Explanatory Note

This Registration Statement contains a prospectus relating to an offering of shares of our Class A common stock, together with separate prospectus pages relating to a concurrent offering of our Equity Units. The complete prospectus for the offering of Class A common stock follows immediately. Following the Class A common stock prospectus are alternate pages for the prospectus for the Equity Units offering, including:

	•		the front and back cover pages;
	•		pages for the “Prospectus summary” section describing the offering of Equity Units;
	•		pages containing risk factors applicable only to the offering of Equity Units;
	•		pages containing a description of the Equity Units;
	•		pages containing descriptions of the senior notes and purchase contracts that constitute the Equity Units;
	•		pages describing U.S. federal income tax consequences of holding the Equity Units;
	•		pages describing ERISA considerations associated with holding the Equity Units; and
	•		pages comprising the section entitled “Underwriting” relating to the offering of the Equity Units.

The complete prospectus for each of the Class A common stock offering and Equity Units offering will be filed with the Securities and Exchange Commission in accordance with Rule 424 under the Securities Act of 1933.

Class A Common Stock

We are offering to sell            shares of Class A common stock. This is the initial public offering of our shares of Class A common stock.

Prior to this offering, there has been no public market for the Class A common stock. It is currently estimated that the initial public offering price per share will be between $      and $      . We will apply to list the Class A common stock on the New York Stock Exchange under the symbol “HTZ.”

We are an indirect wholly owned subsidiary of Ford Motor Company. Upon completion of this offering, Ford Motor Company will indirectly beneficially own       % of the outstanding Class A common stock (       % if the underwriters’ over-allotment option is exercised in full) and 100% of the outstanding shares of our Class B common stock (which has five votes per share), a class of common stock separate from the Class A common stock (which has one vote per share). Following the offering, the outstanding shares of Class A common stock to be offered will represent       % of the combined voting power of all classes of voting stock and       % of the economic interest (or rights of holders of common equity to participate in distributions in respect of the common equity) in us (       % and       %, respectively, if the underwriters’ over-allotment option is exercised in full). The remainder of the voting power and economic interest in us will be beneficially held by Ford Motor Company. See “Risk factors––Risks related to our business––Ford controls us and may have conflicts of interest with us or you in the future” and “Description of capital stock.”

The underwriters have reserved for sale, at the initial public offering price, shares of Class A common stock for certain of our employees and retirees and employees of our affiliates and licensees. Such persons are expected to purchase, in the aggregate, not more than       % of the shares of Class A common stock offered in the offering.

Concurrently with this offering, we are offering, by means of a separate prospectus, $       of our       % Equity Units. Each Equity Unit will have a stated amount of $25 and will initially consist of a contract to purchase shares of our Class A common stock and an interest in a      % senior note which initially matures on November 16, 2015, subject to adjustment, issued by us. The offering of Equity Units is contingent upon the completion of this offering.

Investing in our Class A common stock involves risks. See “Risk factors” beginning on page 13.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

		Per Share				Total
Initial public offering price		$				$
Underwriting discounts and commissions		$				$
Proceeds to us, before expenses		$				$

To the extent the underwriters sell more than       shares of our Class A common stock, the underwriters have an option to purchase up to an additional       shares of our Class A common stock from us at the initial public offering price less the underwriting discounts and commissions. We intend to use our net proceeds from any shares sold pursuant to this option to pay an additional dividend to Ford.

                             , 2005

You should rely only on information contained in this prospectus. Neither we, Ford Motor Company nor the underwriters have authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

Table of Contents

		Page
Prospectus summary			1
Risk factors			13
Special note regarding forward-looking statements			25
Use of proceeds			26
Dividend policy			26
Capitalization			28
Selected historical financial data			30
Management’s discussion and analysis of financial condition and results of operations			33
Business			55
Management			82
Ownership of common stock			96
Relationship with Ford			97
Description of indebtedness			102
Description of capital stock			109
Description of the Equity Units			117
Shares eligible for future sale			124
Certain United States federal income and estate tax consequences to non-U.S. holders			126
Underwriting			129
Validity of the shares			136
Independent registered public accounting firm			136
Where you can find additional information			136
Index to financial statements			F-1

“Hertz,” “Hertz Equipment Rental,” “HERC,” “Hertz #1 Club Gold,” “Hertz #1 Club” and “Hertz NeverLost” are our trademarks or service marks. All other trademarks, service marks or brand names appearing in this prospectus are the property of their respective holders.

Risk factors

Before you invest in our Class A common stock you should carefully consider the following risks, as well as other information set forth in this prospectus. If any of the following risks actually occurs, our business, financial condition or results of operations may suffer. As a result, the trading price of our Class A common stock could decline, and you could lose all or part of your investment. In addition to the risks described below, we may encounter risks that are not currently known to us, which may also impair our business operations and your investment in our Class A common stock .

Risks related to our business

An economic downturn could result in a decline in business and leisure travel and non-residential capital investment, which could harm our business.

Our results of operations are affected by many economic factors, including the level of economic activity in the markets in which we operate. A decline in economic activity either in the United States or in international markets may have a material adverse effect on us. In the car rental business, a decline in economic activity typically results in a decline in both business and leisure travel and, accordingly, a decline in the volume of car rental transactions. In the equipment rental business, a decline in economic activity typically results in a decline in activity in construction and other businesses in which our equipment rental customers operate and, therefore, results in a decline in the volume of equipment rental transactions. In the case of a decline in car or equipment rental activity, we may reduce rental rates to meet competitive pressures, which could have a material adverse effect on our results of operations. A decline in economic activity also may have a material adverse effect on residual values realized on the disposition of our revenue earning cars and/or equipment.

We face intense competition that may lead to downward pricing, or an inability to increase prices, which could have a material adverse impact on our results of operations.

The markets in which we operate are highly competitive. See “Business—Worldwide car rental—Competition” and “Business—Equipment rental—Competition.” We believe that price is one of the primary competitive factors in the car and equipment rental markets. Our competitors, some of whom may have access to substantial capital, may seek to compete aggressively on the basis of pricing. To the extent that we match competitors’ downward pricing, it could have a material adverse impact on our results of operations. To the extent that we do not match or remain within a reasonable competitive margin of our competitors’ pricing, it could also have a material adverse impact on our results of operations, as we may lose rental volume. The Internet has increased pricing transparency among rental car companies by enabling cost conscious customers, including business travelers, to more easily obtain the lowest rates available from rental car companies for any given trip. This transparency may increase the prevalence and intensity of price competition in the future. For the year ended December 31, 2004, and the first six months of 2005, major U.S. car rental brands experienced downward pressure on pricing, as measured through time and mileage rates they charged.

Our car rental business is dependent on the air travel industry, and disruptions in air travel patterns could harm our business.

We estimate that approximately 74% of our worldwide car rental revenues in 2004 were generated at our airport rental locations. Significant airfare increases (e.g., due to an increase in fuel costs) could result in reduced air travel and have a material adverse effect on our results of operations. In addition, any event that disrupts or reduces business or leisure air travel could have a material adverse effect on our results of

operations. In particular, certain U.S. airlines have recently experienced economic distress, including the recent bankruptcy proceedings of US Airways Group, Inc. and United Air Lines, Inc. Any further deterioration in the economic condition of U.S. and international airlines could exacerbate reductions in air travel. Other events that impact air travel could include work stoppages, military conflicts, terrorist incidents, epidemic diseases or the response of governments to any of these events. For example, shortly before the September 11, 2001 terrorist attacks, we estimated that we would earn pre-tax income of approximately $250 million in 2001; by contrast, our actual pre-tax income for 2001 was only $3 million, and we continued to feel the adverse effects of the attacks well into the following year. On a smaller scale, the 2003 outbreak of Severe Acute Respiratory Syndrome, or “SARS,” in the Toronto, Canada area and parts of Asia, significantly reduced our 2003 results of operations in Canada.

Our business is highly seasonal, and a disruption in rental activity during our peak season could materially adversely affect our results of operations.

In our businesses, the second and third quarters of the year have historically been our strongest quarters due to the increased level of leisure travel and construction activity. In 2004, the second and third quarters accounted for approximately 25% and 28% of overall revenue and 29% and 50% of income before income taxes and minority interest, respectively. Any occurrence that disrupts rental activity during the second or third quarters could have a disproportionately material adverse effect on our results of operations. See “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources.”

We may not be successful in our business strategy to expand into the off-airport rental market, including marketing to replacement renters and insurance companies that reimburse or pay for such rentals.

We have been increasing our presence in the off-airport car rental market in the United States. We currently intend to add more off-airport locations in 2005 and subsequent years. In order to increase revenues at our new off-airport locations, we will need to successfully market to insurance companies and other companies that provide rental referrals to those needing cars while their vehicles are being repaired or are temporarily unavailable for other reasons, as well as to the renters themselves. To do so we believe that we will need to serve the market areas covered by nearly all national and regional insurance companies of significant size, which we believe could involve as many as 2,000 locations. We incur minimal non-fleet costs in opening our new off-airport locations, but new off-airport locations, once opened, take time to generate their full potential revenues. As a result, revenues at new locations do not initially cover their start-up costs and often do not, for some time, cover the costs of their ongoing operation. See “Business—Worldwide car rental—Operations.” The results of the strategy and the success of our implementation of this strategy will not be known for a number of years. If we are unable to implement our strategy to expand our off-airport network successfully, properly react to changes in market conditions or successfully market to replacement renters and the insurance companies covering the cost of their rentals, our financial condition, results of operations and cash flows could be materially adversely affected.

Our access to the debt markets has been impaired and may be further impaired by downgrades in our debt ratings. Without adequate access to the debt markets, we may not have sufficient liquidity to operate our business.

We satisfy our funding requirements principally through the issuance of medium and long-term debt, the sale of commercial paper and other short-term borrowings primarily from banks. As of June 30, 2005, our commercial paper borrowings and other short-term indebtedness were $4.1 billion. At various times during April 2005 and the following four months, each of the major rating agencies placed our debt

ratings under review or reduced its outlook or debt ratings with respect to us. See “Management’s discussion and analysis of financial condition and results of operations––Liquidity and capital resources––Debt ratings.” In most cases, the actions with respect to us were taken in conjunction with actions with respect to the debt ratings of Ford. On April 20, 2005, Ford announced that it was evaluating its long-term strategic options for its investment in us. Since that date, our ability to sell unsecured commercial paper has been adversely affected. Our ability to sell commercial paper was impacted by the Ford announcement as well as recent downgrades of Ford’s and our debt ratings. Any further downgrade of our debt ratings may increase our borrowing costs and further impact our ability to sell commercial paper and otherwise access capital markets.

On May 26, 2005, we entered into a short-term senior credit facility, referred to as the “Interim Credit Facility,” with an aggregate availability of up to $3.0 billion with the joint book-running managers of this offering and/or their affiliates. As of June 30, 2005, we had outstanding borrowings of approximately $1.0 billion and C$575.0 million under the Interim Credit Facility. The Interim Credit Facility will mature on November 23, 2005. We are required to prepay loans and permanently reduce commitments under the Interim Credit Facility under certain circumstances, including at the time Ford controls less than 25% of us or any other person or group has equal or greater control of us than Ford.

To the extent that we are unable to access the commercial paper market or otherwise finance our borrowing needs in the public or private markets upon acceptable terms, including to pay back all or a portion of the Interim Credit Facility or any other indebtedness, we would seek to satisfy our liquidity requirements through borrowings under our credit facilities, arranging new facilities or through the issuance of additional asset backed securities. We cannot assure you that our existing credit facilities will provide sufficient liquidity to us under all conditions. Even if the existing facilities provide us with sufficient liquidity, our costs of capital would likely increase as a result of their utilization. To the extent we do not pass on our increased borrowing costs to our customers, our profitability, and potentially our ability to raise capital, could be materially adversely affected. In such circumstances, we might seek to issue equity securities, although our ability to do so could be constrained by market conditions and/or other reasons, including a lock-up agreement related to this offering, or Ford’s possible desire not to be diluted as long as it controls us.

