Billionaire Bill Ackman Takes 19.8% Stake in Hertz, Betting on Tariff Windfall and Turnaround After $2.9 Billion Loss

Ackman's Major Hertz Gamble: Turnaround Play or Electric Misstep Recovery?

As Hertz shares rocketed more than 44% in a single trading session on Thursday, closing at $8.20 and capping a two-day rally that more than doubled the company's market value, the catalyst behind this extraordinary movement became clear: billionaire investor Bill Ackman had taken a substantial position in the struggling car rental giant.

Ackman's firm, Pershing Square Capital Management, disclosed a 19.8% stake in Hertz Global Holdings, making it the company's second-largest shareholder and sending shock waves through Wall Street. The investment represents a bold bet on a company still reeling from a $2.9 billion loss in 2024 and the painful aftermath of its failed electric vehicle strategy.

Tariff Windfall and Fleet Value: The Heart of Ackman's Thesis

At the core of Ackman's investment thesis is a timely macroeconomic opportunity created by President Donald Trump's recent implementation of 25% tariffs on imported automobiles. Ackman believes these tariffs will significantly drive up both new and used car prices across the market, potentially creating a substantial windfall for Hertz.

"With a fleet of over 500,000 vehicles currently valued at approximately $12 billion, even a modest increase in the used car market could dramatically impact Hertz's balance sheet," explained one industry analyst watching the situation closely. "Ackman's calculations suggest that a 10% rise in used car prices could add $1.2 billion to Hertz's asset value, representing nearly half of its market capitalization prior to his investment."

This potential asset appreciation comes at a critical time for Hertz, which is still recovering from writing down $245 million in losses from electric vehicle sales in the fourth quarter of 2024 alone, part of an ill-fated EV adoption strategy that severely damaged the company's financial position.

"We Are Humbled": CEO Responds to Billionaire's Vote of Confidence

Hertz CEO Gil West responded to the investment with apparent gratitude, penning a letter to employees that described the company as "humbled," "encouraged," and "energized" by the strong support from Ackman and Pershing Square.

"This endorsement is a testament to the progress we've made and the relentless dedication of our team," West wrote. He emphasized that while important groundwork has been laid for Hertz's recovery, "the coming year is about execution and delivering real results for both our customers and shareholders."

The CEO's message underscored both the opportunity and pressure created by Ackman's high-profile involvement, as the company now faces increased scrutiny of its performance metrics and turnaround strategy.

Oligopoly Advantages and Operational Targets

Beyond the potential tariff windfall, Ackman has highlighted several structural advantages that make Hertz an attractive investment target. Chief among these is the company's position in what he describes as an "oligopoly," noting that Hertz and its two main competitors, Enterprise and Avis, control approximately 95% of the U.S. car rental market.

"The rental car industry's concentrated structure should allow for stronger margins and more rational competition than we've seen historically," remarked a transportation sector analyst who requested anonymity. "Ackman specifically pointed to Enterprise's strong margins as evidence that this business can be highly profitable with proper execution."

Pershing Square's optimism hinges on Hertz achieving specific operational targets, including:

Increasing revenue per unit to $1,500
Reducing daily per-vehicle operating expenses to the low $30 range
Maintaining depreciation per unit at approximately $300
Boosting fleet utilization rate to 85%

These metrics represent ambitious goals for a company that has struggled with operational efficiency in recent years and rarely achieved the targeted 85% utilization rate historically.

From EVs to Autonomy: Strategic Pivot Possibilities

In a particularly forward-looking aspect of his investment thesis, Ackman has proposed that Hertz could leverage its extensive global footprint and vehicle management expertise by potentially managing a fleet of self-driving vehicles for Uber.

The suggestion has already received positive signals from Uber's CEO, who reportedly expressed openness to expanding the existing partnership between the two companies. Such a strategic pivot could help Hertz diversify away from its traditional business model and potentially capture value in the emerging autonomous vehicle sector.

"A deeper Uber partnership represents the kind of strategic thinking Hertz needs," said one industry observer. "After the EV misstep, they need to be thoughtful about how they participate in transportation's evolution without taking on unmanageable risks."

Market Reaction: From Stocks to Bonds

The market's response to Ackman's vote of confidence has extended beyond Hertz's stock price. The company's bonds have rallied sharply, reflecting renewed confidence among creditors who had previously been concerned about Hertz's debt load and financial trajectory following its 2020 bankruptcy and subsequent struggles.

"The bond market reaction is particularly telling," noted a fixed-income specialist monitoring the situation. "It suggests institutional investors see reduced risk of financial distress now that Ackman is involved. His track record of pushing for operational improvements and financial discipline likely factored into this positive sentiment shift."

Substantial Risks Remain Despite Optimism

Despite the market enthusiasm, significant challenges remain for Hertz. The company still carries substantial debt with tightening covenants and upcoming maturities. It also faces ongoing legal disputes related to its 2020 bankruptcy and must rebuild investor trust after its failed electric vehicle strategy.

Even Ackman himself has tempered expectations, warning in his disclosure that "investing is risky. There are no guarantees of a successful outcome. Caveat emptor."

Industry analysts are similarly cautious. Wall Street's consensus on Hertz remains "underweight," with many analysts projecting significant downside risk from current levels. Critics note that Hertz faces strong competition from better-positioned rivals like Enterprise and Avis, both of which avoided similar strategic missteps with electric vehicles.

"The car rental business is inherently sensitive to economic cycles," explained a veteran travel industry analyst. "Any recession could reduce travel demand and further pressure Hertz's recovery efforts, regardless of Ackman's involvement."

Looking ahead, Ackman has outlined an ambitious vision where Hertz shares could reach $30 by 2029 if the company successfully executes its turnaround plan. This represents more than a 250% increase from current levels, even after the recent rally.

However, this outcome depends on multiple factors aligning favorably:

Sustained impact of auto tariffs on used car values
Successful implementation of operational improvements
Effective management of the company's debt load
Potential development of new strategic partnerships
Avoidance of economic downturns that could impact travel demand

"The path to $30 is certainly possible, but it's far from guaranteed," cautioned a portfolio manager who has followed Ackman's investments closely. "Hertz has fundamental operational issues to resolve, and financial engineering alone won't solve them. The company needs to rebuild its core business while carefully managing its balance sheet."

Investment Community Divides on Prospect

The investment community remains divided on Hertz's prospects even after Ackman's endorsement. While some see tremendous upside potential if the turnaround succeeds, others view the recent stock rally as speculative and potentially disconnected from the company's fundamental challenges.

"This isn't Ackman's first attempt to influence a struggling company," noted one hedge fund analyst. "While he's had significant successes, he's also had notable failures. The key question is whether Hertz's problems are primarily operational issues that can be fixed with better management and strategy, or if they're structural challenges inherent to the business model in a changing transportation landscape."

As investors evaluate Hertz's trajectory, they'll be watching several key indicators closely:

Quarterly fleet utilization rates
Revenue per unit metrics
Progress in reducing operating expenses
Impact of tariffs on the used car market
Development of strategic initiatives like the potential Uber partnership

For now, Ackman's bold bet has breathed new life into a company many had written off. Whether this renewed optimism translates into sustainable long-term performance remains to be seen, but one thing is certain: all eyes in the financial world will be watching Hertz's next moves with heightened interest.