Hertz 2007 Annual Report Download - page 40

HERC disposes of its used equipment through a variety of channels, including private sales to
customers and other third parties, sales to wholesalers, brokered sales and auctions. Ancillary to its
rental business, HERC is also a dealer of certain brands of new equipment in the United States and
Canada, and sells consumables such as gloves and hardhats at many of its rental locations.
Licensees
HERC licenses the Hertz name to equipment rental businesses in eight countries in Europe and the
Middle East. The terms of those licenses are broadly similar to those we grant to our international car
rental licensees.
Competition
HERC’s competitors in the equipment rental industry range from other large national companies to small
regional and local businesses. In each of the four countries where HERC operates, the equipment rental
industry is highly fragmented, with large numbers of companies operating on a regional or local scale.
The number of industry participants operating on a national scale is, however, much smaller. HERC is
one of the principal national-scale industry participants in each of the four countries where it operates.
HERC’s operations in the United States represented approximately 73% of our worldwide equipment
rental revenues during the year ended December 31, 2007. In the United States and Canada, the other
top five national-scale industry participants are United Rentals, Inc., or ‘‘URI,’’ RSC Equipment
Rental, Inc., or ‘‘RSC,’’ Sunbelt Rentals, Home Depot Rentals and NES Rentals. A number of individual
Caterpillar dealers also participate in the equipment rental market in the United States, Canada, France
and Spain. In France, the other principal national-scale industry participants are Loxam and Kiloutou,
while in Spain, the other principal national-scale industry participants are GAM and Euroloc.
Competition in the equipment rental industry is intense, and it often takes the form of price competition.
HERC’s competitors, some of which may have access to substantial capital, may seek to compete
aggressively on the basis of pricing. To the extent that HERC matches downward competitor pricing, it
could have an adverse impact on our results of operations. To the extent that HERC is not willing to
match competitor pricing, it could also have an adverse impact on our results of operations due to lower
rental volume. From 2001 to 2003, the equipment rental industry experienced downward pricing trends,
measured by the rental rates charged by rental companies. For the years ended December 31, 2004,
2005 and 2006, we believe industry pricing, measured in the same way, improved in the United States
and Canada and only started to improve towards the end of 2005 in France and Spain. For the year
ended December 31, 2007, based on publicly available information, we believe the U.S. equipment
rental industry experienced downward pricing, measured by the rental rates charged by rental
companies. HERC experienced higher equipment rental volumes and pricing worldwide for the years
ended December 31, 2005, 2006 and 2007, with pricing increases in 2007 attributable to higher price
activity in Canada and Europe offsetting lower price activity in the U.S. We believe that HERC’s
competitive success has been primarily the product of its 40 years of experience in the equipment rental
industry, its systems and procedures for monitoring, controlling and developing its branch network, its
capacity to maintain a comprehensive rental fleet, the quality of its sales force and its established
national accounts program.
Other Operations
Our wholly-owned subsidiary, Hertz Claim Management Corporation, or ‘‘HCM,’’ provides claim
administration services to us and, to a lesser extent, to third parties. These services include investigating,
evaluating, negotiating and disposing of a wide variety of claims, including third-party, first-party, bodily
injury, property damage, general liability and product liability, but not the underwriting of risks. HCM
conducts business at eight regional offices in the United States. Separate subsidiaries of ours conduct
similar operations in eight countries in Europe.
20