Any deterioration in Ford’s financial condition could adversely affect our access to the credit markets.

Ford Motor Company’s debt rating is currently rated below investment grade by Standard & Poor’s Rating Services, a division of McGraw-Hill Companies, Inc., or “S&P,” and Moody’s Investors Service, Inc., or “Moody’s.” Other debt rating agencies also have recently downgraded their ratings of Ford. We cannot assure you that any future downgrading of Ford’s debt ratings would not have an adverse impact on our debt ratings. Therefore, for so long as Ford maintains a significant interest in us, a deterioration in the financial condition of Ford could have the effect of increasing our borrowing costs and/or impairing our access to the capital markets. To the extent we do not pass on our increased borrowing costs to our customers, our profitability, and potentially our ability to raise capital, could be materially adversely affected. Also, so long as Ford maintains a significant interest in us, Ford will have the ability to enter into agreements or adopt policies that limit our ability to incur debt, issue equity securities and meet our liquidity needs. See “Relationship with Ford.”

We are subject to risks from increases in interest rates, which will increase our borrowing costs and may also lead to a decline in equipment rental demand.

An increase in interest rates and related interest expense may have a material adverse impact on our profitability. In addition, an increase in interest rates may result in a decline in activity in construction and other businesses in which our equipment rental customers operate and, accordingly a decline in the volume of equipment rental transactions. Our total outstanding debt of $10.8 billion as of June 30, 2005 included interest rate sensitive debt of $5.8 billion (either by its original terms or through the use of interest rate derivatives), which had a weighted average interest rate of 4.1% per annum, and non-interest rate sensitive debt of $5.0 billion, which had a weighted average fixed interest rate of 6.4% per annum. During our seasonal borrowing peak in 2004, outstanding interest rate sensitive debt totaled $4.9 billion, with a weighted average interest rate of 2.4% per annum. See “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources.”

We face risks of increased costs of cars and equipment and of decreased profitability, including as a result of limited supplies of competitively priced cars or equipment.

We believe we are one of the largest private sector purchasers of new cars in the world for our rental fleet, and during 2004, our approximate average holding period for a rental car was 11 months in the United States and eight months in our international car rental operations. In recent years, the average cost of new cars has increased. We expect increases in car costs and modest increases in equipment costs in the near term. We expect a significant increase in car costs for the 2006 model year, which will adversely affect our results of operations beginning in the fourth quarter of 2005.

Historically, we have purchased more of the cars we rent from Ford than from any other automobile manufacturer. Under a master supply and advertising agreement, or the “Master Supply and Advertising Agreement,” Ford has agreed to develop fleet offerings in the United States that are generally competitive with terms and conditions of similar offerings by other automobile manufacturers. The Master Supply and Advertising Agreement expires in 2010. See “Relationship with Ford—Master Supply and Advertising Agreement.” We cannot assure you that we will be able to extend the Master Supply and Advertising Agreement beyond its current term. In the future, we expect to buy a smaller proportion of our car rental fleet from Ford than we have in the past. If Ford does not offer us competitive terms and conditions, and we are not able to purchase sufficient quantities of cars from other automobile manufacturers on competitive terms and conditions, then we may be forced to purchase cars at higher prices, or on terms less competitive, than for cars purchased by our competitors.

To date we have not entered into any long-term car supply arrangements with other manufacturers. In addition, certain automobile manufacturers, including Ford, have adopted strategies to de-emphasize sales to the rental car industry which they view as less profitable due to historic sales incentive and other discount programs that tended to lower the average cost of cars for fleet purchasers such as us. Reduced or limited supplies of equipment together with increased prices are risks that we also face in our equipment rental business. We cannot assure you that we will be able to pass on increased costs of cars or equipment to our rental customers. Failure to pass on significant cost increases to our customers would have a material adverse impact on our results of operations and financial condition.

We face risks related to decreased acquisition or disposition of cars through repurchase programs.

During 2004, 81% of the cars purchased for our U.S. and international car rental fleet were subject to repurchase by automobile manufacturers under contractual guaranteed repurchase programs. Under these

programs, automobile manufacturers agree to repurchase cars at a specified price during a specified time period, typically subject to certain car condition and mileage requirements. These repurchase programs limit the risk to us that the market value of a car at the time of its disposition will be less than its estimated residual value at such time. We refer to this risk as residual risk. For these reasons, cars purchased by car rental companies under repurchase programs are sometimes referred to by industry participants as “non-risk,” “buy-back” or “program” cars.

Conversely, those cars not purchased under repurchase programs for which the car rental company is exposed to residual risk are sometimes referred to as “risk” cars. Repurchase programs enable us to determine our depreciation expense in advance. Depreciation is a significant cost factor in our operations. We expect the percentage of our car rental fleet subject to repurchase programs to decrease due primarily to anticipated changes in the terms to be offered by automobile manufacturers under repurchase programs and because we expect car manufacturers to offer fewer program cars to us as part of their announced efforts to de-emphasize sales to rental car companies. Accordingly, we expect to bear increased risk relating to the residual market value of our car rental fleet and car depreciation.

In addition, repurchase programs generally provide us with flexibility to reduce the size of our fleet by returning cars sooner than originally expected without risk of loss in the event of an economic downturn or to respond to changes in demand. This flexibility will be reduced to the extent the percentage of non-risk cars in our car rental fleet decreases. See “Management’s discussion and analysis of financial condition and results of operations—Overview” and “Business—Worldwide car rental—Fleet.”

Automobile manufacturers could modify or eliminate their repurchase programs or change their return policies (which include condition and mileage requirements for returned cars) from one program year to another to make it disadvantageous to acquire certain cars. Any such modification or elimination would expose us to the risks described in the preceding paragraphs.

We could be harmed by a decline in the results of operations or financial conditions of the manufacturers of our cars, particularly if they are unable to repurchase program cars from us.

A severe or persistent decline in the results of operations or financial condition of a manufacturer of cars that we own could reduce the cars’ residual values, particularly to the extent that the manufacturer unexpectedly announced the eventual elimination of its models or nameplates or ceased manufacturing them altogether. Such a reduction could cause us to sustain a loss on the ultimate sale of those cars or require us to depreciate those cars on a more rapid basis while we own them. In addition, if a decline in results or conditions were so severe as to cause a manufacturer to default on an obligation to repurchase program cars we own, we would have to find an alternate method of disposition of those cars, which could significantly increase our expenses and decrease our proceeds on sales. Any such default 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. A decline in the economic and business prospects of manufacturers, including any economic distress impacting the suppliers of automobile components to manufacturers, could also cause them to raise the prices we pay for cars or reduce their supply to us.

Manufacturer safety recalls could create risks to our business.

Our cars may be subject to safety recalls by their manufacturers. Under certain circumstances, the recalls may cause us to attempt to retrieve cars from renters or to decline to re-rent returned cars until we can arrange for the steps described in the recalls to be taken. If a large number of cars are the subject of simultaneous recalls, or if needed replacement parts are not in adequate supply, we may not be able to re-rent recalled cars for a significant period of time. We could also face liability claims if recalls affect cars

that we have already sold. Depending on the severity of the recall, it could materially adversely affect our revenues, create customer service problems, reduce the residual value of the cars involved and harm our general reputation.

We face risks arising from our heavy reliance on communications networks and centralized information systems.

We rely heavily on information systems to accept reservations, process rental and sales transactions, manage our fleets of cars and equipment, account for our activities and otherwise conduct our business. We have centralized our information systems in two facilities in Oklahoma City, Oklahoma, and we rely on communications services providers to link our systems with the business locations these systems serve. A failure of a major system, or a major disruption of communications between the system and the locations it serves, could cause a loss of reservations, interfere with our ability to manage our fleet, slow rental and sales processes and otherwise materially adversely affect our ability to manage our business effectively. Our systems designs, business continuity plans and insurance programs are designed to mitigate such a risk, not to eliminate it. In addition, because our systems contain information about millions of individuals and businesses, our failure to maintain the security of the data we hold, whether the result of our own error or the malfeasance of others, could harm our reputation or give rise to legal liabilities leading to lower revenues, increased costs and other material adverse effects on our results of operations.

Claims that the software products and information systems that we rely on are infringing on the intellectual property rights of others could increase our expenses or inhibit us from offering certain services, which could adversely affect our results of operations.

A number of entities, including some of our competitors, have sought, or may in the future obtain, patents and other intellectual property rights that cover or affect software products and other components of information systems that we rely on to operate our business. For example, Enterprise Rent-A-Car Company, or “Enterprise,” has asserted that certain systems we use to conduct insurance replacement rentals would infringe on patent rights it would obtain if it were granted certain patents for which it has applied.

Litigation may be necessary to determine the validity and scope of third-party rights or to defend against claims of infringement. If a court determines that one or more of the software products or other components of information systems we use infringe on intellectual property owned by others or we agree to settle such a dispute, we may be liable for money damages. In addition, we may be required to cease using those products and components unless we obtain licenses from the owners of the intellectual property, redesign those products and components in such a way as to avoid infringement or cease altogether the use of those products and components. Each of these alternatives could increase our expenses materially or impact the marketability of our services. Any litigation, regardless of the outcome, could result in substantial costs and diversion of resources and could have a material adverse effect on our business. In addition, a third party intellectual property owner might not allow us to use its intellectual property at any price, or on terms acceptable to us, which could materially affect our competitive position and our results of operations. For example, if Enterprise were to obtain the patent rights referred to above and after that pursue and prevail on claims of infringement similar to those it has previously asserted, it could have a material adverse effect on our ability to grow our insurance replacement business and, in turn, our off-airport business.

The concentration of our reservations, accounting and information technology functions at a limited number of facilities in Oklahoma, Alabama and Ireland creates risks for us.

We have concentrated our reservations functions for the United States in two facilities, one in Oklahoma City, Oklahoma, and one in Saraland (Mobile County), Alabama, and we have concentrated our accounting functions for the United States in two facilities in Oklahoma City. Similarly, we have concentrated reservations and accounting functions for our European operations in a single facility near Dublin, Ireland. In addition, our major information systems are centralized in two of our facilities in Oklahoma City. A disruption of normal business at any of our principal facilities in Oklahoma City, Saraland or Dublin, whether as the result of localized conditions (such as a fire or explosion) or as the result of events or circumstances of broader geographic impact (such as an earthquake, storm, flood, epidemic, strike, act of war, civil unrest or terrorist act), could materially adversely affect our business by disrupting normal reservations, customer service, accounting and systems activities. Our systems designs, business continuity plans and insurance programs are designed to mitigate those risks, not to eliminate them, and this is particularly true with respect to events of broad geographic impact.

Ford controls us and may have conflicts of interest with us or you in the future.

Immediately prior to this offering, Ford, through a subsidiary, is our only stockholder. Upon completion of this offering, Ford will beneficially own      % of our outstanding Class A common stock (         % if the underwriters’ over-allotment option is exercised in full) and 100% of our outstanding Class B common stock (which Class B common stock is entitled to five votes per share on any matter submitted to a vote of our stockholders). Upon completion of this offering, the common stock beneficially owned by Ford will represent in the aggregate      % of the combined voting power of all of our outstanding common stock (or      % if the underwriters’ over-allotment option is exercised in full). For as long as Ford continues to beneficially own shares of common stock representing more than 50% of the combined voting power of our common stock, Ford will be able to direct the election of all of the members of our Board of Directors and exercise a controlling influence over our business and affairs, including any determinations with respect to mergers or other business combinations involving us, the acquisition or disposition of assets by us, the incurrence of indebtedness by us, the issuance of any additional common stock or other equity securities, the repurchase or redemption of common stock or preferred stock and the payment of dividends. Similarly, Ford will have the power to determine or significantly influence the outcome of matters submitted to a vote of our stockholders, including the power to prevent an acquisition or any other change in control of us and could take other actions that might be favorable to Ford. See “Description of capital stock” and “Relationship with Ford.”

