Washington, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant x

Filed by a Party other than the Registrant o

Check the appropriate box:

Ryder System, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

11690 N.W. 105th Street

Miami, Florida 33178

NOTICE OF 2007 ANNUAL MEETING OF SHAREHOLDERS

By order of the Board of Directors,

Robert D. Fatovic

Executive Vice President, General Counsel and Corporate Secretary

Miami, Florida

March 23, 2007

TABLE OF CONTENTS

11690 N.W. 105th STREET

MIAMI, FLORIDA 33178

PROXY STATEMENT

INFORMATION ABOUT OUR ANNUAL MEETING

ELECTION OF DIRECTORS

(Proposal 1)

Under our By-Laws, directors are elected for three-year terms, typically with one-third of the directors standing for election in any given year. The four directors whose terms expire at the 2007 Annual Meeting of Shareholders are David I. Fuente, Eugene A. Renna, Abbie J. Smith and Christine A. Varney. Upon the recommendation of the Corporate Governance and Nominating Committee, the Board has nominated Mr. Fuente, Mr. Renna, Ms. Smith and Ms. Varney for re-election at the 2007 Annual Meeting of Shareholders for a three-year term that expires at the 2010 Annual Meeting of Shareholders, and each have consented to serve if elected.

In February 2007, the Board of Directors elected Luis P. Nieto, Jr. to the Board of Directors. A third-party search firm identified Mr. Nieto as a Board candidate, and after an interview process and a recommendation by the Corporate Governance and Nominating Committee, the Board approved his election to the Board. The search firm was paid a fee for their service. In accordance with our By-Laws, Mr. Nieto is being nominated for election at the 2007 Annual Meeting of Shareholders. Because our By-Laws require that the number of directors whose terms expire in any given year remains as nearly equal in number as possible, Mr. Nieto is being nominated to serve in the class of directors whose terms expire at the 2009 Annual Meeting of Shareholders. Mr. Nieto has consented to serve if elected.

The Board of Directors determined that each director nominee qualifies as independent under applicable regulations, our By-Laws and the categorical independence standards adopted by our Board of Directors in December 2006. These categorical independence standards are set forth under “Director Independence” on page 11 of this proxy statement.

L. Patrick Hassey, Lynn M. Martin and Hansel E. Tookes, II are currently serving terms that expire at the 2008 Annual Meeting of Shareholders. John M. Berra, Daniel H. Mudd, E. Follin Smith and Gregory T. Swienton are currently serving terms that expire at the 2009 Annual Meeting of Shareholders. In February 2007, Daniel H. Mudd informed us that he was resigning from the Board of Directors effective at the 2007 Annual Meeting of Shareholders.

The principal occupation and certain other information about each director and director nominee appears on the following pages.

The Board of Directors recommends a vote FOR the election of each of the director nominees.

FOR A TERM OF OFFICE EXPIRING AT THE 2009 ANNUAL MEETING

NOMINEES FOR DIRECTOR

FOR A TERM OF OFFICE EXPIRING AT THE 2010 ANNUAL MEETING

DIRECTORS CONTINUING IN OFFICE

CORPORATE GOVERNANCE

We maintain a Corporate Governance page on our website at www.ryder.com, which includes our Corporate Governance Guidelines, Principles of Business Conduct (including the Finance Code of Ethics) and Board Committee charters. The Corporate Governance Guidelines set forth our governance principles relating to, among other things: director independence; director qualifications and responsibilities; Board structure; director compensation; management succession; and the periodic performance evaluation of the Board. The Principles of Business Conduct apply to our officers, employees and Board members and cover all areas of professional conduct including conflicts of interest, confidentiality and compliance with law. The Principles of Business Conduct include a Finance Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, controller and senior financial management. Any changes to these documents and any waivers granted by the Corporate Governance and Nominating Committee (Governance Committee) with respect to our Principles of Business Conduct will be posted on our website. Any waivers shall also be disclosed in a public filing made with the SEC.

Shareholders may submit requests for free printed copies of our Corporate Governance Guidelines, Principles of Business Conduct (including the Finance Code of Ethics) and Board Committee Charters in writing to: Ryder System, Inc., Attention: Corporate Secretary, 11690 N.W. 105th Street, Miami, Florida 33178.

