In a move referred to as “right sizing”, Hertz Global Holdings (HTZ) will be reducing its fleet to a level below demand and is preparing for further reductions if demand continues to decline.

Hertz reported a $1.21 billion loss in the company’s fourth-quarter earnings release. The loss of $3.76 per share was largely attributable to a $985 million impairment charge.

Revenues also declined’ however, dropping 16% from the comparable period for 2007 to $1.79 billion for the 2008 fourth quarter.

The results posted by Hertz were not surprising, given the dramatic reduction in business and personal travel during the last half of 2008.

In a move which has recently become commonplace for US public companies, Hertz provided no guidance for the current quarter or for the full 2009 year.

Company Chief Financial Officer Elyse Douglas did, however, indicate that the company’s losses for the coming reporting periods “… could be material but Hertz expects to have more than enough liquidity to cover that exposure.”

Hertz stock has been in a modest recovery since dropping from its 52 week high of $14.70 in May to the low of $1.55 in late November. The stock closed Tuesday at $3.40, up slightly following the company’s earnings report.

Company Chief Executive Officer Mark Frissora in remarks prepared for the earnings release pointed out that “Hertz generated net cash flow of $1.8 billion in the fourth quarter, reduced total debt by $1.9 billion and improved year end liquidity to …$4.8 billion.”

Hertz, the world’s largest general use car rental company has in the last 2 years reduced its workforce to a level which is now 32% below the level in 2006. Hertz is projecting an additional staff cut of 4000 in 2009.

Frissora also set a goal of reducing operating expenses by $350 million by the end of the year. Of concern to the company and analysts is that the sale of used vehicles resulting from the reduction in the fleet size in the current depressed state of the used car market will likely generate less cash than expected, increasing the need to reduce expenses in other areas.

While the expense and fleet size reductions are welcome news for investors, concerns regarding the health of the economy and the impact of the recession on the company have resulted in a downgrade in Hertz’s Fitch rating from stable to negative.

This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.