In addition, so long as we are entitled to do so (which under current rules means that so long as Ford continues to own in the aggregate more than 50% of the combined voting power of all of our outstanding common stock), we intend to use the “controlled company” exception under the New York Stock Exchange rules. This exception eliminates the requirements that such a controlled company have a majority of independent directors on its board of directors and that it has compensation and nominating and corporate governance committees composed entirely of independent directors. As a result, you will not have the same protections afforded to stockholders of non-controlled companies that are subject to all of the corporate governance requirements of the New York Stock Exchange.

Ford will also have an option available to it to purchase additional shares of Class B common stock and/or nonvoting capital stock to maintain its then-existing percentage of the total voting power and value of us. Additionally, with respect to shares of nonvoting capital stock, Ford will have an option to purchase such additional shares so as to maintain ownership of 80% of each outstanding class of such stock.

Beneficial ownership of at least 80% of the total voting power and 80% of each class of nonvoting capital stock, if any, is required in order for Ford to effect a tax-free spin-off of us (as discussed under “Description of capital stock––Common stock––Conversion”) or certain other tax-free transactions.

Each member of a consolidated group for federal income tax purposes is severally liable for the federal income tax liability of each other member of the consolidated group. Each member of the Ford controlled group, which currently includes Ford, us and Ford’s other subsidiaries, is also jointly and severally liable for pension and benefit funding and termination liabilities of other group members, as well as certain benefit plan taxes. Accordingly, we could be liable under such provisions in the event any such liability is incurred, and not discharged, by any other member of the Ford consolidated or controlled group for any period during which we were included in the Ford consolidated or controlled group. After this offering, we will no longer be included in Ford’s consolidated group for federal tax purposes, and there is no assurance that our tax position will not be less favorable than it is at present. See “Relationship with Ford.”

In addition, by virtue of its controlling beneficial ownership and the terms of a tax-sharing agreement between us and Ford, Ford effectively controls all of our tax decisions for periods ending on or prior to the date of this offering. Under the tax-sharing agreement, Ford has sole authority to respond to and conduct all tax proceedings (including tax audits) relating to our federal and combined state returns, to file all such returns on behalf of us and to determine the amount of our liability to (or entitlement to payment from) Ford under the tax-sharing agreement. See “Relationship with Ford––Tax-Sharing Agreement.” This arrangement may result in conflicts of interests between us and Ford. For example, under the tax-sharing agreement, Ford may choose to contest, compromise or settle any adjustment or deficiency proposed by the relevant taxing authority in a manner that may be beneficial to Ford and detrimental to us. Although Ford does not plan or intend to effectuate a spin-off of our stock to Ford stockholders, the tax-sharing agreement, which we and Ford will amend in connection with this offering, will provide that in the event that Ford effectuates a spin-off of our common stock that it owns and such spin-off is not tax-free pursuant to Section 355 of the Internal Revenue Code of 1986, as amended, or the “Code,” we will generally be responsible for any taxes incurred by Ford or its stockholders if such taxes result from certain of our actions or omissions. If the taxes incurred by Ford or its stockholders do not result from certain of our actions or omissions, and do not result from certain of Ford’s actions or omissions, then we generally will be responsible for a percentage of such taxes equal to the quotient of the fair market value of our issued and outstanding common stock, divided by the sum of the fair market value of our issued and outstanding common stock and the fair market value of Ford’s issued and outstanding common stock.

For a description of certain provisions of the Restated Certificate of Incorporation concerning the allocation of business opportunities that may be suitable for both us and Ford, see “Description of capital stock—Certain certificate of incorporation and by-law provisions—Corporate opportunities.”

We face risks related to Ford’s change in ownership of us.

Certain of our airport concession agreements require the consent of the airport authority in connection with changes in ownership of us. We will seek those consents in connection with this offering except where not obtaining them will not, in our view, have a material adverse effect on our consolidated financial position or results of operations. In the event that Ford seeks to sell any of our common stock that it owns following this offering, additional consents will be required. Certain of our credit facilities impose consolidated net worth tests on us if Ford ceases to own at least 51% of the voting control of all of our capital stock then outstanding as described under “Restrictive covenants––Minimum consolidated net worth and maximum consolidated senior debt to consolidated net worth ratio.”

Certain intercompany agreements and arrangements exist between Ford and us. See “Relationship with Ford.” We cannot assure you that the products, services and other benefits Ford provides to or purchases from us under such agreements will continue to be provided or purchased, and if not, whether, or on what terms, such products, services or other benefits provided to us could be replicated and sales thereof to Ford replaced. During 2004, approximately 41% of the cars acquired by us domestically were manufactured by Ford and its subsidiaries. See “—We face risks of increased costs of cars and equipment and of decreased profitability, including as a result of limited supplies of competitively priced cars or equipment.”

We face risks related to liabilities and insurance.

Our businesses expose us to claims for personal injury, death and property damage resulting from the use of the cars and equipment rented or sold by us and for workers’ compensation claims and other employment-related claims by our employees. Currently, we generally self-insure up to $10 million per occurrence in the United States and Europe for vehicle and general liability exposures and maintain insurance with unaffiliated carriers in excess of such levels up to $185 million per occurrence, or in the case of equipment rental in Europe and international operations outside of Europe, in such amounts as we deem adequate given the risks. We cannot assure you that we will not be exposed to uninsured liability at levels in excess of our historical levels resulting from multiple payouts or otherwise, that liabilities in respect of existing or future claims will not exceed the level of our insurance, that we will have sufficient capital available to pay any uninsured claims or that insurance with unaffiliated carriers will continue to be available to us on economically reasonable terms or at all. See “Business—Risk management” and “Business—Legal proceedings.” In addition, we are currently insured for certain liabilities under insurance policies maintained by Ford. We cannot assure you that such insurance coverage will continue to be provided by Ford after this offering, and if it is not, whether, or on what terms, such insurance coverage will be replaced. To the extent Ford terminates our coverage under an insurance policy, we may be uninsured for liabilities incurred but not reported pursuant to such policy.

Environmental regulations could subject us to liability for fines or damages.

We are regulated by federal, state, local and foreign environmental laws and regulations in connection with our operations, including, among other things, with respect to the ownership and operation of tanks for the storage of petroleum products, such as gasoline, diesel fuel and motor and waste oils. We have established a compliance program for our tanks that is intended to ensure that the tanks are properly registered with the state or other jurisdiction in which the tanks are located and have been either replaced or upgraded to meet applicable leak detection and spill, overfill and corrosion protection requirements. However, we cannot assure you that these tank systems will at all times remain free from undetected leaks or that the use of these tanks will not result in significant spills.

We have made, and will continue to make, expenditures to comply with environmental laws and regulations, including, among others, expenditures for the cleanup of contamination at our owned and leased properties, as well as contamination at other locations at which our wastes have reportedly been identified. We cannot assure you that compliance with existing or future environmental legislation and regulations will not require material expenditures by us or otherwise have a material adverse effect on our consolidated financial position, results of operations or cash flow. See “Business—Governmental regulation and environmental matters” and “Business––Legal proceedings.”

Changes in the U.S. and foreign legal and regulatory environment that impact our operations, including laws and regulations relating to the insurance products we sell, customer privacy, data security and insurance rates, could disrupt our business, increase our expenses or otherwise could have a material adverse effect on our results of operations.

We are subject to a wide variety of laws and regulations in the United States and the other countries and jurisdictions in which we operate, and changes in the level of government regulation of our business have the potential to materially alter our business practices or our profitability. Depending on the jurisdiction, those changes may come about through new legislation, the issuance of new laws and regulations or changes in the interpretation of existing laws and regulations by a court, regulatory body or governmental official. Sometimes those changes may have not just prospective but also retroactive effect, which is particularly true when a change is made through reinterpretation of laws or regulations that have been in effect for some time. Moreover, changes in regulation that may seem neutral on their face may have either more or less impact on us than on our competitors, depending on the circumstances.

The optional liability insurance policies and products providing insurance coverage in our domestic car rental operations are conducted pursuant to limited licenses or exemptions under state laws governing the licensing of insurance producers. In our international car rental operations, our offering of optional products providing insurance coverage historically has not been regulated. Any changes in U.S. or foreign law that change our operating requirements with respect to insurance could increase our costs of compliance or make it uneconomical to offer such products, which would lead to a reduction in revenue. For instance, in the countries of the European Union and Australia, the regulatory environment for insurance intermediaries is rapidly evolving, and we cannot assure you either that we will be able to continue offering such coverage without substantial changes in our offering process or in the terms of the coverage or that such changes, if required, would not render uneconomic our continued offering of the coverage. Due to a change in law in Australia, we have suspended sales of certain insurance products there; we are currently exploring ways to resume offering those products. See “Business––Risk management” for further discussion regarding how changes in the regulation of insurance intermediaries may affect us internationally.

Laws in many countries and jurisdictions limit the types of information we may collect about individuals with whom we deal or propose to deal, as well as how we collect, retain and use the information that we are permitted to collect. In addition, the centralized nature of our information systems requires the routine flow of information about customers and potential customers across national borders, particularly into the United States. If this flow of information were to become illegal, or subject to onerous restrictions, our ability to serve our customers could be seriously impaired for an extended period of time. Other changes in the regulation of customer privacy and data security could likewise have a material adverse effect on our business. Privacy and data security are rapidly evolving areas of regulation, and additional regulation in those areas, some of it potentially difficult for us to accommodate, is frequently proposed and occasionally adopted. Thus, changes in the worldwide legal and regulatory environment in the areas of customer privacy, data security and cross-border data flows could have a material adverse effect on our business, primarily through the impairment of our marketing and transaction processing activities.

Further, the substantive regulation of the rates we charge car renters, either through direct price regulation or a requirement that we disregard a customer’s source market (location or place of residence) for rate purposes, could reduce our revenues or increase our expenses. We set rates based on a variety of factors including the sources of rental reservations geographically and by the means through which the reservations were made, all of which are in response to various market factors and costs. The European Commission is currently considering a directive that could eventually require us to disregard the country of residence of European Union residents for rate purposes, and bills have been introduced into the New York State legislature that similarly would prevent us from charging higher rates to renters residing in

certain boroughs of New York City. The adoption of any of these measures could have a material adverse impact on our revenues and results of operations.

Risks related to this offering

There is no existing market for our Class A common stock, and we do not know if one will develop to provide you with adequate liquidity.

Currently there is no public market for our Class A common stock. We cannot predict the extent to which investor interest in us will lead to the development of a trading market on the New York Stock Exchange or otherwise or how liquid that market might become. The initial public offering price for the shares will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering.

Future dispositions of common stock by Ford, us or others may depress the market price of our Class A common stock.

