Welcome to Hertz Global Holdings second quarter 2008 Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and -answer session. Instructions will be given at that time. (Operator instructions). The company has asked me to remind you that certain statements made on this call contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance, and by their nature are subject to inherent uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call. Any forward information relayed on this call speaks only as of this date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements is contained in the company's press release regarding its second quarter results issued yesterday and in the Risk Factors and Forward-looking Statements Section of the Company's 2007, Form 10-K and its Form 10-Q for the three months ended March 31, 2008. Copies of these filings are available from the SEC, the Hertz website, or the company's Investor Relations Department. I also want to remind you that this call is being recorded by the company. I would now like to turn the conference over to our host, Ms. Lauren Babus. Please go ahead.

Thank you. Good morning, and welcome to welcome to Hertz Global Holdings second quarter 2008 conference call. You should all have our press release and associated financial information. We have also provided slides to accompany this conference call. You can access these documents at www.Hertz.com/investorrelations. The slides can be accessed using the webcast presentation link. In a minute, I will turn the call over to Mark Frissora, Hertz' Chairman and CEO. Also speaking today is Elyse Douglas, Hertz' Chief Financial Officer. In addition, we have Joe Nothwang, Executive Vice President and President, Vehicle Rental and Leasing, The Americas and Pacific, Michel Taride, Executive Vice President and President Hertz Europe, Limited, and Gerry Plescia, Executive Vice President and President of Hertz, with us for the Q&A session. Today, we will use certain non-GAAP financial measures, all of which are reconciled with GAAP numbers in our press release which is posted on our website. We believe that our profitability and performance is better demonstrated using these non-GAAP metrics. Our call today focuses on Hertz Global Holdings, the publicly traded company. Results for the Hertz Corporation differed only slightly, as explained in our press release. And, now, I'll turn the call over to Mark Frissora.

Thanks, Lauren, and good morning, everyone, and thanks for joining us today. Lets start if can with slide no. 5. Second quarter was indeed a challenging one for the rental industry. We have a difficult economic environment as evidenced by lackluster GDP growth and lower consumer confidence. These trends have particularly impacted companies related to consumer products and services. In spite of the economic factors, we were once again able to deliver a solid performance on an adjusted basis in line with our second quarter 2007 results. We achieved record second quarter revenues of $2.3 billion, a 4.6% increase. We maintained a very strong focus on cost control and efficiency as well as cash management, which enabled us to offset the industry-wide softer volume and pricing pressures experienced in the quarter. We began this process in September 2006 and since that time we have decreased headcount by over 11%, with both the US and international operations showing double-digit reductions. We continue to delay our operating structure, streamlined organizational decision making and centralized processes globally in our centers of expertise. This is an ongoing process. We are constantly reviewing our operations for further opportunities to improve our efficiency. I would like to bring to your attention several major accomplishments we achieved during the second quarter. In the period we had strong levered cash flow; that is levered after tax cash flow, after fleet growth of $305 billion, driven by corporate EBITDA improvement, reduced corporate investment in fleet, [for equipment] rental and car rental. This is an important lever for us as volumes come under pressure we can dispose a fleet, especially in car rental and generate cash. Unlike airlines and hotels we don't have to warehouse unused revenue generating assets. Also this quarter we were able to maximize car rental fleet…

Thank you, Mark, and good morning, everyone. Once again I'll focus my remarks today on the operating environment and outlook for Car Rental and Equipment Rental. Let's start with the second quarter operating highlights for the Rent-A-Car division on Slide 12. Transaction days in the US decreased by 2.2% year-over-year driven by a 3% decline on airport days which was partially offset by a 1.9% increase in off-airport volumes. Hertz domestic rental car pricing in the second quarter as reflected in RPD, finished below prior year by 0.9% for the quarter. The pricing change was driven by decline of 0.7% on-airports and 0.7% off-airports and the increase in the proportion of off-airport rental activity in the overall mix. Airport RPD in the second quarter would have been slightly positive if it once to the impact of the shift to a more online leisure mix which Mark mentioned earlier. We are encouraged by the improvement of pricing in Hertz over the course of the quarter. By June, our airport pricing was slightly positive year-over-year as a result of price increases we took as the industry tightened supply in this summer peak approached. Pricing for the summer months to-date is even more positive. The corporate account pricing environment remains very competitive, particularly with larger accounts. But otherwise we have been able to negotiate low single digit price increases with the majority of our accounts that came up for renewal in the quarter. Another important operating metric, average rental length in the US increased by 3.7% in the second quarter with growth across almost all major customer categories. This reflects the shift to online leisure rental sources, strong growth from international inbound customers, growth in the off-airport business and the lower proportion of commercial rentals. Although we are seeing overall volume weakness some…

