Hertz 2007 Annual Report Download - page 42

As part of our effort to implement our strategy of reducing operating costs, we are evaluating our
workforce and operations and making adjustments, including headcount reductions and process
improvements to optimize work flow at rental locations and maintenance facilities as well as streamlining
our back-office operations and evaluating outsourcing opportunities.
On January 5, 2007 and February 28, 2007, we announced job reductions affecting a total of
approximately 1,550 employees primarily in our U.S. car rental operations, with much smaller reductions
occurring in U.S. equipment rental operations, the corporate headquarters in Park Ridge, New Jersey,
and the U.S. service center in Oklahoma City, Oklahoma, as well as in Canada, Puerto Rico, Brazil,
Australia and New Zealand. On June 1, 2007, we announced another initiative to further improve our
operational efficiency through targeted reductions affecting approximately 480 positions in our U.S. car
and equipment rental operations, as well as positions in our U.S. service center in Oklahoma City,
Oklahoma. During 2007, we began to implement cost reducing initiatives in our European operations,
and we expect to continue implementation of these measures in 2008. During the fourth quarter of 2007,
we finalized or substantially completed contract terms with industry leading service providers to
outsource select functions relating to real estate facilities management and construction, procurement
and information technology. Substantially all of the selected functions in these areas will be transitioned
to the third-party service providers which will result in a decrease in headcount by the end of the third
quarter of 2008. We plan to announce, as plans are finalized, other efficiency initiatives during 2008. We
currently anticipate incurring future charges to earnings in connection with those initiatives; however, we
have not yet developed detailed estimates of these expenses.
Risk Management
Three types of generally insurable risks arise in our operations:
• legal liability arising from the operation of our cars and on-road equipment (vehicle liability);
• legal liability to members of the public and employees from other causes (general liability/
workers’ compensation); and
• risk of property damage and/or business interruption and/or increased cost of working as a
consequence of property damage.
In addition, we offer optional liability insurance and other products providing insurance coverage, which
create additional risk exposures for us. Our risk of property damage is also increased when we waive the
provisions in our rental contracts that hold a renter responsible for damage or loss under an optional loss
or damage waiver that we offer. We bear these and other risks, except to the extent the risks are
transferred through insurance or contracts.
In many cases we self-insure our risks or reinsure risks through wholly-owned insurance subsidiaries.
We mitigate our exposure to large liability losses by maintaining excess insurance coverage, subject to
deductibles and caps, through unaffiliated carriers with respect to our domestic operations and our car
rental operations in Europe. For our international operations outside Europe and for HERC’s operations
in Europe, we maintain some liability insurance coverage with unaffiliated carriers. We also maintain
property insurance through our captive insurer, Probus Insurance Company Europe Limited, or
‘‘Probus’’ (with the risk reinsured with unaffiliated insurance carriers) domestically and in Europe,
subject to deductibles.
Third-Party Liability
In our domestic operations, we are required by applicable financial responsibility laws to maintain
insurance against legal liability for bodily injury (including death) or property damage to third parties
arising from the operation of our cars and on-road equipment, sometimes called ‘‘vehicle liability,’’ in
stipulated amounts. In most places, we satisfy those requirements by qualifying as a self-insurer, a
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