BOARD OF DIRECTORS

Director Independence

It is our policy that a substantial majority of the members of our Board of Directors and all of the members of our Audit Committee, Compensation Committee, Governance Committee and Finance Committee qualify as independent as required by the New York Stock Exchange (NYSE) corporate governance listing standards and our By-Laws.

To assist it in making independence determinations, in December 2006, our Board of Directors adopted categorical independence standards. The Board determined that each of the following transactions or relationships will not, by itself, be deemed to create a material relationship for the purpose of determining a director’s independence:

Pursuant to our Corporate Governance Guidelines, the Board undertook its annual review of director independence in February 2007, which included a review of each director’s responses to questionnaires asking about any relationships with us. This review is designed to identify and evaluate any transactions or relationships between a director or any member of his or her immediate family and us, or members of our senior management, and all relevant facts and circumstances regarding any such transactions or relationships.

As part of this review, other than the relationship with Mr. Swienton, our CEO, the Governance Committee and the Board identified and considered only one transaction between us and one of our directors. In his role as President of Emerson Process Management, John M. Berra also serves as Executive Vice President of Emerson Electric Company. We have entered into a commercial relationship with Emerson Electric Company relating to Emerson’s lease of vehicles from us. The transaction falls below our categorical independence standard relating to commercial relationships, and therefore, the Board determined it to be immaterial. Accordingly, the Board determined that each of the following directors (which together constitute all of the members of the Board other than Mr. Swienton) is independent: John M. Berra, David I. Fuente, L. Patrick Hassey, Lynn M. Martin, Daniel H. Mudd, Luis P. Nieto, Jr., Eugene A. Renna, Abbie J. Smith, E. Follin Smith, Hansel E. Tookes, II and Christine A. Varney.

Communications with the Board

Shareholders and other interested parties can communicate with our independent directors as a group through the Corporate Governance page of our website at www.ryder.com, or by mailing their communication to Independent Directors, c/o Corporate Secretary, Ryder System, Inc., 11690 N.W. 105th Street, Miami, Florida 33178. Any communications received from interested parties in the manner described above will be collected and organized by our Corporate Secretary and will be periodically, but in any event prior to each regularly-scheduled Board meeting, reported and/or delivered to our independent directors. The Corporate Secretary will not forward spam, junk mail, mass mailings, service complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate materials to the independent directors. Correspondence relating to certain of these matters such as service issues may be distributed internally for review and possible response. The procedures for communicating with our independent directors as a group are available on the Corporate Governance page of our website at www.ryder.com.

Our Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding questionable accounting, internal control, financial improprieties or auditing matters. Any of our employees or members of the general public may confidentially communicate concerns about any of these matters to any supervisor or manager, the Vice President of Internal Audit, the Vice President, Global Compliance and Business Standards/ Deputy General Counsel, or on a confidential and/or anonymous basis by way of an external toll-free hotline number, an internal ethics phone line, ethics@ryder.com, or audit@ryder.com. All of the reporting mechanisms are publicized on our website at www.ryder.com, in our Principles of Business Conduct, through compliance training and wallet cards, brochures and location posters. Upon receipt of a complaint or concern, a determination will be made whether it pertains to accounting, internal control or auditing matters and if it does, it will be handled in accordance with the procedures established by the Audit Committee. A summary of all complaints, of whatever type, received through the reporting mechanisms are reported to the Audit Committee at each regularly-scheduled Audit Committee meeting. Matters requiring immediate attention are promptly forwarded to the Chair of the Audit Committee.

Board Meetings

The Board of Directors held six meetings in 2006. Each of the directors attended 75% or more of the aggregate number of meetings of the Board and Committees on which the director served in 2006. Attendance by all directors

We expect each of our directors to attend our annual meeting of shareholders. Because the Board of Directors holds one of its regular meetings in conjunction with our annual meeting of shareholders, unless one or more members of the Board are unable to attend, all of the members of the Board are present for the annual meeting. All of our directors attended the 2006 Annual Meeting of Shareholders.