Thanks, Elyse. Our initial guidance for the full year 2008 was weighted toward the third and fourth quarters based on expectations that the economy would strengthen in the second half of the year. We've not seen evidence of this happening and believe the current weakness may well continue. Further, we didn't expect the European economies to react the way they have recently. The current environment is particularly volatile and it is difficult to forecast with great confidence given that economic indicators and our own trends have been changing week to week. Our Car Rental and Equipment Rental operations in Europe, both have seen precipitous volume declines over the past 45 days. We were hopeful that this volume contraction would be temporary but have grown concern that the decline may be protracted. Accordingly, we believe it is prudent to reduce our guidance at this time. We are comfortable with these projections and believe the ranges are realistic. Based on our current visibility, we are now forecasting total revenues to be between $8.7 billion and $8.8 billion with Car Rental revenue growth of 1.5% to 2.5% and Equipment Rental revenue declining 3% to 4%. Corporate EBITDA is projected to be between $1.4 billion and $1.465 billion. We expect adjusted pre-tax income in the range of $550 million to $600 million and adjusted net income to be between $340 million and $375 million. Using our normalized tax rate of 34% and 325.5 million shares, the number of diluted shares outstanding as of the year ended December 31, 2007 adjusted diluted earnings per share is expected to be between a $1.05 and a $1.15 per share. On the positive side, we affirm our earlier guidance with levered cash flow to be between $550 million and $650 million in 2008. This was certainly a challenging…

(Operator Instructions). We will go to Chris Agnew with Goldman Sachs. Please go ahead.

Thank you very much. Couple of questions. First of all, can I clarify if I am hearing you correctly that the weak pricing in Europe in particular impacted the direct vehicle cost disproportionally. And if I am correct there, how quickly can you adjust your fleet there with environment getting worse and how much are you thinking about reducing or are you considering reducing fleet into 2009? Thanks.

Well, I mean, you heard correctly, and I guess, and talking about the fleet issues in Europe, they have been there in all year. We've talked about them in the first quarter and the second quarter. Car costs in Europe due to the OEM's pricing structure there, it had been up 10% to 12% and they continue to be up in the second quarter. And what we have done is put together fleet plan, rotation plan that does reduce that increase moving into 2009. So, we grew confidence saying we will have to reduce fleet cost on a year-over-year basis moving into 2009. I don't know if I am being very specific to answering your question but that's the best I can give you right now.

Well, I think more on the direct vehicle cost side rather than the fleet cost side and because I mean you grew your fleet there 10% year-over-year and obviously see demand environments deteriorate much faster. How quickly can you actually start reducing your fleet to try and get better pricing?

Very quickly. And I guess it's a same, the trends are similar to what you saw in the US. In the US which you saw from us is a precipitous volumes drop up in November, December of 2006 and then the second quarter, we just announced the US which is the biggest business unit had double-digit pre-tax growth and improvement in margin of over a 100 basis points, right. So we were able to, over the period of about a 120 days, reduce fleet right sizes, start driving with tighter fleets, better pricing and the cost efficiencies took place. In Europe, we would expect to see things similarly develop. In other words, we have a pressure, if you will, in the third quarter and fourth quarter and those pressures have driven around right sizing the fleet than as you right size that you are throwing more cars into the markets so residual suffers. So you have a double whammy for a short period of time. What's a short period of time for us, let's say it's a 120 days roughly that hits operating results. So moving into the end of the fourth quarter, beginning in to the first quarter of 2009 and we have an improvement similar to what we saw in the US. We have more program cars in Europe right, so 55% plus program cars. So that helps us in terms of residual value issues. So the impact is not as great on a residual issue because of the higher content of program cars in Europe. Does that the answer your question better?

