Hertz (2020)

Hertz's May 2020 bankruptcy demonstrated how travel-dependent businesses can be destroyed instantly by demand collapse. The company—which had survived the Great Depression, multiple recessions, and industry consolidation—couldn't survive three months of COVID-19 travel restrictions. Hertz filed bankruptcy with $19 billion in debt, much of it secured by vehicles that had suddenly lost significant value. The mechanism failure was leverage meeting demand shock. Hertz financed its vehicle fleet through asset-backed securities—debt secured by the cars themselves. This structure required continuous vehicle turnover: Hertz would buy cars, rent them for 12-18 months, then sell them before depreciation exceeded rental income. When COVID-19 stopped travel, the turnover mechanism broke. Hertz couldn't sell cars (used car market collapsed); couldn't make debt payments (no rental revenue); couldn't return cars to manufacturers (contracts didn't allow it). Hertz's bankruptcy became a meme-stock phenomenon when retail traders drove the stock price up 900% even as the company warned shares would become worthless. The company actually tried to sell stock into this rally—an unprecedented attempt to raise capital during bankruptcy—before the SEC intervened. Hertz emerged from bankruptcy in 2021 when travel resumed and used car prices spiked, demonstrating that the underlying business model remained viable once demand returned. The company's survival depended on outlasting the pandemic—a race it won only through bankruptcy protection.