Board Committees

The Board has four standing committees — Audit, Compensation, Finance and Corporate Governance and Nominating. All of the Committees are composed entirely of independent directors who meet in executive session without management present as part of each regularly-scheduled Committee meeting. We have adopted written charters for each of the Committees that comply with the NYSE’s corporate governance listing standards and applicable provisions of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) and SEC rules. The Committee charters set forth each Committee’s responsibilities, and provide for a periodic review of the charter and an annual evaluation of the Committee’s performance. The charters grant each Committee the authority to obtain the advice and assistance of, and receive appropriate funding from us for, outside legal, accounting or other advisors as the Committee deems necessary to fulfill its obligations.

AUDIT COMMITTEE

Responsibilities

The Audit Committee is responsible for appointing, overseeing and determining the compensation and independence of our independent auditor. The Committee approves the scope of the annual audit and the related audit fees as well as the scope of internal audit procedures. The Committee reviews audit results, financial disclosure and earnings guidance, and is responsible for overseeing investigations into accounting and financial complaints. The Committee reviews major financial risk exposures and management’s policies relating to those risks.

The specific powers and responsibilities of the Audit Committee are set forth in more detail in the Audit Committee’s charter, which is available on the Corporate Governance page of our website at www.ryder.com. The charter is reviewed annually by the Audit Committee and our Governance Committee. Any changes to the charter are approved by the full Board.

Independence and Financial Expertise

In addition to the independence standards applicable to all Board members, rules issued by the SEC pursuant to Sarbanes-Oxley require that all members of our Audit Committee meet additional independence standards. Under NYSE rules, each member of the Audit Committee must be financially literate and at least one member must have accounting or related financial management expertise. The SEC requires that at least one Audit Committee member be an “audit committee financial expert.”

The Board reviewed the background, experience and independence of Audit Committee members based in large part on the directors’ responses to questions relating to their background and experience. Based on this review, the Board determined that each member of the Audit Committee meets the enhanced independence standards for audit committee members required by the SEC; is financially literate, knowledgeable and qualified to review financial statements; qualifies as an “audit committee financial expert” under SEC rules; and has accounting and related financial management expertise.

COMPENSATION COMMITTEE

Responsibilities

The Compensation Committee of our Board of Directors administers all of our executive and director compensation policies and programs and regularly reports to the Board of Directors on these matters. When we refer to our executive compensation program, we are referring to the compensation program for our CEO, Chief Financial Officer (CFO), three division presidents and four executive vice presidents (executive officers). The Compensation Committee approves and recommends the appointment of new officers and reviews and discusses the Compensation Discussion and Analysis included in this proxy statement to determine whether to recommend it for inclusion in our proxy statement.

The specific powers and responsibilities of the Compensation Committee are set forth in more detail in the Compensation Committee’s Charter, which is available on the Corporate Governance page of our website at www.ryder.com. The charter is reviewed annually by the Compensation Committee and our Governance Committee. Any changes to the charter are approved by the full Board.

Compensation Processes and Procedures

      Meetings. The Compensation Committee meets at least five times each year in February, May, July, October and December. Each year in December, the Committee reviews and approves an agenda schedule for the following year. The agenda schedule outlines the various topics the Committee will consider during the year to ensure that the Committee adequately fulfills its responsibilities under its charter. The Committee considers other topics during the year as needed to fulfill its responsibilities.

Our Chief Human Resources Officer (CHRO) works closely with the Chair of the Committee prior to each Committee meeting to ensure that the information presented to the Committee in connection with the items to be discussed and/or approved by the Committee is clear and comprehensive. The information is then provided to the Committee for its review and consideration typically one week prior to the meeting.

The CHRO, CEO, Vice President of Compensation and Benefits and a representative from our legal department all attend the Committee meetings to assist the Committee in its discussion and analysis of the various agenda items. These individuals are generally excused from the Committee meetings as appropriate, including for discussions regarding their own compensation. The Committee meets in executive session, consisting exclusively of outside directors, at the end of every regularly-scheduled Committee meeting.

      Authority, Role of Management and Delegation. Generally, the Committee is responsible for reviewing and approving all of the components of our executive compensation program as well as the compensation program for our Board of Directors. New executive compensation plans and programs must be approved by the full Board based on recommendations made by the Committee. All compensation decisions for our CEO are made by all of the independent directors on our Board supported by recommendations made by the Committee. All compensation decisions for our Board of Directors are made by the Board based in part on recommendations made by the Committee and the Governance Committee.