Yes, thanks. And one more question. Previously, you've talked about stress testing your model on 10% swing in revenue. I think you said you can hopefully hold your EBITDA margins in the high 30s.

Higher than that Chris, I mean we can hold on to 42 or better is what I would tell you right now. Gerry, do you want to comment on that?

Sure, yeah. We had talked about a worldwide decline of 10% still hoping a low 40s EBITDA. We're not predicting that level of the decline, but we're still comfortable with that or higher.

Okay, great. Thanks.

We will go to Rich Kwas with Wachovia. Please go ahead.

Hi, good morning.

Hi, Rich.

Mark, on the compact cars side, or US rental car, are you concerned about getting a sufficient number of compact cars and faster cars for year '09, given that there is a severe lack of availability at the retail level right now?

The answer is decidedly, no. We are not concerned at all and we're getting everyone that we want. So our mix vehicles that we've been able to acquire for the next year, we're pretty much locked down in the US any ways all of our fleet needs, where we're very happy and don't have a capacity issue at all.

Okay. So despite the lack of retail availability and the margins likely being better, selling to retail, you're not concerned with OEMs pulling back?

Rich, no, and I would tell you right now the plan is done. We're pretty much done with our plan by making model and we have everything we want and we could more if we wanted. So we have built in flexibility in the fleet plan for next year. And if we wanted to find more compacts, we could. So we're actually more in '09 than '08 on small cars. We've actually moved to a higher mix of small cars in '09 than in '08 so, and even with that move to higher mix content, we were able to satisfy everything that we wanted.

And does the SUV mix drop dramatically going forward over the next year and where it is now?

Rick, it drops. You say dramatically, I don't have the numbers in front of me here but it drops, but we use a special equipment to generate higher revenue per day, right. We get $80 to $90 RPD on some of like an SUV, like a navigator Lincoln and that special equipment is what people want on vacations. So you want to make sure you give what they want. So mini-vans, big SUVs, on seasonal peaks in our business we have to have that, otherwise we don't drive a higher RPD rate. It has come down. But when people travel on vacation with their families, they've got to have a bigger vehicle to transport their families and it doesn't make sense to have two vehicle when they can do with one given the RPD on it. But we're still comfortable with the mix that we have. And as you saw fleet cost in the second quarter, Rich, those fleet costs went down year-over-year and all the competitors as you know are going up. So we feel pretty good about ability to manage to fleet in tough environment.

Okay. And then moving over to Equipment Rental strong growth internationally that implies US was down in the quarter. It sounds like there is some weakness occurring in Europe. How should we expect to see the difference and the changes in kind of revenue growth regionally speaking over the next couple of quarters?

Well, as I mentioned in the guidance information I gave you on the outlook section, we talk about growing somewhere between 3% and 8% and now we calibrated that growth rate on an annualized basis. Let me find the exact, minus 3% to 4%. So the new range is minus 3% to 4% versus a positive growth rate that we had expected. So you can obviously do the math on that.

And is driven by the US and Europe continuing to slow.

Yeah. Our assumption, Rich, is that the US and Europe will continue slow.

And then incrementally, I mean US get much worse or is it kind of Europe getting worse than US?

They are both getting equally worse.

Equally worse.

Almost in equal installments.

Yeah.

Europe, I think you read the news, I mean the Europe economy has significantly slowed in the last 30 to 45 days and then you know we saw evidence of that. And so the question is it going to sustain? Is it going to continue to continue to contract? I don't have a crystal ball. Our assumption and guidance was, yes, it is. It's sustainable.

Okay. And lastly, just on the guidance, how comfortable are you with it at this point, what would be kind of the triggers that would make things worse or better kind of second half? What are thinking of it as the main drivers?

It's exactly as I detailed, I mean honest. I can't, I don’t know how more I can comment on it. Based on our current visibility, and assuming that the contraction in the marketplace that we have seen in Europe and the contraction that we have seen in Rent-A-Car continues through the end of the year, we are comfortable with guidance. Our hope is that the current contraction rates that we have seen over the last 45 days stopped and improved, I mean and we will look at guidance every single quarter and determine whether or not we can improve it or we have to bring it lower. But based on our current visibility, we are very comfortable with that guidance.