Subject to applicable federal securities laws and the restrictions set forth below, after completion of this offering, Ford may dispose of any or all of the shares of the common stock beneficially owned by it. Dispositions by Ford of substantial amounts of common stock in the public market or to its stockholders, or the perception that such dispositions could occur, could adversely affect prevailing market prices for our Class A common stock. Ford is not subject to any obligation, contractual or otherwise, to retain or dispose of its controlling interest, except that we and Ford, our directors, executive officers and certain other employees have agreed, subject to certain exceptions, not to offer, sell, contract to sell, pledge or otherwise dispose of any shares of common stock or any of our securities which are substantially similar to shares of our common stock for a period of 180 days after the date of this prospectus without the prior written consent of the joint book-running managers, subject to certain limitations and limited extensions. See “Underwriting.” As a result, we cannot predict the period of time during which Ford will maintain its beneficial ownership of common stock owned by it following this offering. Ford has indicated that it expects, subject to market conditions, to completely divest its ownership in us. As a result, subject to the lock-up arrangements described above, Ford could dispose of all or a substantial portion of the remaining interest in our common stock in the near future. See “Shares eligible for future sale.” Ford will have registration rights with respect to the shares of the common stock owned by it following this offering, which would facilitate any future disposition. See “––Risks related to our business––Ford controls us and may have conflicts of interest with us or you in the future,” “Relationship with Ford—Corporate Agreement” and “Shares eligible for future sale.”

The market price of our Class A common stock could decline as a result of dispositions by Ford or any future issuances by us of a large number of shares of common stock in the market after the offering or the perception that such dispositions could occur. These dispositions, or the possibility that these dispositions may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

After this offering, we will have approximately            shares of Class A common stock and shares of Class B common stock outstanding. Of those shares, the approximately       shares of Class A common stock sold in this offering (assuming no exercise of the over-allotment option) will be freely tradable. The approximately            shares of Class A common stock that are held by Ford, and any shares of Class A common stock into which shares of Class B common stock are converted at Ford’s option, will be eligible for resale from time to time after the expiration of the 180-day lock-up period, subject to contractual restrictions and restrictions under the Securities Act of 1933, as amended, or the “Securities Act.” These shares may be sold subject to the volume, manner of sale and other conditions of

Rule 144 or pursuant to a registered public offering. In addition, the purchase contracts included in the Equity Units being offered concurrently with this offering will require us to issue up to shares of our Class A common stock between the third and fourth anniversaries of the consummation of this offering (or sooner if holders exercise their rights to settle early) subject to certain conditions. We expect that shares of Class A common stock issued upon settlement of the purchase contracts relating to the Equity Units will be freely tradable upon issuance.

The market price of our Class A common stock may be volatile, which could cause the value of your investment to decline.

Securities markets worldwide, and especially equity markets, experience significant price and volume fluctuations. This market volatility, as well as general economic conditions, could reduce the market price of our Class A common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our Class A common stock could decrease significantly. You may be unable to sell your shares of Class A common stock at or above the initial public offering price.

Provisions in our amended and restated certificate of incorporation and bylaws may discourage a takeover attempt.

Certain provisions of our restated certificate of incorporation and by-laws may render more difficult, or have the effect of discouraging, unsolicited takeover bids from third parties or the removal of our incumbent management. See “Description of capital stock—Certain certificate of incorporation and by-law provisions.” Although such provisions do not have a substantial practical significance to investors while Ford controls us, such provisions could have the effect of depriving stockholders of an opportunity to sell their shares at a premium over prevailing market prices should Ford’s combined voting power decrease to less than 50%.

Special note regarding forward-looking statements

Certain statements contained in this prospectus are “forward looking statements.” These statements give our current expectations or forecasts of future events and our future performance and do not relate directly to historical or current events or our historical or current performance. Most of these statements contain words that identify them as forward-looking, such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” or other words that relate to future events, as opposed to past or current events.

Forward-looking statements are based on the then-current expectations, forecasts and assumptions of our management and involve risks and uncertainties, some of which are outside of our control that could cause actual outcomes and results to differ materially from current expectations. For some of the factors that could cause such differences, see “Risk factors.”

We cannot assure you that the assumptions made in preparing any of the forward-looking statements will prove accurate or that any projections will be realized. It is expected that there will be differences between projected and actual results.

These forward-looking statements speak only as of the date of this prospectus, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. We caution prospective purchasers not to place undue reliance on the forward-looking statements. All forward-looking statements attributable to us are expressly qualified in their entirety by the cautionary statements contained herein.

Use of proceeds

The proceeds to us from the offering, after the deduction of underwriting discounts, commissions and expenses payable by us, are estimated to be $          ($          if the underwriters’ over-allotment option is exercised in full). We expect to use substantially all of these proceeds, as well as the proceeds from the offering of Equity Units, to repay the Intercompany Notes issued by us to Ford in the aggregate amount of $          . The Intercompany Notes each mature on June 10, 2010 and may be prepaid at any time. The Intercompany Note issued on June 10, 2005 has a per annum interest rate equal to three-month LIBOR plus a spread of 200 basis points and the Intercompany Note issued on           , 2005 has a per annum interest rate equal to three-month LIBOR plus a spread of basis points. See “Relationship with Ford—Intercompany Notes.” In addition, we intend to use the proceeds from any shares sold pursuant to the over-allotment option for this offering and from any Equity Units sold pursuant to the over-allotment option for the Equity Unit offering, less underwriting discounts, to pay additional dividends of up to $          and $          , respectively, to Ford that will be declared prior to the consummation of this offering and that will be limited to net proceeds we actually receive from the sale of such shares and Equity Units. This offering of our Class A common stock is not conditioned on the consummation of the concurrent offering of our Equity Units.

Dividend policy

Our Board of Directors currently intends to declare quarterly dividends on both our Class A common stock and Class B common stock. It is expected that the first quarterly dividend payment will be $     per share (an indicated rate of $     per share annually), with the initial dividend to be declared and paid in 2005. The declaration and payment of dividends are subject to the discretion of our Board of Directors. Any determination as to the payment of dividends will depend upon, among other things, general business conditions, our financial results, contractual, legal and regulatory restrictions regarding the payment of dividends by us and our subsidiaries, our credit ratings and such other factors as the Board of Directors may consider to be relevant.

Certain debt and other instruments under which we have issued, or may in the future issue, debt securities restrict our ability to pay dividends. Such restrictions generally provide that we may not pay dividends, purchase, redeem or invest in our shares or permit purchases, redemptions or investments by Restricted Subsidiaries, as such term is defined in the applicable debt instruments, in our shares subsequent to a specified date if, together with total investments by us and our Restricted Subsidiaries in subsidiaries that are not Restricted Subsidiaries made subsequent to such specified date, the aggregate of any such dividends or investments exceeds the sum of (i) $185,000,000, plus (or minus in the case of a deficit) (ii) the consolidated net income (or net loss) of us and our Restricted Subsidiaries earned subsequent to December 31, 1985, plus (iii) the aggregate net proceeds received from capital stock, including rights or warrants to purchase capital stock and indebtedness converted into capital stock, issued subsequent to December 31, 1985. After giving effect to this offering, the concurrent offering of Equity Units and related use of proceeds together with the contemporaneous transactions described under “Capitalization,” approximately $          of consolidated stockholder’s equity is expected to be free of such limitations. The Interim Credit Facility and the purchase contract agreement related to the Equity Units contain additional restrictions on our ability to pay dividends. See “Description of indebtedness––Restrictive covenants,” “Description of indebtedness––Senior credit facilities” and “Description of Equity Units.”

We did not pay any dividends during the part of the year 2005 ended June 9, 2005 or the years ended December 31, 2004, 2003 or 2002. On June 10, 2005 and          , 2005, we paid dividends of $1,185.0 million and $          , respectively, on our common stock to Ford in the form of the Intercompany Notes. We intend to pay additional dividends to Ford

out of the proceeds of shares sold pursuant to the over-allotment option for this offering and out of the proceeds of Equity Units sold pursuant to the over-allotment option for the Equity Units offering. To the extent that the over-allotment option for this offering is not subscribed for in full, we intend to pay a dividend to Ford in the form of Class A common stock.

We previously announced a plan to commence paying semi-annual dividends to Ford in June 2005. That plan was based on the assumption that Ford would continue to own 100% of our outstanding capital stock. As a result of this offering, the dividend policy set forth above will supersede that plan.

Capitalization

The following table sets forth our capitalization as of June 30, 2005:

	•		on an actual basis;
	•		on an as adjusted pre-offering basis, after giving effect to our issuance of the second Intercompany Note on      , 2005 as a dividend to Ford and the issuance of the Cumulative Preferred Stock to Ford as described below; and
	•		on an as adjusted post-offering basis, after giving effect to the items just described, plus this offering, the offering of Equity Units, the repayment of the Intercompany Notes with the proceeds of those offerings and the redemption of the Cumulative Preferred Stock from Ford described below.

You should read the information in this table in conjunction with our audited consolidated financial statements and our unaudited condensed consolidated financial statements and the notes to those statements included in this prospectus and “Use of proceeds,” “Dividend policy,” “Selected historical financial data,” and “Management’s discussion and analysis of financial condition and results of operations.”

Selected historical financial data

The following table presents selected consolidated financial information and other data for our business. The selected consolidated statement of operations data presented below for the years ended December 31, 2003, 2002, 2001 and 2000 and the six months ended June 30, 2004 have been restated. For a discussion of the Restatement, see note (a) below and note 1A to the notes to our audited consolidated financial statements and our unaudited condensed consolidated financial statements included in this prospectus. The selected condensed consolidated statement of operations data for the six months ended June 30, 2005 and June 30, 2004 (as restated) and the condensed consolidated balance sheet data as of June 30, 2005 presented below were derived from our unaudited condensed consolidated financial statements and the related notes thereto included in this prospectus. The selected consolidated statement of operations data for each of the years in the three-year period ended December 31, 2004 and the consolidated balance sheet data at December 31, 2004 and 2003 presented below were derived from our audited consolidated financial statements and the related notes thereto included in this prospectus. The operating results for the six months ended June 30, 2005 and June 30, 2004 include all adjustments (consisting only of normal recurring adjustments) that we consider necessary for a fair statement of the results for such interim periods. The interim results are not necessarily an indication of the results for the full year.

You should read the following information in conjunction with the section of this prospectus entitled “Management’s discussion and analysis of financial condition and results of operations,” our unaudited condensed consolidated financial statements and our audited consolidated financial statements and related notes beginning on page F-1 of this prospectus.

Management’s discussion and analysis of
financial condition and results of operations

The statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk factors.” Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following discussion together with the sections entitled “Risk factors,” “Special note regarding forward-looking statements,” “Selected historical financial data” and our unaudited condensed consolidated and audited consolidated financial statements and related notes included in this prospectus .

Restatement of consolidated statements of operations

We have restated our previously issued consolidated statements of operations for the years ended December 31, 2003 and 2002 and the quarters ended March 31, 2004 and June 30, 2004, and we will be restating our quarterly statement of operations for the quarter ended September 30, 2004. The Restatement was reported in our Annual Report on Form 10-K for the year ended December 31, 2004, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, as well as in this prospectus. The Restatement will also be reported in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. The restated amounts for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004 and for all quarters of 2003 are presented in note 13 to the notes to our audited consolidated financial statements included in this prospectus. The Restatement also affects periods prior to 2002. The Restatement corrected certain of our historical accounting policies to conform with generally accepted accounting principles, or “GAAP.”

Before the Restatement, our consolidated statements of operations reflected historical accounting policies, under which (1) amounts charged by us to our car rental customers to reimburse us for certain operating expenses (principally concession fees incurred for the privilege of operating at airports and certain other locations and vehicle licensing fees) were netted against related operating expenses, (2) amounts charged by us to our car rental and equipment rental customers for fueling of vehicles and equipment were netted against related operating expenses, (3) costs incurred in connection with the sale of consumables and dealer inventory from our equipment rental business were netted against revenues and (4) other immaterial items of revenues and expenses were presented on a net basis.

