Hertz 2008 Annual Report Download - page 58

ITEM 1A. RISK FACTORS (Continued)
Any default or reorganization of a manufacturer that has sold us program cars might also leave us with a
substantial unpaid claim against the manufacturer with respect to program cars that were sold and
returned to the car manufacturer but not paid for, or that were sold for less than their agreed repurchase
price or guaranteed value. For the year ended December 31, 2008, the highest outstanding month-end
receivable balance for cars sold to a single manufacturer was $249.1 million owed by General Motors.
See ‘‘—We face risks of increased costs of cars and of decreased profitability, including as a result of
limited supplies of competitively priced cars.’’
In addition, events negatively affecting the car manufacturers, including a bankruptcy, could affect how
much we may borrow under our asset-backed financing facilities. Under the current terms of our asset-
backed financing facilities, we may be required to materially increase the enhancement levels regarding
the fleet vehicles provided by such bankrupt manufacturer. The actual enhancement level that we would
be required to provide would be dependent on a number of factors, and could be almost all of the net
book value, of the portion of our fleet vehicles then provided by such bankrupt manufacturer.
Accordingly, as we decrease the number of General Motors vehicles in our fleet, this exposure as it
relates to General Motors is expected to be reduced throughout 2009. If we were required to provide this
additional enhancement following a bankruptcy of a car manufacturer, including Ford or General Motors,
we believe that we would be able to satisfy such obligations with a combination of our available cash, our
availability under our Senior ABL Facility or any existing over-enhancement that we may then have under
our Fleet Financing Facilities. However, in the case of Ford or General Motors, such use would materially
reduce our liquidity available for operations or the refinancing of maturing debt. For a detailed
description of the amounts that we have available under our Senior ABL Facility and our Fleet Financing
Facilities, see Note 3 to the Notes to our consolidated financial statements included in this Annual Report
under caption ‘‘Item 8—Financial Statements and Supplemental Data.’’ In addition to the consequences
described above, events negatively affecting car manufacturers that supplies cars for our fleet could
have other consequences under our asset-backed financing program. See ‘‘—Risks Related to Our
Substantial Indebtedness—Our reliance on asset-backed financing to purchase cars subjects us to a
number of risks, many of which are beyond our control.’’
We may not be successful in implementing our strategy of reducing operating costs and our cost
reduction initiatives may have other adverse consequences.
We are implementing initiatives to reduce our operating expenses. These initiatives include headcount
reductions, business process outsourcing, business process re-engineering and internal
reorganization, as well as other expense controls. We cannot assure you that we will be able to
implement our cost reduction initiatives successfully, or at all. For the year ended December 31, 2008,
we incurred $242.5 million of restructuring and restructuring related costs associated with our cost
reduction initiatives, and we anticipate incurring further expenses throughout the upcoming year, some
of which may be material in the period in which they are incurred.
Even if we are successful in our cost reduction initiatives, we may face other risks associated with our
plans, including declines in employee morale or the level of customer service we provide, the efficiency
of our operations or the effectiveness of our internal controls. Any of these risks could have a material
adverse impact on our results of operations, financial condition and cash flows. In addition, investors or
securities analysts who cover the common stock of Hertz Holdings may not agree with us that these
changes are beneficial, and our stock price may decline as a result.
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