Okay. Thank you.

Our next question comes from Michael Millman with Soleil. Please go ahead.

Thank you. Just continuing on that last guidance on the HERC the minus 3% to 4%, is that for '08 or is that annualized for the second half and I guess the same thing in RAC?

That's for all other rate, Michael.

That was going from plus in the first half to minus? Okay.

Right.

In terms of the RAC pricing, to what extent is the mix impacting particularly the compact as you go down in size, obviously you get less for that, and what I am looking for is some comparison of price to cost of car rather than just a peer RDP number?

Well, I mean, the best way I can answer that is kind of talking about two things. One is that RPD decline that we saw in the US, a third of that decline was build around mix shift. So, it had nothing to do with actual pricing going down, right. So a third of that was built around the mix shift.

And that mix was the car or the off-airport mix shift?

Both the mix shift to off-airport as well as the shift to leisure. We have a higher percent of business that’s going to leisure channels now. Go ahead, Joe.

Yeah, the demand for compacts and subcompacts has not materially changed the pricing mix at all, because we've been able to get pricing increases on those compacts, so there is no impact on the pricing.

So does that make those products then more profitable because you're getting increases there?

I don't know if I'd say more profitable but I mean that's profitable. I mean obviously our pre-tax margin in the second quarter for US Rental Car went up. The margin actually went up. I mean obviously you saw our competitors, all their margins went down, all their pre-tax went down in the US, they are all US based for the most part. Our margins went up a 100 basis points and our pre-tax was double digit. So to answer your question, I think you can see by that pre-tax improvement that we didn't have a profit margin squeeze if you will due to a move to lower compact cars. Again the other issue is transaction. And when we look at the length, our length improved significantly. In US what is length improve to, Joe, in the US Rent-A-Car division length improved by how much?

In the second quarter, length improved by 3.7%

3.7% which offset if you will some of the RPD decline.

The other thing Michael I could add that the shift to subcompacts and compacts is relatively small and what drives the needs of our customers is the utility of the vehicle, four doors, large trunk, all that sort of things. And if you are taking customers on a comp cars and that sort of thing, you're not going to do it and focus.

And just quickly, on the ancillary revenue, I think you said it was up 12.3%. But I assume a large part of that is international and OpEx. It looked like the US numbers were sort of mid-single digit as I did the arithmetic. I was wondering why that rate of growth seems to be decelerating?

The rate of growth in the US is pretty comparable to the worldwide number. What you might be referring to might have our airport concession fees built into it and that is not reflected in the statistics that we quoted earlier in Elyse's presentation.

I was looking at the other, so other includes airport fees?

It does, other and our revenue base does include airport fees but it is not ancillary revenue.

I see.

We are talking about the insurance products and baby seats ski racks, NeverLost, GPS all of that products.

Okay. Thank you.

Thank you, Michael.

We will go to Michelle Ko with UBS. Please go ahead.

Hi, I was just wondering of the 300 million in cost savings that you anticipate this year, how much do you anticipate the flow through to the bottom line after reinvestments? And also --

As I mentioned in the script that we just read, I mean it's zero. Obviously if you look at the pre-tax and the EBITDA guidance, it essentially goes down year-over-year, none of it will flow through. So that's our current expectation based on where we see the trajectory in the market. Our hope is that the market improves, as I mentioned and if it does improve then we will see some flow through toward. At this point we are not forecasting that we will flow through. It's just going to offset the inflationary pressures that we have. The pricing pressures that we have and the buying contraction we have in our businesses.

Okay, great. And in terms of shrinking the fleet, to what degree will the new offer per rental sites offset the reduction in the same star fleet. So what would be the overall change in the fleet?

I don’t think we've forecasted the change in the fleet. We said that our fleet was down in the second quarter though in US Rent-A-Car about 3% and equipment rental business, the fleet continues to, in terms of the way we rotate it get better and better, leaner and leaner. Gerry, you want to talk about that?