We have determined that the historical accounting policies described above were not in accordance with the Financial Accounting Standards Board Emerging Issues Task Force, or “EITF,” Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” and EITF Issue No. 01-14, “Income Statement Characterization of Reimbursement Received for Out-of-Pocket Expenses Incurred.” EITF No. 99-19 and No. 01-14 employ multi-factor tests to determine whether amounts charged to customers in respect of certain expenses incurred should be included in revenues or netted against such expenses. Accordingly, we restated our previously issued consolidated statements of operations to reclassify revenues and expenses in accordance with GAAP, with particular regard to the requirements of EITF No. 99-19 and No. 01-14.

In view of this error in the application of GAAP, we determined that, as of December 31, 2004, a material weakness existed in our internal control over financial reporting with respect to the selection and application of GAAP to our financial statements. We considered the impact of the material weakness as

of December 31, 2004 and June 30, 2005, and determined that the magnitude of any actual or potential misstatement in our financial statements was limited to an increase by identical amounts in revenue and expense in the relevant statements of operations, with no changes to income before income taxes or net income (loss) and no effect on consolidated balance sheets or consolidated statements of cash flows. Since December 31, 2004, we have taken a series of steps designed to improve the control processes regarding the selection and application of GAAP and preparation and review of the consolidated financial statements. Specifically, key personnel involved in our financial reporting processes have enhanced the process through which authoritative guidance will be monitored on a regular basis. On-going reviews of authoritative guidance will be conducted in order to ensure that new guidance is being complied with in the preparation of the financial statements, related disclosures and periodic filings with the Securities and Exchange Commission, or “SEC.” Additionally, when we became aware of the misapplication of EITF No. 99-19 and No. 01-14, our management reviewed all applicable authoritative guidance issued since 1999 in relation to all consolidated financial statements which had been filed with the SEC. Our management believes that the corrective actions which have been implemented address the identified deficiencies in our disclosure controls and procedures. Our management will continue to apply these process improvements to our disclosure controls and procedures.

As a result of the Restatement, total revenues and total expenses in the previously issued consolidated statements of operations have each been increased by $725.8 million and $670.3 million for the years ended December 31, 2003 and 2002, respectively and by $386.7 million for the six months ended June 30, 2004. Because previously reported revenues and expenses for each of the affected periods were increased by equal amounts, the Restatement has not resulted in a change in our previously reported income (loss) before income taxes and minority interest, income (loss) before cumulative effect of change in accounting principle or net income (loss), nor has it changed our liquidity or financial condition. The Restatement had no effect on our consolidated balance sheets or consolidated statements of cash flows.

A summary of the effects of the Restatement on the previously issued consolidated statements of operations is as follows (in thousands of dollars):

All prior period amounts included in this prospectus affected by the Restatement are presented on a restated basis.

Overview

We are engaged principally in the businesses of renting cars and renting equipment.

Our revenues principally are derived from rental and related charges and consist of:

	•		Car rental revenues (revenues from all company-operated car rental operations, including charges to customers for the reimbursement of costs incurred relating to airport concession fees and vehicle license fees, the fueling of vehicles and the sale of loss or collision damage waivers, liability insurance coverage and other products);
	•		Equipment rental revenues (revenues from all company-operated equipment rental operations, including amounts charged to customers for the fueling and delivery of equipment and sale of loss damage waivers); and
	•		Other revenues (fees and certain cost reimbursements from our licensees and revenues from our claim management services).

Our equipment rental business also derives revenues from the sale of new equipment and consumables.

Our expenses consist of:

	•		Direct operating expenses (primarily wages and related benefits; commissions and concession fees paid to airport authorities, travel agents and others; facility, self-insurance and reservations costs; the cost of new equipment and consumables purchased for resale; and other costs relating to the operation and rental of the revenue earning equipment, such as damage, maintenance and fuel costs);
	•		Depreciation expense relating to revenue earning equipment (including net gains or losses on the disposal of such equipment). Revenue earning equipment includes cars and equipment;
	•		Selling, general and administrative expenses (including advertising); and
	•		Interest expense relating primarily to the funding of the acquisition of revenue earning equipment.

The car and equipment rental industries are significantly influenced by general economic conditions. The car rental industry is also significantly influenced by developments in the travel industry, and, particularly in, airline passenger traffic. Our profitability is primarily a function of the volume and pricing of rental transactions and the utilization of cars and equipment. Significant changes in the purchase price of cars and equipment or interest rates can also have a significant effect on our profitability depending on our ability to adjust pricing for these changes. We expect increases in car costs and modest increases in equipment costs in the near term. We expect a significant increase in car costs for the 2006 model year, which will adversely affect our results of operations beginning in the fourth quarter of 2005 because we do not expect rental price increases in the near term to offset these car cost increases. Our business requires significant expenditures for cars and equipment, and consequently we require substantial liquidity to finance such expenditures.

Car rental and equipment rental operations are seasonal businesses, with decreased levels of business in the winter months and heightened activity during the spring and summer. To accommodate increased demand, we increase our available fleet and staff during the second and third quarters. As business demand declines, fleet and staff are decreased accordingly. However, certain operating expenses, including minimum concession fees, rent, insurance, and administrative overhead, remain fixed and cannot be adjusted for seasonal demand.

In the United States, industry revenues from airport rentals have only recently returned to levels seen before the 2001 recession and the September 11, 2001 terrorist attacks. During the first half of 2005, the major U.S. car rental brands have reported that pricing for rental cars, as measured by rental rates charged, declined slightly, while our pricing essentially remained equal to our pricing in the same period last year. Industry pricing performance is consistent with the downward pressure on pricing for the major U.S. car rental brands in the first half of 2005. Also, we believe most European car rental companies’ pricing moved downward in 2004. During the first half of 2005, we experienced strong transaction day growth in our European operations, but our rental car pricing was below the pricing during the same period last year.

In each of the years ended December 31, 2003 and 2004, we increased the number of our staffed off-airport rental locations in the United States by approximately 200, to over 1,200 off-airport locations as of December 31, 2004. As of June 30, 2005, we had 1,329 off-airport locations. We intend to add more off-airport locations in the United States in the remainder of 2005 and in subsequent years. Accordingly, we expect the percentage of our overall U.S. rental revenues and transactions represented by our off-airport operations to grow. When we open a new off-airport location, we incur a number of costs, including those relating to site selection, lease negotiation, recruitment of employees, selection and development of managers, initial sales activities and integration of our systems with those of the companies who will reimburse the location’s replacement renters for their rentals. New off-airport locations, once opened, take time to generate their full potential revenues, and as a result revenues at new locations do not initially cover their start-up costs and often do not, for some time, cover the costs of their ongoing operation.

From 2001 to 2003, the industrial and construction equipment rental industry experienced downward pricing, measured by the per-period rates charged by rental companies. For the year ended December 31, 2004 and the first half of 2005, we believe industry pricing, measured in the same way, has improved in North America but has continued to decline in France and Spain, albeit at a reduced rate. HERC has also experienced higher equipment rental volumes worldwide for the year ended December 31, 2004 and the first half of 2005. HERC slightly contracted its North American network of industrial and construction equipment rental locations during the 2001 to 2003 downturn in construction activities. In 2005, we currently expect that HERC will add 7 to 9 new locations in major markets across the United States. In this expansion, we expect that HERC will incur non-fleet start-up costs of approximately $900,000 per location and additional fleet acquisition costs over an initial twelve-month period of approximately $4.9 million per location.

We expect moderate demand in the car rental business and continued strong demand in the industrial and construction equipment rental business during the remainder of 2005. We anticipate our full year 2005 income before income taxes and minority interest will be similar to 2004 levels.

The following discussion and analysis provides information that management believes to be relevant to understanding our consolidated financial condition and results of operations. This discussion should be read in conjunction with the financial statements and the related notes thereto contained in our audited consolidated financial statements and unaudited condensed consolidated financial statements included in this prospectus.

Critical accounting policies and estimates

Our discussion and analysis of financial condition and results of operations are based upon our audited consolidated financial statements and our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts in the consolidated financial statements and accompanying notes.

We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements and changes in these judgments and estimates may impact future results of operations and financial condition. For additional discussion of our accounting policies, see note 1 to the notes to our audited consolidated financial statements included in this prospectus.

Revenue earning equipment

Our principal assets are revenue earning equipment, or “REE,” which represents 71% of total assets as of June 30, 2005. REE consists of vehicles utilized in car rental operations and equipment utilized in equipment rental operations. During 2004, 81% of the vehicles purchased for our U.S. and international car rental fleet were subject to repurchase by automobile manufacturers under contractual guaranteed repurchase programs, subject to certain manufacturers’ car condition and mileage requirements, at a specific price during a specified time period. These programs limit our residual risk with respect to vehicles purchased under the programs. For all other vehicles, as well as equipment acquired by our equipment rental business, we use historical experience and monitor market conditions to set depreciation rates. When REE is acquired, we estimate the period that we will hold the asset. Depreciation is recorded on a straight-line basis over the estimated holding period, with the objective of minimizing gain or loss on the disposition of the REE. Upon disposal of the REE, depreciation expense is adjusted for the difference between the net proceeds received and the remaining book value. As market conditions change, we adjust our depreciation rates prospectively, over the remaining holding period, to reflect these changes in market conditions.

Public liability and property damage

The obligation for public liability and property damage, or “PL/PD,” on self-insured U.S. and international vehicles and equipment represents an estimate for both reported accident claims not yet paid, and claims incurred but not yet reported. The related liabilities are recorded on a non-discounted basis. Reserve requirements are based on actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses, premiums and administrative costs. The adequacy of the liability is regularly monitored based on evolving accident claim history. If our estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.

Pensions

Our employee pension costs and obligations are dependent on our assumptions used by actuaries in calculating such amounts. These assumptions include discount rates, salary growth, long-term return on plan assets, retirement rates, mortality rates and other factors. Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect our recognized expense and recorded obligation in such future periods. While we believe that the assumptions used are appropriate, significant differences in actual experience or significant changes in assumptions would affect our pension costs and obligations. See note 6 to the notes to our audited consolidated financial statements included in this prospectus.

Goodwill

We review goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable, and also review goodwill annually in accordance with Statement of Financial Accounting Standards, or “SFAS,” No. 142, “Goodwill and Other Intangible Assets.” Our annual review is conducted in the second quarter of each year. Under SFAS No. 142, goodwill impairment is deemed to exist if the carrying value of goodwill exceeds its fair value. In addition, SFAS No. 142 requires that goodwill be tested at least annually using a two-step process. The first step is to identify any potential impairment by comparing the carrying value of the reporting unit to its fair value. If a potential impairment is identified, the second step is to compare the implied fair value of goodwill with its carrying amount to measure the impairment loss. We estimate the fair value of our reporting units using a discounted cash flow methodology. A significant decline in the projected cash flows used to determine fair value could result in a goodwill impairment charge. See note 2 to the notes to our audited consolidated financial statements included in this prospectus.

Results of operations

The following table sets forth for each of the periods indicated, the percentage of operating revenues represented by certain items in our consolidated statement of operations:

Six months ended June 30, 2005 compared with six months ended June 30, 2004

Revenues . Total revenues for the six months ended June 30, 2005 of $3,502.9 million increased by 12.5% from $3,112.4 million for the six months ended June 30, 2004. Revenues from car rental operations of $2,824.5 million for the six months ended June 30, 2005 increased by $272.6 million, or 10.7%, from $2,551.9 million for the six months ended June 30, 2004. The increase was primarily the result of a 7.5% increase in car rental volume worldwide and the effects of foreign currency translation of approximately $37.3 million, partly offset by a 1.1% decrease in pricing worldwide.

