Hertz 2007 Annual Report Download - page 35

as ‘‘program’’ cars. Conversely, those cars not purchased under repurchase or guaranteed depreciation
programs for which the car rental company is exposed to residual risk are sometimes referred to as
‘‘non-program’’ cars.
The percentage of our car rental fleet subject to repurchase or guaranteed depreciation programs has
substantially decreased due primarily to changes in the overall terms offered by automobile
manufacturers under repurchase programs. Accordingly, we bear increased risk relating to the residual
market value and the related depreciation on our car rental fleet and must use different rotational
techniques to accommodate our seasonal peak demand for cars.
Over the five years ended December 31, 2007, approximately 40% of the cars acquired by us for our U.S.
car rental fleet, and approximately 31% of the cars acquired by us for our international fleet, were
manufactured by Ford and its subsidiaries. During the year ended December 31, 2007, approximately
24% of the cars acquired by us domestically were manufactured by Ford and its subsidiaries and
approximately 25% of the cars acquired by us for our international fleet were manufactured by Ford and
its subsidiaries. The percentage of the fleet which we purchase from Ford has declined as we try to
further diversify our fleet to meet customer demands and minimize overall costs. See ‘‘—Relationship
with Ford’’ and Note 14 to the Notes to our consolidated financial statements included in this Annual
Report under the caption ‘‘Item 8—Financial Statements and Supplementary Data.’’ Historically, we
have also purchased a significant percentage of our car rental fleet from General Motors Corporation, or
‘‘General Motors.’’ Over the five years ended December 31, 2007, approximately 22% of the cars
acquired by us for our U.S. car rental fleet, and approximately 15% of the cars acquired by us for our
international fleet, were manufactured by General Motors. During the year ended December 31, 2007,
approximately 27% of the cars acquired by our U.S. car rental fleet, and approximately 15% of the cars
acquired by us for our international fleet, were manufactured by General Motors. During the year ended
December 31, 2007, approximately 13% of the cars we acquired, on a worldwide basis, were
manufactured by Toyota.
Purchases of cars are financed through cash from operations and by active and ongoing global
borrowing programs. See ‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital Resources.’’
We maintain automobile maintenance centers at certain airports and in certain urban and off-airport
areas, providing maintenance facilities for our car rental fleet. Many of these facilities, which include
sophisticated car diagnostic and repair equipment, are accepted by automobile manufacturers as
eligible to perform and receive reimbursement for warranty work. Collision damage and major repairs
are generally performed by independent contractors.
We dispose of non-program cars, as well as program cars that have for any reason become ineligible for
manufacturer repurchase or guaranteed depreciation programs, through a variety of disposition
channels, including auctions, brokered sales, sales to wholesalers and dealers and, to a lesser extent
and primarily in the United States, sales at retail through a network of eight company-operated car sales
locations dedicated exclusively to the sale of used cars from our rental fleet. During the year ended
December 31, 2007, of the cars that were not repurchased by manufacturers, we sold approximately
90% at auction or on a wholesale basis, while 4% were sold at retail and 6% through other channels.
Licensees
We believe that our extensive worldwide ownership of car rental operations contributes to the
consistency of our high-quality service, cost control, fleet utilization, yield management, competitive
pricing and our ability to offer one-way rentals. However, in certain predominantly smaller U.S. and
international markets, we have found it more efficient to utilize independent licensees, which rent cars
that they own. Our licensees operate locations in over 140 countries, including most of the countries
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