Fitch: Kicking the Tires of the U.S. Rental Car Industry

NEW YORK--(BUSINESS WIRE)--Fitch said today that while the rental car industry has been restored to pre-9/11 levels, the financial deterioration of U.S. vehicle manufacturers and rising interest rates have combined to produce growing rental car fleet expenses and depreciation costs, only a portion of which have been passed on to the vehicle renter.

Indeed, the financial deterioration at domestic vehicle manufacturers, combined with intense price competition and increasing interest rates are negatively impacting profit margins at the some of the largest rental car companies in the United States.

In a report released today, Fitch takes a closer look at the major rental car companies, namely Hertz Global Holdings and Vanguard Car Rental Group, both of which plan to issue public equity securities in late 2006, in addition to publicly-traded Avis Budget Group (NYSE:CAR) and Dollar Thrifty Automotive Group (NYSE:DTG). These four companies, combined, control the Hertz, National, Alamo, Avis, Budget, Dollar, and Thrifty rental brands.

Leverage ratios and funding costs are on the rise, but Fitch's outlook on the industry is not totally unfavorable. A rental car company can achieve success in the current operating environment if it can diversify vehicle manufacturer relationships, implement competitive pricing strategies, appropriately manage the size and age of its vehicle fleet, and achieve some level of funding flexibility. A rental car companies' ability to manage through the structural changes impacting the industry will determine its profitability, and ultimately, its debt rating.

A copy of the Special Report, 'The Rental Car Industry: Time to Kick the Tires' is available on the Fitch web site at www.fitchratings.com.

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