From the equipment rental side, we started the year up over 8.5% at the end of June worldwide. We are only about 2.5% up driven by Canada and other strength in Europe originally. The flip side of that will happen in the back half. So this thing can turn year-over-year to negative high single digits to double digit negative and by the end of year as we continue to balance that fleet against the demand that we discussed.

Yeah Mark this is Michelle speaking,

Yes go ahead, Michelle, please.

I thought, I would highlight important point of previous question from Chris Agnew. When he was asking, and up to the point of fleet efficiency, I just want to say to everybody while the European economies are flowing and our rate of growth as well, we are already in July above last year in terms of fleet utilization, and our forecast for the rest of year is a further improvement. So it's not that we are behind the curve, we are already ahead of the curve. We have saw it coming. We have delayed fleet additions, we have canceled orders and that we accelerated our divisions, so that already in July in Q2 by the way our utilization was flat with last year. And, in July with the decline, it's already ahead with last year, and again we are planning a further improvement for the rest of the year, and I think that’s absolutely achievable, and we made it in July, I just wanted to point that out.

Thank you Michelle.

Any addition to that, we're embarking another project to indeed reengineer completely the way, we it's quite complex. We pull our locations and as Mark said generate new efficiencies, which give us huge opportunity for the years to come in terms of fleet management as a whole.

Okay great thank you.

We’ll go to Emily Shanks with Lehmann Brothers. Please go ahead.

Good morning.

Good morning.

I had a quick question around the equity enhancement side, I am just wondering around the actual mechanics of it. There are certain enhancement levels obviously in your ABS debt, how does that work in terms of valuation, is that means that’s done on a quarterly basis, and then let's just say residual values were decline for your fleet. I recognize that you didn't, where you guys this year, this quarter but at some point in the future is it on a quarterly basis that you need to inject more equity in order to maintain the enhancement levels or is it done rolling basis or how does that work mechanically?

We actually have two tests within the U.S. ABS facility and they are performed monthly, and one is market value test, so we look at the sales of the cars relative to the book values. And if there is a continued selling below the book value there is a credit enhancement adjustment.

Okay perfect.

And we do that monthly.

Okay. And then, just if you wouldn’t mind going over one more time what the reason was for the lower net fleet equity investment this quarter?

It was really, I think if you’ll recall in the first quarter we - there were some timing issues. We didn’t get enough of the cars particularly in Europe into the borrowing base under the fleet facility that was one issue. We had a timing issue related to a ramp up of the sale lease pack in the UK. So at the end of the first quarter, our advanced rate was much lower because of the inefficiencies of getting those cars including the borrowing base, and that basically is the time we set up. We correct itself in the second quarter, and that’s what we're seeing.

Okay. So it was simply the correction of that issue, it wasn’t something more?

Right correct.

Okay. All right perfect thank you.

And we’ll go to Declan Carlin of BlueBay. Please go ahead. Declan Carlin your line is open.

Hi, just a question on your Rent-a-Car business. A few questions only on the domestic on airport section, could you say whether you gained or lost market share in the first half? And secondly, just on the international business and I guess focusing on the European market, recently quite a heavy price decline. I'm just wondering whether there was anything specific to your business or was the industry as whole over slated and suffer from weakening demand.

I guess market share in the US, we look at airport and off airport, it's a $20 billion market. And my guess is, I don't have the, on airport you have more precision around market share. The data right now is only good through April and only it was about, I mean, 80% airport of the airport was reporting through April. Then off airport, what we do is we measure the growth rates of insurance replacement, so that's our growth rate. And what I would tell you is that we think market share in both those markets is probably essentially flat on a year-over-year basis. We increased market share in the off airport markets. In the off airport market, we increase share, in the on airport, we probably loss through this shares. We yield manage into the second quarter. What we did was we tried to tighten our fleet and get higher revenue per car by keeping the fleet tight. As I told you, we took the fleet down 5% in June, so we're running the fleets tight in order to do yield management. Its typical what you do and when you see some volume contraction. It's a prudent thing to do, and then you loosen the fleet as you begin to see volume improvement, but, so that kind of answers that question. The other piece of your question dealt with Europe, I guess right?