Revenues from equipment rental operations of $630.1 million for the six months ended June 30, 2005 increased by $107.8 million, or 20.6%, from $522.3 million for the six months ended June 30, 2004. The increase was due to improved pricing in the United States, higher worldwide rental volume, and the effects of foreign currency translation of approximately $9.3 million.

Revenues from all other sources of $48.3 million for the six months ended June 30, 2005 increased by $10.1 million, or 26.4%, from $38.2 million for the six months ended June 30, 2004, primarily due to the increase in car rental licensee revenue and the effects of foreign currency translation.

Expenses. Total expenses of $3,312.9 million for the six months ended June 30, 2005 increased by 11.5% from $2,970.6 million for the six months ended June 30, 2004, and total expenses as a percentage of revenues decreased to 94.6% for the six months ended June 30, 2005 compared with 95.4% for the six months ended June 30, 2004.

Direct operating expenses of $2,025.5 million for the six months ended June 30, 2005 increased by 13.7% from $1,781.8 million for the six months ended June 30, 2004. The increase was primarily the result of increases in wages and benefits, facility expenses, gasoline costs and concession fees in car rental operations, the effects of foreign currency translation and $7.0 million received in 2004 regarding insurance claims made by us relating to the terrorist attacks of September 11, 2001.

Depreciation of revenue earning equipment for car rental operations of $649.7 million for the six months ended June 30, 2005 increased by 7.7% from $603.4 million for the six months ended June 30, 2004. The increase was primarily due to the increase in the average number of vehicles worldwide and the effects of foreign currency translation. This increase was partly offset by higher net proceeds received in excess of book value on the disposal of used vehicles and a $10.1 million reduction in depreciation for domestic car rental operations resulting from a decrease in depreciation rates to reflect changes in the estimated residual values of vehicles. Depreciation of revenue earning equipment for equipment rental operations of $106.7 million for the six months ended June 30, 2005 decreased by 3.3% from $110.3 million for the six months ended June 30, 2004 due to higher net proceeds received in excess of book value on the disposal of used equipment in the United States, and the effects of changes in depreciation rates of equipment.

Selling, general and administrative expenses of $318.9 million for the six months ended June 30, 2005 increased by 9.1% from $292.4 million for the six months ended June 30, 2004. The increase was primarily due to increases in administrative and sales promotion expenses and the effects of foreign currency translation.

Interest expense, net of interest income, of $212.0 million for the six months ended June 30, 2005 increased by 16.1% from $182.7 million for the six months ended June 30, 2004, primarily due to increases in the weighted average debt outstanding, the weighted average interest rate and the effects of foreign currency translation, partly offset by an increase in interest income.

The provision for taxes on income of $64.9 million for the six months ended June 30, 2005 increased by 31.1% from $49.5 million for the six months ended June 30, 2004, primarily due to an increase in pre-tax income for the six months ended June 30, 2005. The effective tax rate for the six months ended June 30, 2005 was 34.2% as compared to 35.0% in six months ended June 30, 2004. See Note 5 to the Notes to our condensed consolidated financial statements included in this prospectus.

Minority interest of $5.0 million for the six months ended June 30, 2005 represents the minority interest’s share (35%) of Navigation Solutions LLC’s net income for the six months ended June 30, 2005. See Note 1 to the Notes to our condensed consolidated financial statements included in this prospectus.

Net Income. We had net income of $120.1 million for the six months ended June 30, 2005, representing an increase of $27.9 million, or 30.3% from $92.2 million for the six months ended June 30, 2004. The increase in net income was primarily due to higher rental volume in our worldwide car rental business and improved results in our North American equipment rental operations, partly offset by lower pricing in our worldwide car rental business, as well as the net effect of other contributing factors noted above.

Year ended December 31, 2004 compared with year ended December 31, 2003

Revenues. Total revenues of $6,676.0 million for the year ended December 31, 2004 increased by 12.5% from $5,933.7 million for the year ended December 31, 2003.

Revenues from car rental operations of $5,430.8 million for the year ended December 31, 2004 increased by 12.7% from $4,819.3 million for the year ended December 31, 2003. This increase of $611.5 million was primarily the result of higher car rental volumes worldwide and the effects of foreign currency translation of approximately $143.6 million, partly offset by a 2.6% decrease in time and mileage rates worldwide. The impact of changes in exchange rates on net income was mitigated by the fact that not only foreign revenues but also most foreign expenses were incurred in local currencies.

Revenues from equipment rental operations of $1,162.0 million for the year ended December 31, 2004 increased by 12.0% from $1,037.8 million for the year ended December 31, 2003. This $124.2 million increase was principally due to improved pricing in the United States, higher equipment rental volumes worldwide and the effects of foreign currency translation of approximately $22.1 million.

Revenues from all other sources of $83.2 million for the year ended December 31, 2004 increased by 8.5% from $76.6 million for the year ended December 31, 2003, due to an increase in licensee revenues.

Expenses. Total expenses of $6,173.4 million for the year ended December 31, 2004 increased by 8.4% from $5,696.2 million for the year ended December 31, 2003, and total expenses as a percentage of revenues decreased to 92.5% for the year ended December 31, 2004 compared to 96.0% for the year ended December 31, 2003.

Direct operating expenses of $3,734.4 million for the year ended December 31, 2004 increased by 12.6% from $3,316.1 million for the year ended December 31, 2003. The increase was primarily the result of the effects of foreign currency translation, increases in wages and benefits, commissions, concession fees, facility expense, vehicle damage expense and gasoline costs in car rental operations. The increase was partly offset by favorable credit and collection and PL/PD claims experience. Current period expenses were further reduced by $7.0 million received for the year ended December 31, 2004 for claims made by us on our insurance policies for business interruption losses resulting from the terrorist attacks of September 11, 2001 and a final gain of $7.5 million for the year ended December 31, 2004 from the condemnation of a car rental and support facility in Florida. (An initial gain of $8.0 million related to the condemnation was recorded for the year ended December 31, 2003.)

Depreciation of revenue earning equipment for car rental operations of $1,228.6 million for the year ended December 31, 2004 decreased by 2.4% from $1,258.3 million for the year ended December 31, 2003. The decrease was primarily due to the decrease in the United States average cost per vehicle and higher net proceeds received in excess of book value on the disposal of used vehicles worldwide, partly offset by the effects of foreign currency translation, an increase in the average number of vehicles operated worldwide and a one-time refund of $7.8 million for the year ended December 31, 2003. The refund resulted from a special transitional credit for car rental companies instituted by the Australian Taxation Office for Goods and Services Tax. Taxes paid were previously included in the capitalized cost

of the vehicles in our Australian car rental fleet. Depreciation of revenue earning equipment for equipment rental operations of $234.7 million for the year ended December 31, 2004 decreased by 11.5% from $265.1 million for the year ended December 31, 2003, primarily due to higher net proceeds received in excess of book value on the disposal of used equipment in the United States.

Selling, general and administrative expenses of $591.3 million for the year ended December 31, 2004 increased by 17.9% from $501.7 million for the year ended December 31, 2003. The increase was principally due to the effects of foreign currency translation and increases in administrative and advertising expenses. The increase in administrative expenses was attributable to increases in salaries and in incentive compensation expense relating to the improvement in earnings for the year ended December 31, 2004. The increase in advertising was due to expanded media advertising, primarily in television.

Interest expense, net of interest income, of $384.4 million for the year ended December 31, 2004 increased 8.3% from $355.0 million for the year ended December 31, 2003, primarily due to an increase in average debt outstanding and foreign currency translation, partly offset by a decrease in the weighted average interest rate and higher interest income.

The provision for taxes on income of $133.9 million for the year ended December 31, 2004 increased 69.7% from $78.9 million for the year ended December 31, 2003. The increase in the provision for taxes on income was primarily the result of an increase in pre-tax income for the year ended December 31, 2004, partly offset by net favorable tax adjustments totaling $46.6 million, principally relating to the evaluation of certain federal and foreign tax accruals and foreign tax credits. The effect of the net tax adjustments caused a decrease in the effective tax rate from 35.9% to 26.6% as compared to 33.2% for the year ended December 31, 2003. See notes 1 and 9 to the notes to our audited consolidated financial statements included in this prospectus.

On July 1, 2004, we increased our joint venture ownership interest in Navigation Solutions from 40% to 65%. Minority interest of $3.2 million for the year ended December 31, 2004 represents the minority interest’s share (35%) of Navigation Solutions’ net income for the period July 1, 2004 through December 31, 2004. See note 5 to the notes to our audited consolidated financial statements included in this prospectus.

Income before cumulative effect of change in accounting principle. We had income before cumulative effect of change in accounting principle of $365.5 million for the year ended December 31, 2004, representing an increase of $206.9 million from $158.6 million for the year ended December 31, 2003. The increase reflects higher rental volume in our worldwide car and equipment rental businesses, lower fleet costs, higher proceeds received in excess of book value on the disposal of used vehicles and equipment and net favorable tax adjustments, partly offset by lower pricing in our worldwide car rental business, as well as the net effect of other contributing factors noted above.

Year ended December 31, 2003 compared with year ended December 31, 2002

Revenues. Total revenues of $5,933.7 million for the year ended December 31, 2003 increased by 5.2% from $5,638.4 million for the year ended December 31, 2002.

Revenues from car rental operations of $4,819.3 million for the year ended December 31, 2003 increased by 6.2% from $4,537.6 million for the year ended December 31, 2002. This increase of $281.7 million was primarily the result of the effects of foreign currency translation of approximately $197.7 million and higher rental volume worldwide, partly offset by a 1.5% decrease in time and mileage rates. The impact of changes in exchange rates on net income was mitigated by the fact that not only foreign revenues but also most foreign expenses were incurred in local currencies.

Revenues from equipment rental operations of $1,037.8 million for the year ended December 31, 2003 increased by 1.9% from $1,018.7 million for the year ended December 31, 2002. This $19.1 million increase was principally due to the effects of foreign currency translation, mostly offset by a decrease in rental volume in the United States which was the result of depressed capital spending for new non-residential construction and its impact on the equipment rental industry.

Revenues from all other sources of $76.6 million for the year ended December 31, 2003 decreased by 6.6% from $82.1 million for the year ended December 31, 2002, due to a decrease in license and management fees earned from Axus International, Inc., or “Axus.” Axus was a wholly owned vehicle leasing subsidiary of Ford Motor Credit Company, or “Ford Credit,” to which we had licensed the Hertz name and provided management services prior to the completion of the sale of Axus by Ford Credit and termination of the Hertz license in the quarter ended March 31, 2003.

Expenses. Total expenses of $5,696.2 million for the year ended December 31, 2003 increased by 5.1% from $5,422.0 million for the year ended December 31, 2002, and total expenses as a percentage of revenues remained relatively constant at 96.0% for the year ended December 31, 2003 compared to 96.2% for the year ended December 31, 2002.

Direct operating expenses of $3,316.1 million for the year ended December 31, 2003 increased by 7.2% from $3,093.0 million for the year ended December 31, 2002. The increase was primarily the result of the effects of foreign currency translation, increases in wages and benefits, self insurance, concession fees, facility expense and gasoline costs in car rental operations, partly offset by an initial gain of $8.0 million from the condemnation of a car rental and support facility in Florida.

Depreciation of revenue earning equipment for car rental operations of $1,258.3 million for the year ended December 31, 2003 increased by 2.4% from $1,228.5 million for the year ended December 31, 2002. The increase was due to the effects of foreign currency translation. This increase was partly offset by a one-time refund of $7.8 million which resulted from a special transitional credit for rental car companies instituted by the Australian Taxation Office for Goods and Services Tax. Taxes paid were previously included in the capitalized cost of the vehicles in our Australian car rental fleet. Depreciation of revenue earning equipment for equipment rental operations of $265.1 million for the year ended December 31, 2003 decreased by 2.2% from $271.0 million for the year ended December 31, 2002 due to a decrease in the size of the equipment rental fleet partly offset by lower net proceeds received in excess of book value on the disposal of equipment in the United States.