In determining the compensation package for Mr. Swienton, the Committee and the independent directors consider the results of Mr. Swienton’s annual performance evaluation, comparative compensation data and information on our competitive position and performance. In January 2006, our independent directors completed a comprehensive CEO evaluation questionnaire. The questionnaire focused on (a) our historical and forecasted performance, (b) Mr. Swienton’s effectiveness in leading the organization, the Board and external constituencies, and (c) his effectiveness at team building and succession planning and development. With respect to compensation decisions for other executive officers, our CEO gives the Committee a performance assessment and compensation recommendation for each executive officer. The performance assessment includes strengths, weaknesses and succession

The Committee’s charter allows the Committee, to the extent permitted by the relevant equity compensation plan, to delegate its authority to approve equity awards to management (other than to the CEO or his direct reports), provided that the Committee receives at least annually a report from management detailing any equity award grants made pursuant to such delegated authority. The Committee previously delegated to our CEO, CFO and CHRO, the right to collectively approve off-cycle equity awards to our employees (other than our executive officers) provided that amounts approved did not exceed the applicable guidelines for equity awards previously set by the Committee. During 2006, management used its delegated authority to grant 8,000 options to new hires or in connection with promotion or retention packages for existing employees (none of whom were company officers). In February 2007, the Committee approved a Policy on Equity Granting Practices, which provides that all grants of equity awards must be approved by the Committee, or in certain limited instances, the Chair of the Committee.

      Use of Compensation Consultants. The Committee has authority to retain outside consultants to assist it in fulfilling its responsibilities. Except as described below, all consultants and legal counsel used in 2006 were retained by management.

In mid-2005, at the direction of the Compensation Committee, management retained Mercer Human Resources Consulting (Mercer) to review our long-term incentive programs and make recommendations with respect to amending the programs based on competitive practices and emerging trends. Mercer provided a report to management summarizing its findings and recommendations, which management considered when making its recommendations to the Committee regarding changes to our long-term incentive program.

In 2006, management (at the request of the Committee) retained Deloitte & Touche LLP (Deloitte) and Mercer to review and evaluate our severance and change of control severance programs relative to market standards. Mercer compared the type and amount of severance and change of control severance benefits provided by us as well as the general terms and conditions of our programs with those of comparable companies within Mercer’s proprietary database. Deloitte provided comprehensive data and calculations regarding potential change of control severance payments under our existing program and various other scenarios. Management also retained outside legal counsel to review the terms and conditions of our existing severance and change of control severance programs in light of market trends and emerging governance practices. Each of the consulting firms and outside counsel provided a report to management which summarized their findings. This information was communicated to the Committee and the Board in connection with their review of our existing severance and change of control severance programs and their consideration of proposed changes to the programs.

The Committee retained its own legal counsel to prepare new individual severance and change of control severance agreements for each of our executive officers, including Mr. Swienton, which will replace the executive’s existing severance and change of control severance agreements.

      Compensation Committee Interlocks and Insider Participation. In 2006, none of our executive officers or directors was a member of the board of directors of any other company where the relationship would be considered a committee interlock under SEC rules.

Responsibilities

The Corporate Governance and Nominating Committee is responsible for recommending criteria for Board membership, identifying qualified individuals to serve as directors, reviewing the qualifications of director candidates, including those recommended by our shareholders pursuant to our By-Laws, and recommending to the Board the nominees to be proposed by the Board for election as directors at our annual meeting of shareholders. The Committee recommends the size, structure, composition and functions of Board Committees and reviews and recommends changes to the Committee charters. The Committee oversees the Board evaluation process. The Committee reviews and recommends changes to our Corporate Governance Guidelines and Principles of Business Conduct. The Committee is also responsible for identifying and analyzing trends in public policy, public affairs and corporate responsibility.

The specific powers and responsibilities of the Governance Committee are set forth in more detail in the Governance Committee’s charter, which is available on the Corporate Governance page of our website at www.ryder.com. The charter is reviewed annually by the Governance Committee. Any changes to the charter are approved by the full Board.