I'm just, a question on the, the price decline seems, the price decline which you report, the minus 5.1% I understand that's on a constant cost currency basis but it seems quite a severe decline, and especially as you mentioned the softening came over really over the last 30, 45 days. I was just wondering whether there is anything specific to your European business or it's just an industry wide over fleeting period?

I am going to let Michel answer this. The price decline of 5.5%, again it will offset by a lot of what I call linked growth as well. It's important you look at those two things together. Going back to the US, we did improve our price in the US, 2.2 points. So again that's why again tightening the fleet gives you better pricing. Going back to Europe for a second, Michel would you answer his question about the price decline of 5.5 and what other factors we should consider when we think about that.

Yes, absolutely. Mark is correct. When you look at our revenue for transaction, which factors into the length, actually since the beginning of the year and even now as we speak, our revenues transaction has been positive, which means down the line has more than offset declining RPD. RPD is not just pricing. It's an effect of length as well. So it's essentially a mixed thing, I would say. Also the fact that our, off-airport business in Europe is growing faster than the airport business understandably and traditionally the off-airport business is at a lower RPD, but higher length than the airport business. So it's, I would say 80% of it is a mixed issue. Certainly I would agree that the pricing is currently under some pressure even though I would hope that going forward and I don't think it's the effect of over fleeting yet. But I think, going forward I would hope the trend would improve as these fleet tightened. But so far, it's essentially a mixed effect.

Thanks.

Okay. Next question.

And we will go to John Sykes with Nomura. Please go ahead?

Yeah. Hi, Good morning.

Hi.

I guess, I am still a little bit confused in terms of how the lower residuals are impacting your business? It didn't sound like that was having a major impact on you, am I correct?

It's having zero impact. Our reschedules actually improved in the second quarter by 1%. So it is having zero impact and we don't forecast it to have any impact. So, I guess, why is that you might ask.

Well, that's the question, why?

Let me explain it. It has to do with the fact that are SUVs, again we buy those on a program basis for the most part, which means we have no residual risk when buy it from an OEM on that basis are very little reschedule risk. And then the subcompacts and the compacts, we are getting better pricing on, then we have got year-over-year, month-to-month, quarter-to-quarter. So, we did adjust depreciation rates also in Q1 which helped us levels that if you will in the second quarter. But again we feel really good about residuals. They are actually improving. So, and again the Manheim Index is not at all anything like our business.

Okay.

Manheim is all used cars.

All right.

We have new cars. I mean we buy cars new and we are selling cars let's say within a year roughly. So, our used car population is much different than their index, and I mean the profile is totally different and that we are able to manage the mix. We are able to rotate fleet differently. We have a better mix of vehicles in the Manheim Index represents because we buy only the popular selling cars. And again, we have been moving into over the last 12 to 18 months a lower mix SUVs and a higher mix of compact, subcompacts, that's helping us.

What's the big three composition of our fleet right now? The big three, GM, Ford, Chrysler. What percentage of your fleet is GM, Ford and Chrysler?

Yeah. Chrysler is like 3% of our fleet. I think Ford, if I remember right, it's around 23%, guys, is that about right?

Right now 26.

26% right now. GM is probably in the neighborhood of about 20%, 22%.

Okay.

So that gives you the mix. And then we have fleet from Toyota's the largest customer in the world. That's been increasing as a mix of overall vehicle mix. They both probably represent together, and so those two brands are 13%, let's say roughly. We have BMWs, Mercedes in our fleet. Honda is also now actually a higher percent of our mix than it was a year ago and Nissan as well. Both are higher percents of our overall mix. What does Nissan represent, do you have any ideas? 10% now.

I know you can't go forward too much, but if I'm looking a year out, the composition of our fleet is going to be more and more the Japanese big three fad, is that a fair assumption?

It has been, I mean it's been moving in that direction and I will assume it will, yes. Going forward, it will be a bigger piece of our mix, absolutely. If you compare our fleet profile versus any of our competitors we're vastly different, I mean we have a much more diverse fleet than anyone else. And that becomes a huge competitive advantage for us. That's why our fleet costs are down year-over-year in the second quarter and everyone else's were up double-digit. And what we said in the call was that we expect that to continue, in fact, maybe even improve. That gap will widen we believe based on both fleet efficiencies as well as the diversity of our fleet. Okay?

