Hertz 2009 Annual Report Download - page 47

ITEM 1A. RISK FACTORS
In addition to the other information included in this Form 10-K, you should carefully consider each of the
following risks and uncertainties. We believe that the following information identifies the material risks and
uncertainties affecting our company, but it is possible that other risks and uncertainties might significantly
impact us. Risks that we are not aware of could arise, and issues that we now view as minor could
become more important. Any of those risks and uncertainties may have a material adverse effect on our
business, financial condition, results of operations and cash flows.
Risks Related to Our Business
The car and equipment rental industry is significantly affected by general economic conditions,
and any further decreases in general economic activity could materially and adversely affect our
financial condition and results of operations.
Our results of operations are affected by many economic factors, including the level of economic activity
in the markets in which we operate. Over the past 18 months, the United States and international markets
have experienced a significant decline in economic activity that has affected the car rental market,
including a tightening of the credit markets, reduced business and leisure travel, reduced consumer
spending and volatile fuel prices. In the equipment rental business, the decline in economic activity has
resulted in a decline in activity in construction and other businesses in which our equipment rental
customers operate. Accordingly, the car and equipment rental industries have both experienced
unprecedented declines in volume and demand. See ‘‘Item 1—Business—Worldwide Car Rental—
Fleet’’ and ‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Overview’’ in this Annual Report. If economic conditions in the United States and
worldwide worsen or do not improve, our financial condition and results of operations could be
materially and adversely impacted in 2010 and beyond.
Our car rental business, which provides the majority of our revenues, is particularly sensitive to
reductions in the levels of airline passenger travel, and any further reduction in air travel could
materially adversely impact our financial condition and results of operations.
The car rental industry is particularly affected by reductions in business and leisure travel, especially with
respect to levels of airline passenger traffic. Approximately 84% of our worldwide revenues during 2009
were provided by our car rental segment, and we estimate that approximately 67% of these car rental
revenues were generated at our airport rental locations. Further reductions in levels of air travel, whether
caused by general economic conditions, airfare increases (e.g., due to capacity reductions or increases
in fuel costs borne by commercial airlines) or other events such as work stoppages, military conflicts,
terrorist incidents, natural disasters, epidemic diseases, or the response of governments to any of these
events, could materially and adversely affect us.
We face intense competition that may lead to downward pricing, or an inability to increase prices.
The markets in which we operate are highly competitive. See ‘‘Item 1—Business—Worldwide Car
Rental—Competition’’ and ‘‘Item 1—Business—Worldwide Equipment Rental—Competition.’’ We
believe that price is one of the primary competitive factors in the car and equipment rental markets and
that the Internet has increased pricing transparency among car rental companies by enabling
cost-conscious customers, including business travelers, to more easily obtain the lowest rates available
from car rental companies for any given trip. If we try to increase our pricing, our competitors, some of
whom may have greater resources and better access to capital than us, may seek to compete
aggressively on the basis of pricing. In addition, our competitors may reduce prices in order to attempt to
gain a competitive advantage or to compensate for declines in rental activity associated with reductions
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