Process for Nominating Directors

In identifying individuals to nominate for election to our Board, the Governance Committee seeks candidates that:

The Committee will seek to identify individuals who would qualify as independent under applicable NYSE listing standards and our By-Laws and who are independent of any particular constituency. The Committee may, based on the composition of the Board, seek individuals that have specialized skills or expertise, experience as a leader of another public company or major complex organization, or relevant industry experience. In addition, the Committee will attempt to select candidates who will assist in making the Board a diverse body in terms of age, gender, ethnic background and professional experience.

Generally, the Committee identifies individuals for service on our Board through experienced director search firms that are paid to use their extensive resources and networks to find qualified individuals who meet the qualifications established by the Board. These search firms create a comprehensive record of a candidate’s background, business and professional experience and other information that would be relevant to the Committee in determining a candidate’s capabilities and suitability. The Committee will also consider qualified candidates who are proposed by other members of the Board, our senior management and, to the extent submitted in accordance with the procedures described below, our shareholders. The Committee will not consider a director candidate unless the candidate has expressed his or her willingness to serve on the Board if elected and the Committee has received sufficient information relating to the candidate to determine whether he or she meets the qualifications established by the Board.

Upon receipt of this information, the Committee will evaluate and discuss the candidate’s qualifications, skills and characteristics in light of the current composition of the Board. The Committee may request additional information from the recommending party or the candidate in order to complete its initial evaluation. If the Committee determines that the individual would be a suitable candidate to serve as one of our directors, the candidate will be asked to meet with members of the Committee, members of the Board and/or members of senior management, including in each case, our CEO, to discuss the candidate’s qualifications and ability to serve on the Board. Based on the Committee’s discussions and the results of these meetings, the Committee will recommend a nominee or nominees for election to the Board either by our shareholders at our annual meeting of shareholders or by the Board to fill vacancies on the Board between annual meetings. The Board will, after consideration of the Committee’s recommendations, nominate a slate of directors for election by our shareholders, or with regards to filling vacancies, elect a nominee to the Board.

FINANCE COMMITTEE

Responsibilities

The Finance Committee is responsible for reviewing our overall financial goals, position, arrangements and requirements. The Committee reviews, approves and recommends capital expenditures, issuances of debt and equity securities, dividend policy and pension contributions. The Committee is also responsible for reviewing our relationships with rating agencies, banks and analysts, and reviewing and assessing our risk management activities and tax planning strategies.

The specific powers and responsibilities of the Finance Committee are set forth in more detail in the Finance Committee’s charter which is available on the Corporate Governance page of our website at www.ryder.com. The charter is reviewed annually by the Finance Committee and our Governance Committee. Any changes to the charter are approved by the full Board.

RELATED PERSON TRANSACTIONS

We recognize that related person transactions can present potential or actual conflicts of interest and create the appearance that our decisions are based on considerations other than in our best interests and that of our shareholders. Accordingly, as a general matter, it is our preference to avoid related person transactions. Nevertheless, we recognize that there are situations where related person transactions may be in, or may not be inconsistent with, our best interests, including but not limited to situations where we may obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternative sources or when we provide products or services to related persons on an arm’s length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally.

Our Board of Directors is responsible for reviewing and pre-approving all transactions with any related person. Related persons include any of our directors or executive officers and their respective immediate family members. This policy is set forth in our Principles of Business Conduct, which is available on the Corporate Governance page of our website at www.ryder.com.

RATIFICATION OF INDEPENDENT AUDITOR

(Proposal 2)

Our Audit Committee appointed PricewaterhouseCoopers LLP as our independent auditor for the 2007 fiscal year. Although shareholder ratification of the appointment of PricewaterhouseCoopers LLP is not required, the Board of Directors believes that submitting the appointment to the shareholders for ratification is a matter of good corporate governance. The Audit Committee will consider the outcome of this vote in future deliberations regarding the appointment of our independent auditor. Representatives of PricewaterhouseCoopers LLP will be present at the 2007 Annual Meeting of Shareholders to respond to questions and to make a statement if they desire to do so.

Change in Auditor

During 2005, the Audit Committee solicited proposals from the four major accounting firms and conducted an extensive evaluation process in connection with the selection of our independent auditor for the fiscal year ending December 31, 2006. Following this process, on September 22, 2005, the Audit Committee dismissed KPMG LLP as our independent auditor for the fiscal year ending December 31, 2006 and appointed PricewaterhouseCoopers LLP to serve as our independent auditor for 2006. KPMG LLP served as our independent auditor for the fiscal year ended December 31, 2005.

