Consumer Nation

Published: Thursday, 25 Jun 2009 | 8:27 AM ET

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Hertz Global Holdings is making a big bet on the consumer.

In an interview on CNBC, Hertz CEO Mark Frissora says he's "literally scrambling to buy as many cars as we can" to ramp up for a rebound in demand.

Hertz

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[HTZ  Loading...      ()   ] has purchased 16,000 vehicles for about $350 million in the past six to eight weeks in the U.S. The company also is taking similar steps in Europe.

Frissora says he's taking advantage of excess dealer inventory, and he is not avoiding vehicles manufactured by General Motors

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[GMGMQ  Loading...      ()   ] or Chrysler Group, which are in the process of restructuring under bankruptcy protection.

Frissora's comments follow an upbeat earnings forecast. The car rental company raised its forecast for second-quarter earnings, saying demand for rental cars has stabilized and the outlook for summer reservations has improved.

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In addition to a more optimistic view of summer travel, the company has been watching its costs very closely. It's worth noting that the company's revenue forecast was below analysts' views. Hertz expects earnings in the second quarter to be in the range of 9 cents to 10 cents a share, on revenue of between $1.7 billion and $1.75 billion.

Analysts polled by Thomson Reuters, on average, expected Hertz to earn 1 cent a share on revenue of $1.89 million in the second quarter.

For the year, Hertz is expecting earnings to be in the range of 12 cents to 15 cents, compared with analysts' views for 23-cent loss.

The forecast from Hertz is notable too. The company had suspended earnings forecasts for the past eight months due to the uncertain conditions.

The cost controls the company put in place had resulted in a smaller fleet of vehicles. Hertz's U.S. fleet is 15 percent smaller than it was a year ago, while the European fleet is about 17 percent smaller.

The improvement in reservations at Hertz is a new development. Reservations are up for nine straight weeks in the U.S. and seven in Europe.

Much of the demand is coming from leisure travelers who are being attracted by the steep discounts being offered by those in the travel industry.

"Not only is there just improved demand because people are staying local," Fissora says. "There's incentives out there that consumers have never seen before, causing people, I think, in some cases, to initiate vacations that they might not normally would have even taken."

(CORRECTION: An earlier version of this story incorrectly stated Hertz's second-quarter revenue forecast. The correct estimate is between $1.7 billion and $1.75 billion.)

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