Thrifty Car Rental 2008 Annual Report Download - page 15

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Dollar and Thrifty have maintained U.S. vehicle supply agreements with Chrysler since the 1997 model
year. In September 2006, the Vehicle Supply Agreement (the “VSA”) was amended to enable the
Company to acquire vehicles through the 2011 model year. The VSA provides that the Company will
purchase at least 75% of its vehicles from Chrysler to obtain agreed incentive payments until a certain
minimum level is reached. Dollar and Thrifty will promote Chrysler vehicles exclusively in their advertising
and other promotional materials, and Chrysler has agreed to make various promotional payments to the
Company. These payments are material to the Company’s results of operations. See Note 6 of Notes to
Consolidated Financial Statements. While Chrysler has the sole discretion to set the specific terms and
conditions of its Residual Value Program for a model year, it has agreed in the VSA to offer programs to
the Company that, taken as a whole, are competitive with the Residual Value Programs that Ford Motor
Company (“Ford”) and General Motors Corporation make generally available to domestic vehicle rental
companies.
In February 2009, the Company signed a secondary vehicle supply agreement with Ford that, beginning
with the 2009 model year, will allow the Company to source a portion of its annual vehicle purchases, with
certain minimum and maximum volumes, through Ford until August 2012. This agreement may be
renewed for a three-year term, upon written agreement by the Company and Ford prior to August 31,
2012.
Vehicle Remarketing
DTG Operations generally holds Program Vehicles in rental service for approximately six months. Most
Program Vehicles must be removed from service before they reach 30,000 miles to avoid excess mileage
penalties under Chrysler’s and other manufacturers’ Residual Value Programs. DTG Operations must
bear the risk on the resale of Program Vehicles that cannot be returned.
DTG Operations historically held Non-Program Vehicles in rental service for approximately ten months
but expects to extend holding periods in 2009. DTG Operations remarketed 54% of its Non-Program
Vehicles through auctions and 46% directly to used car dealers, wholesalers and its franchisees during
the year ended December 31, 2008.
Fleet Management
The Company utilizes fleet optimization software (the “Pros Fleet Management Software”) from PROS
Holdings, Inc., a leading provider of pricing and revenue optimization software. The Pros Fleet
Management Software allows the Company to improve fleet planning and efficiencies in its vehicle
acquisition and remarketing efforts.
Vehicle Financing
The Company requires a substantial amount of debt to finance the purchase of vehicles used in its rental
fleets. The Company primarily utilizes asset backed medium term notes and commercial paper programs
to finance its vehicles. Under these programs, the Company is required to provide collateral at different
levels for Program Vehicles and Non-Program Vehicles. The Company also uses bank lines of credit and
vehicle manufacturer lines of credit to finance the remainder of its vehicles. See Note 10 of Notes to
Consolidated Financial Statements.
Fleet Leasing Programs
DTG Operations has historically made fleet leasing programs available to Dollar and Thrifty U.S.
franchisees for each new model year. This program is not offered for the 2009 model year due to
constrained financing capacity and instability in the credit markets. For the year ended December 31,
2008, approximately 1% of the Company’s total revenue was derived from vehicle leasing programs.
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