Selling, general and administrative expenses of $501.7 million for the year ended December 31, 2003 increased by 8.3% from $463.1 million for the year ended December 31, 2002. The increase was principally due to the effects of foreign currency translation and increases in administrative and sales promotion expenses. Administrative expenses for the year ended December 31, 2003 included $6.0 million of stock-based employee compensation expense which resulted from the adoption of the fair value recognition provisions of SFAS No. 123, effective January 1, 2003. See notes 1 and 7 to the notes to our audited consolidated financial statements included in this prospectus.

Interest expense, net of interest income, of $355.0 million for the year ended December 31, 2003 decreased 3.1% from $366.4 million for the year ended December 31, 2002, primarily due to a decrease in the weighted-average interest rate and an increase in interest income for the year ended December 31, 2003, partly offset by higher average debt levels.

The tax provision of $78.9 million for the year ended December 31, 2003 increased 9.0% from $72.4 million for the year ended December 31, 2002. The effective tax rate for the year ended December 31, 2003 was 33.2% as compared to 33.4% for the year ended December 31, 2002. The increase in the tax

provision was primarily the result of higher income before income taxes for the year ended December 31, 2003. See notes 1 and 9 to the notes to our audited consolidated financial statements included in this prospectus.

Income before cumulative effect of change in accounting principle. We had income before cumulative effect of change in accounting principle of $158.6 million for the year ended December 31, 2003, representing an increase of $14.6 million from $144.0 million for the year ended December 31, 2002. The increase reflects improved car rental volume worldwide partly offset by lower pricing in our U.S. car rental business and the impact of the Iraqi conflict and SARS had on the travel industry for the year ended December 31, 2003 as well as the net effect of other contributing factors noted above.

Cumulative effect of change in accounting principle. We recorded a non-cash charge of $294.0 million to adjust goodwill upon the adoption of SFAS No. 142, effective January 1, 2002. The charge related to the equipment rental segment. The goodwill write-off was the result of a reduction in projected cash flows used to determine fair value due to the unfavorable economic conditions as of the date of adoption, which reduced demand for equipment in North America. See notes 1 and 2 to the notes to our audited consolidated financial statements included in this prospectus.

Liquidity and capital resources

As of June 30, 2005, we had cash and equivalents of $703.9 million, an increase of $23.0 million from December 31, 2004. As of June 30, 2005, cash and equivalents includes $7.4 million of restricted cash to be used for the purchase of revenue earning vehicles or for the repayment of outstanding indebtedness under our Asset Backed Securitization, or “ABS,” program. As of December 31, 2004, we had cash and cash equivalents of $680.9 million, an increase of $70.9 million from December 31, 2003, which includes $2.9 million of restricted cash to be used for the purchase of revenue earning vehicles or for the repayment of outstanding indebtedness under the ABS program. As of December 31, 2003, we had cash and equivalents of $610.0 million, an increase of $8.7 million from December 31, 2002. In addition, we have made short-term investments with a related party investment fund that pools and invests excess cash balances of certain Ford subsidiaries to maximize returns. These short-term investments totaled $296.4 million as of June 30, 2005, $557.0 million as of December 31, 2004 and $500.1 million as of December 31, 2003. These funds are held until they are required for operating purposes or used to reduce indebtedness.

Our domestic and foreign operations are funded by cash provided by operating activities and by extensive financing arrangements maintained by us in the United States, Europe, Australia, New Zealand, Canada and Brazil. Net cash provided by operating activities during the six months ended June 30, 2005 was $1,665.5 million, an increase of $3.0 million from the six months ended June 30, 2004, primarily due to timing differences in the receipts and payments of receivables, amounts due from affiliates and accounts payable. Net cash provided by operating activities was $2,251.4 million for the year ended December 31, 2004, an increase of $352.1 million from the year ended December 31, 2003, primarily due to the increase in net income. Net cash provided by operating activities was $1,899.3 million for the year ended December 31, 2003, an increase of $21.8 million from the year ended December 31, 2002, primarily due to an increase in net income. Revenue earning equipment expenditures and proceeds from the disposal of such equipment have been reclassified from operating activities to investing activities for all periods presented in our consolidated statement of cash flows.

Our primary use of cash in investing activities is for the acquisition of revenue earning equipment, which consists of cars and equipment. Net cash used in investing activities during the six months ended June 30, 2005 was $2,924.8 million, a decrease of $125.3 million from the six months ended June 30, 2004. The decrease is primarily due to the net increase in the proceeds from sales of short-term investments,

partly offset by net revenue earning equipment expenditures. Net cash used in investing activities was $2,843.0 million for the year ended December 31, 2004, an increase of $612.4 million from the year ended December 31, 2003. Net cash used in investing activities was $2,230.6 million for the year ended December 31, 2003, an increase of $167.1 million from the year ended December 31, 2002. The increases during 2004 and 2003 were primarily due to an increase in net expenditures for revenue earning equipment. For the six months ended June 30, 2005, our expenditures for revenue earning equipment were $7,640.6 million, partially offset by proceeds from the disposal of such equipment of $4,611.7 million. For the year ended December 31, 2004, our expenditures for revenue earning equipment were $11,310.0 million, partially offset by proceeds from the disposal of such equipment of $8,740.9 million. For the year ended December 31, 2003, our expenditures for revenue earning equipment were $9,436.6 million, partially offset by proceeds from the disposal of such equipment of $7,874.4 million. These assets are purchased by us in accordance with the terms of programs negotiated with car and equipment manufacturers.

For the six months ended June 30, 2005, our capital expenditures for property and non-revenue earning equipment were $186.8 million. For the year ended December 31, 2004, our capital expenditures for property and non-revenue earning equipment were $286.4 million. For the year ended December 31, 2003, our capital expenditures for property and non-revenue earning equipment were $226.7 million. For the year ending December 31, 2005, we anticipate a slightly increased level of net expenditures for revenue earning equipment and property and equipment compared to the year 2004.

Car rental and equipment rental operations are seasonal businesses with decreased levels of business in the winter months and heightened activity during the spring and summer. This is particularly true of our on-airport car rental operations and equipment rental operations. To accommodate this increased demand, we maintain a larger fleet by holding vehicles and equipment and purchasing additional fleet which increases our financing requirements in the second and third quarter. These seasonal financing needs are funded by increasing the utilization of our commercial paper programs and our bank credit facilities. As business demand moderates during the winter, we reduce our fleet accordingly and dispose of vehicles and equipment. The disposal proceeds are used to reduce short-term debt.

Financing

To finance our domestic operations, we maintain active unsecured and asset backed commercial paper programs. We are also active in the domestic unsecured medium-term and long-term debt markets and the domestic asset backed medium-term debt market, and maintain credit facilities described under “— Credit facilities” below.

During 2002, we established the ABS program for our domestic car rental fleet to reduce our borrowing costs and enhance our financing resources. All debt issued under the ABS program is collateralized by the assets of the special purpose financing entities, consisting of revenue earning vehicles used by us in our car rental business, restricted cash and certain receivables related to the revenue earning vehicles. The ABS program provided for the initial issuance of asset backed commercial paper (up to $1.0 billion) and the subsequent issuance of asset backed medium-term notes. These notes are issued by wholly owned and consolidated special purpose financing entities and are included in “Debt” in our consolidated balance sheet. As of June 30, 2005, $849.5 million of asset backed commercial paper and $600.0 million of asset backed medium-term notes were outstanding. As of December 31, 2004, $297.6 million of asset backed commercial paper and $600.0 million of asset backed medium-term notes were outstanding.

The asset backed commercial paper notes have ratings of A-1 by S&P, Prime-1 by Moody’s and F1 by Fitch Ratings, or “Fitch.” Under certain conditions, the commercial paper notes may be repaid by draws under a related bank liquidity facility ($814.0 million), which expires in June 2006 or a related letter of credit issued under a letter of credit facility ($215.0 million), which expires in June 2007.

On September 30, 2003, we issued $500.0 million of 4.7% Senior Promissory Notes, or the “4.7% Notes,” due on October 2, 2006. On June 3, 2004, we issued $600.0 million of 6.35% Senior Promissory Notes, or the “6.35% Notes,” due on June 15, 2010. Effective September 30, 2003 and June 3, 2004, we entered into interest rate swap agreements relating to the 4.7% Notes and 6.35% Notes, respectively. Under these agreements, we pay interest at a variable rate in exchange for fixed rate receipts, effectively transforming the 4.7% Notes and the 6.35% Notes to floating rate obligations with effective interest rates as of June 30, 2005 of 5.25% and 5.24%, respectively. See note 7 to the notes to our unaudited condensed consolidated financial statements and note 3 to the notes to our audited consolidated financial statements included in this prospectus.

On March 31, 2004, we issued $600.0 million of asset backed medium-term notes, or the “Medium-Term Notes,” under the ABS program. Of the $600.0 million of the Medium-Term Notes, $500.0 million has fixed interest rates ranging from 2.4% to 3.2% and maturities ranging from 2007 to 2009 and the remaining $100.0 million has a variable interest rate based on the one-month LIBOR rate plus nine basis points (3.4% as of June 30, 2005) and matures in 2007. Payments of principal and interest relating to the Medium-Term Notes are insured to the extent provided in a note guaranty insurance policy issued by MBIA Insurance Corporation. The Medium-Term Notes have ratings of AAA by S&P, Aaa by Moody’s and AAA by Fitch.

On July 2, 2004, we established a Euro Medium-Term Program under which we and/or Hertz Finance Centre plc, or “HFC,” a wholly owned subsidiary of ours, can issue up to € 650.0 million in medium-term notes, or the “Euro Notes.” On July 16, 2004, HFC issued € 200.0 million of Euro Notes under this program. These Euro Notes are fully guaranteed by us, mature in July 2007 and have a variable interest rate based on the three-month EURIBOR rate plus 110 basis points. As of June 30, 2005, the interest rate on the Euro Notes was 3.24%.

On August 5, 2004, we issued $500.0 million of promissory notes consisting of $250.0 million of floating rate notes at the three-month LIBOR rate plus 120 basis points due on August 5, 2008, and $250.0 million 6.90% senior fixed rate notes due on August 15, 2014. As of June 30, 2005, the interest rate on the $250.0 million floating rate notes was 4.42%.

As the need arises, it is our intention to issue unsecured senior, senior subordinated, junior subordinated or asset backed securities on terms to be determined at the time the securities are offered for sale. The total amount of unsecured medium-term and long-term debt outstanding as of June 30, 2005 and December 31, 2004 was $5.4 billion and $6.0 billion, respectively, excluding the Intercompany Note payable to Ford of $1,185.0 million discussed below, having fixed and floating rates ranging from 2.38% to 9.28% as of June 30, 2005, and having maturities ranging from 2005 to 2028. From time to time, we file with the SEC shelf registration statements to allow for the issuance of such unsecured senior, senior subordinated and junior subordinated debt securities on terms to be determined at the time such securities are offered for sale. As of June 30, 2005, we had $1.9 billion available for issuance under effective registration statements, so long as the SEC’s conditions for issuance are satisfied. Among those conditions is one that, at the time of issuance, the securities being issued are placed in a generic rating category signifying investment grade by at least one nationally recognized statistical rating organization (such as S&P, Moody’s, Fitch and Dominion Bond Rating Service, or “DBRS”). See “—Debt ratings.”

