Economy

Closures, job losses loom as wheels come off car rental business

Date: Jul 13, 2020

Bidvest Car Rental has warned staff that all the positions in the company, which has more than 100 branches across the country, might become redundant, as it plans to close or sell the business.

The sector has experienced a jobs bloodbath, as the tourism industry was effectively shut during the Covid-19 lockdown, with most people staying home despite the resumption of business travel from June 1.

The other major car rental group in South Africa, operating under the Avis Budget brands within Barloworld’s logistics and automotive division, was also put under review over a week ago, while the logistics business is being exited. Barloworld warned then that more than 2 500 jobs might be lost in the process.

Motus, the vehicle business of the Imperial group and South Africa’s biggest automotive group, also warned recently that about 2 000 employees might go on early retirement or be retrenched because.

Bidvest Automotive Chief Executive Steve Keys said in a letter to staff at the weekend that even before the lockdown the car-rental company was producing a return that failed to meet shareholders’ requirements.

About 50% of its revenue was derived from air travel, and the start-up of domestic and international travel had been crucial to the company’s recovery. In addition, tourism, another vital sector for car rental companies, would take a long time to recover, said Keys.

“Regrettably, due to these factors, we have taken the decision to disinvest from the Bidvest Car Rental business. This will involve closure and/or disposal of the business,” Keys said in the letter. All positions in the company might be declared redundant.

Barloworld’s automotive business contributed 29% of group revenue in the first half of 2020. Bidvest’s automotive business contributed 27% of group revenue in the six months to the end December 2019, although both groups have many new and used vehicle dealerships in addition to the car rental operations.

Bidvest had warned in a trading statement last month that it would review all its businesses and right-size its operations to ensure its operating models remained appropriate for the level of demand.

“This may lead to retrenchments across all six divisions, in order to reinforce their competitive positions in the future, and ensure that the businesses have the potential of sufficient scale,” the group said at the time.

In the six months to the end of December 2019, Bidvest Car Rental had staged a turnaround, with 16.5% growth in trading profit to R379 million($22.58m), after growing rental days, achieving rate successes and managing its fleet better, but the country entered recessionary trading conditions in the three months prior to the lockdown.

Motus has said normalised headline earnings per share were expected to fall by between 60 and 70 percent for the year to end June.

Barloworld’s automotive trading business reported a 69% slide in operating profit to R85m ($5.06m) in the six months to March 31, while its vehicle rental division slumped 31% to R194m($11.56m).

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