Yeah, that's good. I appreciate that. Thank you.

We'll go to Mike Lanier with AIG. Please go ahead.

Thanks. I was curious on the financing side, what you see as your next couple of milestones when you're going to get this facility put together in August, and then what's the next couple of things that you are, as you look down the road, that you have to take care of?

Yes. We're already looking at that. We know we have some maturities coming up in '09. And so we're already in discussions with a number of players looking at different structures to refinance some of that ABS that comes due next year. That's really the next thing in the horizon, trying to turn that out.

And that's about a year away?

It's about, yeah.

And then, obviously some of the competitors on the car rental side are doing not nearly as well as you are. Are you going to be able to take advantage of their problems or is it pretty much business as usual?

You're asking from an operational perspective or a financing perspective?

Just operational primarily.

So could you repeat the question just so we have it clear?

Well, it seems like some of your primary competitors are really struggling, at least, let's say they stock and bonds are struggling. And I was wondering if that creates an opportunity for you?

Absolutely. I mean we feel our fleet cost issue because we have such an advantage. That’s a competitive advantage that allows us to price competitively and even take share, if possible. So we think that fleet cost advantage will continue for the foreseeable future. You can't move your fleet mix overnight. So we'll take advantage of that competitive advantage. We've announced some new service policy guarantees, gas policies and we're on the offensive, I'll put it that way. Hopefully, as the economies globally come out of recession, this would just accelerate and separate us from the past.

And I guess the last question, I knew your financials were a little better than a few, but when I look at the EBITDA on table 3 of the segment analysis, the EBITDA at car rental and equipment rental, let's say, for example, on the six-month period is pretty flat. But when you back up, go and look at the income line, the equipment rental is down significantly. Did they have that much larger of a depreciation charge?

As you might recall, the corporate EBITDA is calculated in two different ways for Rent-A-Car and for equipment rental. So the equipment rental is the traditional where you add back depreciation and interest and in Rent-A-Car, we treat it as an operating expense.

So it's above the line versus below the line as it is in equipment rental?

At the end of the day, Hertz has a larger percentage of our overall EBITDA because of the way it's calculated.

Okay. And then, finally, what are you looking for on the on-airport side? When you give your guidance, what kind of employment number are you embedding in that number here, what are you looking for on-airport here in the second half?

Employment number is coming off variety of sources, but we assume the worst case scenario that's out there in the market today. So our assumption that we build into our guidance is it will be down over 5%, 6% that range on employments. Okay?

All right. Thank you.

Thanks a lot. We'll just take two more questions now. Okay?

Okay. We'll go to Emily Shanks with Lehman Brothers please go ahead.

Thank you for letting us present. Two very brief follow-up question. You referenced your model year 2009 discussions with the OEMs. Can you speak at all about what your expectations are for cost increases for model year 2009?

Overall flat to down.

Okay. And then, around the Hertz business you cited the industrial business mix. Is that increase in mix just due to the slowdown in the other segments or are you guys actually acquiring new accounts or expanding organic growth?

Hi, Emily, this is Gerry. No, we're actually growing the industrial sector. In the second quarter, the actual revenue growth was double-digit in North America through new account acquisitions and just growing our share.

Okay. And what type of end markets are those accounts then?

Most of them are in the petrochemical areas, steel, other manufacturing, but the largest growth component is in the petrochem area.

Great, thank you.

Okay. One more question.

And our final question comes from [Yoma Abibi] with JPMorgan. Please go ahead.

Thank you. There are two questions for me. The first question is the reduction in corporate debt in this quarter, what debt was paid down?

We have an ABL facility as part of our corporate debt. It's a revolving credit facility that funds our Hertz business primarily.

Yes, okay. That was their pay down?

Yeah.

And then my second question is in terms of your outlook for debt reduction, corporate debt reduction for the balance of the year and views there?

It should be in line with our cash flow guidance. And our cash flow guidance is $550 million to $650 million.

Great, thank you.

Okay. So once again everyone thanks for joining us today. We appreciate your interest and look forward to updating you after the third quarter.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference service. You may now disconnect.