Borrowing for our international operations also consists of loans obtained from local and international banks, and commercial paper programs established in Ireland, Canada, the Netherlands, Belgium and Australia. We guarantee only the commercial paper borrowings of our subsidiaries in Ireland, Canada,

the Netherlands and Belgium, and we guarantee commercial paper and short-term bank loans of our subsidiary in Australia. All borrowings by international operations are either in the international operation’s local currency or, if in non-local currency, hedged to minimize foreign exchange exposure. As of June 30, 2005, total debt for the foreign operations was $1,896.7 million, of which $1,649.1 million was short-term (original maturity of less than one year) and $247.6 million was long-term. As of June 30, 2005, the total amounts outstanding under the commercial paper programs in Ireland, Canada, the Netherlands and Belgium were $243.5 million, $31.0 million, $27.2 million and $15.8 million, respectively. As of December 31, 2004, total debt for the foreign operations was $1,733.7 million, of which $1,455.3 million was short-term and $278.4 million was long-term. As of December 31, 2004, the total amounts outstanding under the commercial paper programs in Ireland, Canada, the Netherlands and Belgium were $384.5 million, $320.9 million, $54.3 million and $28.0 million, respectively.

On each of June 10, 2005 and           , 2005, we issued Intercompany Notes to Ford in the amounts of $1,185.0 million and $           , respectively, as dividends on all of our then outstanding common stock. The Intercompany Notes are subordinated in right of payment to all of our existing and future senior indebtedness. The Intercompany Notes each mature on June 10, 2010, but may be prepaid in whole at any time or in part from time to time. Interest on each of the Intercompany Notes will be payable in cash quarterly or on or before the maturity date of the Intercompany Notes, subject to certain limitations on payment contained in the Interim Credit Facility. The Intercompany Note issued on June 10, 2005 has a per annum interest rate equal to three-month LIBOR plus a spread of 200 basis points and the Intercompany Note issued on      , 2005 has a per annum interest rate equal to three-month LIBOR plus a spread of      basis points. As of June 30, 2005 the interest rate on the Intercompany Note issued on June 10, 2005 was 5.4%. We intend to repay the Intercompany Notes with the proceeds of this offering and the concurrent offering of Equity Units.

On April 20, 2005, Ford first announced that it was evaluating its long-term strategic options for its investment in us. Since the announcement by Ford, our ability to sell unsecured commercial paper has been adversely affected. Our ability to sell unsecured commercial paper may have been impacted by the announcement by Ford or by the recent developments, described under “—Debt ratings” below, regarding Ford’s and our debt ratings.

Credit facilities

As of June 30, 2005, we had committed credit facilities totaling $2.8 billion.

A portion of our committed credit facilities are represented by a combination of multi-year, 364-day global and other committed credit facilities provided by 20 participating banks which as of June 30, 2005 totaled $1.3 billion in commitments. In addition to direct borrowings by us, the multi-year and 364-day global facilities allow certain of our subsidiaries to borrow on the basis of a guarantee by us.

	•		The multi-year facilities were renegotiated effective July 1, 2005 and as of June 30, 2005 totaled $952.5 million in commitments with expirations as follows: $35.0 million on June 30, 2006, $108.0 million on June 30, 2007, $102.0 million on June 30, 2008, $81.0 million on June 30, 2009 and $626.5 million on June 30, 2010. The multi-year facilities that expire in 2010 have an evergreen feature, which provides for the automatic extension of the expiration date one year forward unless the bank provides timely notice.
	•		During 2005, the 364-day global committed credit facilities, which totaled $94.0 million as of June 16, 2005, were renegotiated and currently expire on June 15, 2006. Under the terms of the 364-day facilities, we are permitted to convert any amount outstanding prior to expiration into a two-year loan.

•

The other committed facilities totaled $178.9 million as of June 30, 2005 and expire at various times during 2005 and 2006.

Some of our committed credit facilities are represented by facilities that support our ABS program, which as of June 30, 2005 totaled $1.0 billion:

	•		Effective September 18, 2002, as part of the ABS program, we transferred a portion of the 364-day global committed credit facilities to the ABS program. As part of the agreement to transfer these commitments, we have waived the right to transfer them back to the 364-day global committed credit facilities without the consent of the participating banks. As of June 30, 2005, $814.0 million was committed under this facility which expires in June 2006.
	•		In addition to the transfer of the 364-day commitments, we raised committed credit support through an ABS letter of credit from banks that participate in our multi-year global committed credit facilities, which totaled $215.0 million as of June 30, 2005 and expires in June 2007. In exchange for this credit support, we agreed to reduce the banks’ multi-year facility commitment by one half of the amount of their ABS letter of credit participation.

In addition to these committed credit facilities, in February 1997, Ford extended to us a line of credit of $500.0 million, which currently expires June 30, 2007. This line of credit has an evergreen feature that provides on an annual basis for automatic one-year extensions of the expiration date, unless notice is provided by Ford at least one year prior to the then scheduled expiration date. The line of credit automatically terminates, however, at any time Ford ceases to own, directly or indirectly, our capital stock having more than 50% of the total voting power of all our capital stock outstanding and all loans and accrued interest under this facility would become immediately due and payable. Our obligations under this agreement would rank pari passu with our senior debt securities. A quarterly commitment fee of 0.2% is payable to Ford on the average daily unused available credit. On May 2, 2005, we borrowed $250.0 million under this line of credit, which we repaid on May 31, 2005 with borrowings under the Interim Credit Facility described below.

On May 26, 2005, we entered into the Interim Credit Facility with an aggregate availability of up to $3.0 billion with the joint book-running managers of this offering and/or their affiliates as the arrangers and initial lenders, JPMorgan Chase Bank, N.A. as the U.S. administrative agent and JPMorgan Chase Bank, N.A., Toronto Branch as the Canadian administrative agent. The Interim Credit Facility, as amended July 5, 2005, provides a term facility of up to $1,650.0 million and a revolving credit facility of up to $700.0 million available to The Hertz Corporation and a term facility of up to $350.0 million and a revolving credit facility of up to $300.0 million available to our Canadian subsidiary, Hertz Canada Limited, guaranteed by The Hertz Corporation, with unutilized capacity under the Canadian tranches available to be borrowed by The Hertz Corporation. Amounts under the term facilities are available to be borrowed from May 26, 2005 to July 26, 2005 and were fully drawn. Amounts under the revolving facilities are available to be borrowed throughout the term of the Interim Credit Facility. The Interim Credit Facility matures on November 23, 2005. We may elect a combination of per annum interest rates on the Interim Credit Facility including the federal funds rate plus 0.50%, JPMorgan Chase Bank, N.A.’s prime rate, LIBOR and, for loans made to Hertz Canada Limited, a Canadian base rate or Canadian prime rate, plus, in each case, a margin based on our then-current S&P and Moody’s debt ratings. We are also required to pay to the lenders a quarterly facility fee equal to a rate per annum of 0.175% of the total amount of the Interim Credit Facility (such rate based upon our current S&P and Moody’s debt ratings). As of June 30, 2005, we had outstanding borrowings of approximately $1.0 billion and C$575.0 million under the Interim Credit Facility.

We are required to prepay loans and permanently reduce commitments under the Interim Credit Facility under certain limited circumstances, including certain issuances of securities (not including this offering), certain sales of assets and when Ford controls less than 25% of us or any other person or group has equal or greater control of us than Ford. Effective July 26, 2005, $1,825.0 million of the Interim Credit Facility commitments provided by the three initial external financial institutions were syndicated and allocated to eight additional external financial institutions. The Interim Credit Facility has terms, including restrictive covenants, substantially similar to the terms of our other current committed credit facilities. In addition, the Interim Credit Facility contains restrictions on the payment of any indebtedness to, or investments other than in the ordinary course of business in, Ford, other than as noted above, and our ability to pay future dividends, other than the dividend to Ford of the Intercompany Notes or additional stock, payments pursuant to certain stock option plans or other benefit plans, or any dividend in connection with this offering or the concurrent offering of Equity Units. We have used and continue to use the amounts borrowed under the Interim Credit Facility to refinance existing, short-term indebtedness and for general corporate purposes. We intend to repay the Interim Credit Facility from the proceeds received from a combination of issuances of additional asset backed securities under our ABS program, accessing the commercial paper market and issuing unsecured senior debt securities.

We maintain agreements with Ford Financial Services, Inc., or “FFS,” a NASD registered broker/dealer and an indirect wholly owned subsidiary of Ford, whereby FFS acts as a sales agent for our secured and unsecured domestic commercial paper programs. We pay fees to FFS, which range from 0.03% to 0.05% per annum of commercial paper placed depending upon the monthly average dollar value of the notes outstanding in the portfolios. For the six months ended June 30, 2005, we paid fees to FFS of $74,096. For the year ended December 31, 2004, we paid FFS $89,148 of such fees. FFS is under no obligation to purchase any of the notes for its own account. On July 13, 2005, we entered into a letter agreement with FFS which amended the agreements to provide that they will automatically terminate at any time Ford ceases to own shares having more than 50% of the total voting power of all of our outstanding capital stock. Through our subsidiary Hertz Australia Pty. Limited, we also have a similar agreement with Ford Credit Australia Limited, also an indirect wholly owned subsidiary of Ford. Hertz Australia Pty. Limited no longer maintains an active commercial paper program.

Contractual obligations

As of December 31, 2004, our contractual cash obligations were as follows:

Other than our entry into the Interim Credit Facility and issuance of the Intercompany Note on June 10, 2005, we are not aware of any material changes outside the ordinary course of our business in the contractual obligations set forth on the table above as of June 30, 2005. See “Capitalization” for a discussion of these contractual obligations and the effects of this offering and the offering of Equity Units.

Debt ratings

Our short and long-term debt is rated by four of the nationally-recognized statistical rating organizations: Fitch; Moody’s; S&P; and DBRS. Debt ratings reflect an assessment by the rating agencies of the credit risk associated with particular securities issued by us. Lower ratings generally result in higher borrowing costs and reduced access to capital markets. Long- and short-term debt ratings of BBB- and F3 or higher by Fitch, Baa3 and Prime-3 or higher by Moody’s, BBB- and A3 or higher by S&P, and BBB and R-2 or higher by DBRS are considered “investment grade.” However, debt ratings are not recommendations to buy, sell, or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria in evaluating the risk associated to a company, and therefore ratings should be evaluated independently for each rating agency.

In April 2005 and the four following months, our debt ratings or outlook were downgraded by all four rating agencies, generally in conjunction with downgrades of Ford and Ford Credit. Our current ratings are as follows:

Other factors

Foreign currency. Our decision to withdraw earnings or investments from foreign countries is, in some cases, influenced by exchange controls and the utilization of foreign tax credits, and may also be affected by fluctuations in exchange rates for foreign currencies and by revaluation of such currencies in relation

to the U.S. dollar by the governments involved. Foreign operations have been financed to a substantial extent through loans from local lending sources in the currency of the countries in which such operations are conducted. Car rental operations in foreign countries are, from time to time, subject to governmental regulations imposing varying degrees of currency restrictions. Currency restrictions and other regulations historically have not had a material impact on our operations as a whole.

Ford ownership. Prior to this offering by virtue of its 100% ownership interest in us, Ford has the right to make any changes that it deems appropriate in our assets, corporate structure, capitalization, operations, properties and policies (including dividend policies). On April 20, 2005, Ford announced that it will consider options regarding its future ownership of us, which includes this offering and the concurrent offering of Equity Units.

Capital expenditures

The table below shows revenue earning equipment and property and equipment capital expenditures and related disposal proceeds received by quarter for 2005, 2004 and 2003.