MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table illustrates the calculation of Ford Credit’s managed leverage (in billions, except for ratios): Ford Credit believes that managed leverage, which is the result of adjustments to its financial statement leverage, is useful  to its investors because it reflects the way Ford Credit manages its business. Ford Credit retains interests in receivables sold  in off-balance sheet securitization transactions, and with respect to subordinated retained interests, is exposed to credit risk.  Accordingly, Ford Credit considers securitization as an alternative source of funding and evaluates credit losses, receivables  and leverage on a managed as well as a financial statement basis. Ford Credit also deducts cash and cash equivalents because  they generally correspond to excess debt beyond the amount required to support its operations. In addition, Ford Credit adds  its minority interests to its financial statement equity, because all of the debt of such consolidated entities is included in its total  debt. SFAS No. 133 requires Ford Credit to make fair value adjustments to its assets, debt and equity positions to reflect the  impact of interest rate instruments Ford Credit uses in connection with its term debt issuances and securitizations. SFAS No. 133  adjustments vary over the term of the underlying debt and securitized funding obligations based on changes in market interest  rates. Ford Credit generally repays its debt funding obligations as they mature. As a result, Ford Credit excludes the impact  of SFAS No. 133 on both the numerator and denominator in order to exclude the interim effects of changes in market interest  rates. Accordingly, the managed leverage measure provides Ford Credit’s investors with meaningful information regarding  management’s decision-making processes. a/ Includes securitized funding from discontinued operations.  b/ Includes retained interest in securitized receivables from discontinued operations. Ford Credit’s managed leverage strategy involves establishing a leverage level that it believes reflects the risk characteristics  of its underlying assets. In establishing a target leverage level, Ford Credit considers the characteristics of the receivables in its  managed portfolio and the prevailing market conditions.  At December 31, 2004, Ford Credit’s managed leverage was 13.7 to 1, compared with 13.0 to 1 a year ago. Ford Credit’s  dividend policy is based in part on its strategy to maintain managed leverage at the lower end of the 13 - 14 to 1 range. Based  on profitability and managed receivable levels, Ford Credit paid dividends of $4.3 billion in 2004. In the first quarter of 2005,  Ford Credit expects to decrease its managed leverage to the lower end of its target range, and remain at the low end of the  range throughout the year. Hertz requires funding for the acquisition of revenue earning equipment, which consists of vehicles and industrial and  construction equipment. Hertz purchases this equipment in accordance with the terms of agreements negotiated with automobile  and equipment manufacturers. The financing requirements of Hertz are seasonal and are mainly explained by the seasonality  of the travel industry. Hertz’ fleet size, and its related financing requirements, generally peak in the summer months, and decline  during the winter months.  Hertz maintains unsecured domestic and foreign commercial paper programs and a secured domestic commercial paper  program to cover short-term funding needs, and also draws from bank lines, as a normal business practice, to fund  international needs. Hertz also is active in the domestic secured and unsecured medium-term and long-term debt markets and in  the unsecured international medium-term debt market. Hertz 4 0 December 31, 2004 2003 2002 Total debt $ 144.3 $  149.7 $  140.3 Securitized off-balance sheet receivables outstanding a/ 37.7 49.4 71.4 Retained interest in securitized off-balance sheet receivables b/ (9.5) (13.0) (17.6) Adjustments for cash and cash equivalents (12.7) (15.7) (6.8) Adjustments for SFAS No. 133 (3.2) (4.7) (6.2) Total adjusted debt $ 156.6 $  165.7 $  181.1 Total stockholder’s equity (including minority interest) $ 11.5 $ 12.5 $ 13.6 Adjustments for SFAS No. 133 (0.1) 0.2 0.5 Total adjusted equity $ 11.4 $ 12.7 $ 14.1 Managed debt-to-equity ratio (to 1) 13.7 13.0 12.8