Stephen M. Scherr: Yes. Well, I guess first principle is that we should continue to hold supply of cars inside where we expect demand to be, so that we can run at a respectable level of utilization and I think we’re not of a mind to have capital deployed against cars that are simply not going to be used. There are obvious variations in demand quick moves, troughs, and peaks. And so you need to hold cars for that. Our view has been not to chase low-quality demand even if it meant that utilization sort of falls. So there is a baseline of holding supply inside demand. And then there’s the execution in the moment where I’m not of a mind to sort of chase low-quality demand that’s not expressing sort of sufficient RPD. And so the combination of those two should hold us there.
In terms of the broader sort of optimism or confidence on stability, candidly, I look at what you look at, which is I look at whether there is motive to sort of drive price down by any one of our competitors. I don’t believe there is. There’s no world in which lowering price brings more demand to the industry. It may split share, but share has been very stable across the majors, across a variety of markets. So there’s not an embedded incentive. Nobody is making a decision to take a business trip or not, or to take a vacation or not because the rate on the rental car is $5 higher or lower. So there’s no particular incentive across the industry to lower rate as if it’s going to generate industry-driven demand. And there doesn’t seem to be a chase for share on that basis.
And then again, sort of stability in what we’re seeing across travel, in fact, growth that’s being forecast by airlines and hotels, these are to our left and right in the context of where they deposit our customers at the airport. And so to the extent that travel continues, you should see us rationalize as Justin was saying, our off-airport locations maintaining sufficiency of network, which I think is very valuable to us, but redeploying cars to the airport where these travelers are coming and optimizing to price at the same time.
Elizabeth Dove: That’s helpful, thank you. And just one follow-up on the EV. I saw the headline yesterday that you’re causing the plans to buy a 65,000 EVs from Tulsa [ph]. I was just curious if you have any outstanding kind of minimum agreement — minimum purchase agreements for this year with any of the others, whether that’s GM or Tesla. I know you have the kind of initial kind of framework agreements. But I’m curious if there is any kind of purchase agreements you do have to hit this year?
Stephen M. Scherr: Remember, the — generally speaking, the agreements that we have long had with the OEMs is sort of a broad understanding about aggregate number of cars over some number of years. The commitment is not final until model year when price and trim and the like is all decided. By the way, that runs both ways. They’re not obligated to deliver any more than we’re not obligated to buy under these broader agreements. And so we put the pause on obviously buying EVs, except to the extent that they were packaged with other ICE vehicles, but it’s a deminimis amount that’s there. By and large, we will be net lower for sure in the context of EVs based on the sale and based on a very deminimus number of EVs that come in.
Elizabeth Dove: Thank you, that’s helpful.
Stephen M. Scherr: Sure.
Operator: Thank you. One moment please. Our next question comes from the line of Christopher Stathoulopoulos of SIG. Your line is open.
Christopher Stathoulopoulos: Thank you for taking my questions. Good morning everyone. Justin, on the $250 million with the five areas that you’ve identified, just wondering if you could give a little bit more of a finer point with respect to Dollar per category and your comment that you would be disappointed if you don’t do more, how should we think about potential upside there. I guess it would be in the third category on operating collision and things like that. But if you just look for a little bit more detail as we think about the cost for those five categories you’ve identified?
Justin Keppy: Yes, sure, Christopher. As you can imagine, we’re building internal plans that are going to target a much higher cost. So we see this benefit drop through as committed. That’s the first one. And secondly, we’re spending less time kind of bucketing these things between categories. There’s some accounting things, for instance, subro [ph] benefits are turned over a period of time. So while we’re getting the immediate recoveries, it may bleed through from a portion of time before we fully recognize it and the benefits there. So my suggestion there would be as we continue to solidify these plans and see real traction beyond the immediate kind of cost reduction, spend reduction, you have my commitment to provide further clarity and updates in the future calls.
Christopher Stathoulopoulos: Okay, thank you. And then second question, Stephen. So your comments around I guess would be — you alluded to a healthy demand outlook. We’ve heard similar comments here from the airlines as we wrap up earnings season. But it sounded like you were pointing to some confidence around the second half. Curious to your thoughts around there? And then potentially sort of a nuanced question here is the return to office mandates accelerate and potentially or arguably could drive change in nonpeak versus peak demand for the airlines. Any thoughts around that, whether how that might affect length of rentals or is it sort of net neutral as this leisure travel phenomenon that starts to normalize? Thank you.
Stephen M. Scherr: Yes. So let me take the second one first, which is I think that — we’ve always tried to sort of manage leisure and corporate so as to manage intra-week like trough period. So the corporate contracts we have need to stand as profitable in their own right, but they do put the car to better, more normalize, smoother use, if you will, over the course of the week. To the extent that there’s a return to what was in terms of normal sort of employee and corporate behavior that inevitably will benefit us as it does the airlines and others. So we shouldn’t track differently than they do in the context of the benefit of returning back to what’s otherwise defined as normal. In terms of optimism for the second half, I mean here I’m just referring to kind of more macroeconomic trends that would benefit sort of various components of our business.
Obviously, the first one is demand and the proclivity and inclination to travel. So if things — if inflation comes down and interest rates come down and there is a higher degree of consumer confidence that springs from it, that inevitably will be better for the travel industry, not limited to us. The second component of that was the comment I was making around residual pricing of used cars, which is December into January is historically a low period in the context of volume of activity and the like. Typically, Presidents stay weaken and then as you move into spring is a more kind of buying period, if you will, around residuals. The comment I was making was, what are the factors that drive that? So we’ll see seasonal movement, the question is whether the curve lifts up or stay sustained elevated at the back end.
And I think the positive drivers of that as to whether or not they happen, we’ll see will be lower interest rates, structural short in the used car market, and the extent to which the average age of the car is getting old and people will be compelled to recycle their car, if you will, on the forward. Those are positive leading indicators in the context of what you think or should think that market will do. And if that happens, that will be a benefit to us.
Christopher Stathoulopoulos: Okay, thank you.
Stephen M. Scherr: Okay, we want to thank you all for your participation today. Before we close the call, I’d like to thank our employees for their continued hard work and dedication over the year. And without whose efforts, none of this would be obviously possible. In closing, we look forward to sharing further updates with you on our next call. And with that, I’ll turn it back to the operator.
Operator: Thank you. This concludes the Hertz Global Holdings Fourth Quarter 2023 Earnings Conference Call. Thank you for your participation.
