Thrifty Car Rental 2008 Annual Report Download - page 19

declining demand and undertaken significant reductions in our workforce. We cannot assure you,
however, that these actions will be successful in mitigating revenue declines resulting from reduced
demand.
During 2008, there were significant disruptions in the financial markets that affected our access to
funding. In 2008, our ability to access the commercial paper market was impaired and we were entirely
unable to access that market in the fourth quarter. We believe our access to financing will continue to be
severely limited in 2009. In particular, we believe that our peak vehicle financing purchases for 2009 may
be constrained as a result of lack of bank credit capacity to replace certain of our financing arrangements.
The remarketing of Non-Program Vehicles is subject to prevailing market prices, and the general decline
in economic conditions has also adversely affected values realized on the disposition of Non-Program
Vehicles in the wholesale market in 2008. Whether, when and to what extent the used car market will
rebound remains uncertain. If the current challenging environment persists, our financial condition and
results could be further adversely affected.
The economic environment has also affected some of our customers and franchisees. In 2008, an
important tour operator customer filed for bankruptcy. Additionally, some of our franchisees have
experienced financial challenges and a limited number of them have either closed or consolidated their
operations. These circumstances have resulted in reduced fee revenue to the Company and a potential
for increased bad debt exposure. Depending on the depth and duration of the current recession, we may
lose other customers or our franchisees may become unable to meet their payment obligations to us.
Liquidity Considerations
The current economic environment has placed pressure on major aspects of our business, with the result
that our primary objective has been to preserve liquidity and enhance operating cash flow to ensure that
we maintain maximum flexibility to address persistent adverse conditions. The actions we have taken to
position the Company to meet this objective, such as reductions in our workforce and in our overall rental
fleet size, may be inadequate if economic conditions deteriorate further or if there is a significant
disruption in the U.S. automotive industry requiring a restructuring of any of the U.S. automotive
companies, including Chrysler. In that event, we may need to take additional material actions that could
cause disruptions to our business, operations and prospects, which could in turn further adversely affect
our cash flow and liquidity.
Chrysler Restructuring or Bankruptcy
Our principal supplier, Chrysler, has requested significant federal assistance and is exploring other
means to restructure so as to remain financially viable. It is highly uncertain whether federal assistance
will be available as requested or at all or whether other alternatives available to it will prove successful.
Any restructuring of Chrysler could have significant implications for its business with its customers,
including us. Moreover, Chrysler has stated that, in the absence of further federal assistance, it may seek
protection under the federal bankruptcy laws, which could result in a court-supervised restructuring or
liquidation of Chrysler.
Our business could be materially and adversely affected to the extent that repayment of our receivables
from Chrysler, resulting mainly from residual value guarantees on Program Vehicles, are delayed or
compromised in any restructuring or liquidation of Chrysler. The residual value of Chrysler vehicles in our
fleet would likely also be adversely affected as consumers lose confidence in Chrysler’s ability to meet
warranty obligations. A restructuring or bankruptcy of Chrysler could also disrupt vehicle supply to our
business. We expect that for the 2009 model year, Chrysler vehicles will continue to represent a
substantial majority of our U.S. fleet.
We have taken actions to mitigate these exposures. For example, we have significantly reduced
receivables outstanding from Chrysler and our purchases of Program Vehicles during 2008 to reduce our
exposure to Chrysler’s credit, and we are continuing to increase the proportion of risk vehicles in our fleet.
We have also sought to diversify our suppliers, including through a new secondary supply agreement with
Ford Motor Company.
These actions and others that we plan to take if Chrysler’s viability continues to worsen may not be
adequate to address our exposure to Chrysler or ensure an adequate supply of vehicles to operate our
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