KPMG LLP’s audit report on our consolidated financial statements for the fiscal year ended December 31, 2005 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles, except that KPMG LLP’s audit report dated February 15, 2006 included an explanatory paragraph related to the change in method of accounting for conditional asset retirement obligations in 2005 and methods of accounting for variable interest entities and asset retirement obligations in 2003. The audit report of KPMG LLP on management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as of December 31, 2005 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. During fiscal 2005 and through February 17, 2006, (i) there were no disagreements between us and KPMG LLP on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG LLP, would have caused KPMG LLP to make reference to the subject matter of the disagreement in its report on our consolidated financial statements, and (ii) there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K. During fiscal 2005 and through February 17, 2006, neither we nor anyone acting on our behalf, consulted PricewaterhouseCoopers LLP regarding any of the matters or events set forth in Item 304(a)(2) of Regulation S-K.

Fees and Services of Independent Auditor

Fees billed for services by PricewaterhouseCoopers LLP for the 2006 fiscal year and KPMG LLP for the 2005 fiscal year were as follows ($ in millions):

Audit Fees primarily represent amounts for services related to the audit of our consolidated financial statements and internal control over financial reporting, a review of financial statements included in our Forms 10-Q (or other periodic reports or documents filed with the SEC), statutory or financial audits for our subsidiaries or affiliates, and consultations relating to financial accounting or reporting standards.

Tax Fees represent amounts for U.S. and international tax compliance services (including review of our federal, state, local and international tax returns), tax advice and tax planning. All of the tax fees paid in 2006 and 2005 relate to tax compliance services.

Approval Policy

All services rendered by our independent auditor are either specifically approved (including the annual financial statement audit) or are pre-approved by the Audit Committee in each instance in accordance with our Approval Policy for Independent Auditor Services (Approval Policy), and are monitored both as to spending level and work content by the Audit Committee to maintain the appropriate objectivity and independence of the independent auditor’s core service, which is the audit of our consolidated financial statements. Under the Approval Policy, the terms and fees of annual audit services, and any changes thereto, must be approved by the Audit Committee. The Approval Policy also sets forth detailed pre-approved categories of other audit, audit-related, tax and other non-audit services that may be performed by our independent auditor during the fiscal year, subject to the dollar limitations set by the Audit Committee. The Audit Committee may, in accordance with the Approval Policy, delegate to any member of the Audit Committee the authority to approve audit and non-audit services to be performed by the independent auditor. The Audit Committee has delegated to the Chair of the Audit Committee the authority to approve audit and non-audit services if it is not practical to bring the matter before the full Audit Committee and the estimated fee does not exceed $100,000. Any Audit Committee member who exercises his or her delegated authority, including the Chair, must report any approval decisions to the Audit Committee at its next scheduled meeting. All of the services provided in 2006 were approved by the Audit Committee in accordance with the Approval Policy.

The Board of Directors recommends a vote FOR ratification of

the appointment of PricewaterhouseCoopers LLP as our independent auditor.

AUDIT COMMITTEE REPORT

The following report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that Ryder System, Inc. specifically incorporates it by reference into a filing.

The Audit Committee of the Board of Directors of Ryder System, Inc. (Company) is comprised of six outside directors, all of whom are independent under the rules of the New York Stock Exchange and applicable rules of the Securities and Exchange Commission (SEC). The Committee operates under a written charter that specifies the Committee’s responsibilities. The full text of the Committee’s charter is available on the Corporate Governance page of the Company’s website (www.ryder.com). The Audit Committee members are not auditors and their functions are not intended to duplicate or to certify the activities of management and the independent auditor.

