Hertz 2008 Annual Report Download - page 45

ITEM 1. BUSINESS (Continued)
During the fourth quarter of 2008, our North American and European car rental businesses, in order to
further streamline operations and reduce costs, initiated the closure of approximately 200 off-airport
locations. Related to these location closures, as well as the elimination of several more equipment rental
branches in the U.S. and Europe, we incurred charges for asset impairments, losses on disposal of
surplus vehicles and equipment and recognition of future facility lease obligations for those locations
vacated by year-end. The locations closed were strategically selected to enable us to continue to
provide our rental services from other locations in the same area to our loyal customer base. We will
continue to assess the effectiveness, size and geographical presence of our global network footprint and
may make adjustments as warranted. In January 2009, we announced that, as part of a comprehensive
plan to further decrease costs and as a result of reduced rental demand, we were reducing our global
workforce by more than 4,000 employees beginning in the fourth quarter 2008 and continuing through
the first quarter of 2009, more than half of whom are not eligible for severance benefits. We expect job
reductions in the car and equipment rental businesses, corporate and support areas, and in all
geographies, with an emphasis on eliminating non-customer facing jobs. Related to these location
closures and continued cost reduction initiatives, we incurred restructuring charges for employee
termination liabilities covering approximately 1,500 employee separations in the fourth quarter.
For the years ended December 31, 2008 and 2007, our consolidated statement of operations includes
restructuring charges relating to the initiatives discussed above of $216.1 million and $96.4 million,
respectively.
Additional efficiency and cost saving initiatives may be developed during 2009. However, we presently
do not have firm plans or estimates of any related expenses. See Note 12 to the Notes to our
consolidated financial statements included in this Annual Report under caption ‘‘Item 8—Financial
Statements and Supplementary Data.’’
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 contractual arrangements.
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 of 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) in Europe, subject to deductibles.
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