertz’s fleet, and business travelers were turned off by the aging selection of rides to choose from, Keller said.

And according to the Securities and Exchange Commission, the company committed fraud. The regulator said that from February 2012 through March 2014, Hertz materially misstated pretax income due to accounting errors. Investors including billionaire Carl Icahn pushed for Frissora’s ouster in September 2014, and the company restated results the following year.

Hertz settled with the SEC for US$16 million and Frissora wasn’t charged. A spokesman for the former CEO said he presided over operational improvements during his eight-year tenure. Hertz’s 2015 earnings restatements have no bearing on the company’s current financial situation and Frissora did not direct any improper accounting or engage in any wrongdoing, the spokesman said.

Icahn Enters

Icahn entered the picture after a 2014 dinner in New York that an industry analyst had with Dan Ninivaggi, who was then CEO of Icahn Enterprises. Ninivaggi was told Hertz had a good brand and solid foundation but needed discipline and better management. Icahn was swayed and bought up shares. By year-end, his holding was worth more than US$1.13 billion, according to data compiled by Bloomberg.

The head of Hertz’s equipment-rental business took over the company for a few months before a fateful decision. Rather than hire former Dollar Thrifty CEO Scott Thompson to run the company, Icahn went with John Tague, an ex-COO of United Airlines.

Icahn “didn’t put the best people in place” and “had a revolving door of managers,” said Keller, who believes Hertz would not be in the position it’s in today if it had hired Thompson. Icahn didn’t respond to requests for comment.

Tague updated Hertz’s fleet but did so with passenger cars just as U.S. consumers began fleeing sedans for sport-utility vehicles. Consumers went looking to other rental counters for SUVs, and depreciation costs mounted as sedans retained less of their value. He also tried raising prices, figuring the industry’s oligopoly would follow suit. But Enterprise and Avis didn’t and instead picked off more of Hertz’s customers.

In an interview Saturday, Tague said growth wasn’t his priority. He started tilting the fleet mix toward SUVs, but had a lot else on his plate: finishing the accounting investigation and restating earnings, integrating Dollar Thrifty, rebuilding the management team hollowed out by the Florida move and spinning off the equipment-rental business.

“Upon my arrival, it was clear that many things had to be addressed with a sense of urgency,” he said in a phone interview. “That’s what I undertook.”

Future Journeys

Tague retired at the beginning of 2017 and was replaced by Kathryn Marinello, who had been on the board of GM and truckmaker Volvo AB. The results of her early efforts to shrink the fleet and further the shift toward SUVs were undercut by the emergence of Uber Technologies Inc. and Lyft Inc.

Marinello did make progress. Hertz reported nine consecutive quarters of earnings growth and expanded revenue in 10 straight.

But when the pandemic decimated the rental industry, Hertz still had too little cash and a mountain of debt. Marinello resigned on May 16, less than a week before the bankruptcy filing.

“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’s new CEO Paul Stone said in a statement announcing the company’s bankruptcy. “Our loyal customers have made us one of the world’s most iconic brands, and we look forward to serving them now and on their future journeys.”