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Company’s management has the responsibility for preparing the consolidated financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. The Company’s independent auditor is responsible for performing an audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), and expressing opinions on (i) whether the financial statements present fairly, in all material respects, the financial condition and results of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States, (ii) whether the Company maintained effective internal control over financial reporting, and (iii) management’s assessment of the effectiveness of the Company’s internal control over financial reporting. In fulfilling its oversight responsibilities, the Committee reviewed and discussed the audited consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and management’s assessment of the effectiveness of internal control over financial reporting with Company management, including a discussion of the quality of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Committee reviewed with the independent auditor its judgments as to the quality of the Company’s accounting principles and such other matters as are required to be discussed with the Committee by Statement on Auditing Standards No. 61, “Communications with Audit Committees,” as amended, PCAOB Standards, rules of the SEC, and other applicable regulations. In addition, the Committee has discussed with the independent auditor the firm’s independence from Company management and the Company, including the matters required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” and considered the compatibility of non-audit services with the independent auditor’s independence.

The Committee discussed with the Company’s internal auditor and the independent auditor the overall scope and plans for their respective audits. The Committee met with the internal auditor and the independent auditor, with and without management present, to discuss the results of their examinations; their evaluations of the Company’s internal control, including internal control over financial reporting; and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting be included in the Annual Report on Form 10-K for the year ended December 31, 2006 filed by the Company with the SEC. The Committee has also approved, subject to shareholder ratification, the selection of PricewaterhouseCoopers LLP as the Company’s independent auditor.

Submitted by the Audit Committee of the Board of Directors.

Abbie J. Smith (Chair)

Daniel H. Mudd

Luis P. Nieto, Jr.

Eugene A. Renna

E. Follin Smith

Hansel E. Tookes, II

SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS

The following table shows the number of shares of common stock beneficially owned as of January 8, 2007, by each director and each executive officer named in the Summary Compensation Table herein, individually, and all directors and executive officers as a group. No family relationships exist among our directors and executive officers.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports with the SEC relating to their common stock ownership and changes in such ownership. To our knowledge, based solely on our records and certain written representations received from our executive officers and directors, during the year ended December 31, 2006, all Section 16(a) filing requirements applicable to directors, executive officers, and greater than 10% shareholders were complied with on a timely basis.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table shows the number of shares of common stock held by all persons who are known by us to beneficially own or exercise voting or dispositive control over more than five percent of our outstanding common stock.

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Objectives

Our goal is to design, implement and maintain an executive compensation program that accomplishes the following four key objectives. When we refer to our executive compensation program, we are referring to the compensation program for our CEO, CFO, three division presidents and four executive vice presidents (we refer to these nine officers as our “executive officers”). Our named executive officers are those executive officers named in the Summary Compensation Table on page 33.

The Compensation Committee of our Board of Directors (Committee) regularly evaluates the effectiveness of our executive compensation programs, considering the cost to us and the value to the executive of each element of compensation, in light of the above stated compensation objectives. Our executive compensation program, as well as individual executive compensation packages, are designed to be market competitive and to reward executives for their (i) contributions to our overall short- and long-term performance, (ii) individual performance and (iii) commitment and loyalty to our company.

Significant Executive Compensation Actions Taken in 2006

During 2006, the Committee approved the following significant compensation actions:

      • Long-Term Incentive Program. After an in-depth review of our long-term incentive program, the Committee approved design changes to the program in 2006. Specifically, in 2006, our executive officers received stock options and three-year performance-based restricted stock rights (with tandem cash awards) rather than the long-term cash awards, stock options and time-vested restricted stock rights that had historically been granted to executive officers. Restricted stock rights represent the right to receive our common stock in the future to the extent the executive continues to be employed during the relevant vesting period. A detailed description of the changes is included in this Compensation Discussion and Analysis under “Incentive Compensation.”

      • Severance and Change of Control Programs. The Committee conducted a comprehensive review of our existing severance and change of control severance programs. As a result, in January 2007, the Board approved changes that generally reduce the severance and change of control severance benefits payable to our officers (including our CEO and other executive officers). The changes became effective on January 1, 2007 for all new

      • CFO Compensation Package. The Committee approved the compensation package for Mark Jamieson, our new Executive Vice President and Chief Financial Officer. Mr. Jamieson’s initial annual base salary was set at $475,000, which the Committee determined was appropriate for a company of our size and structure. This amount was consistent with market data and the salary paid to our previous Chief Financial Officer. Mr. Jamieson became eligible to participate in our annual incentive compensation plan with a potential plan payout for 2006 equal to the greater of the actual amount payable to him under the terms of the plan or $275,000. Mr. Jamieson received a $150,000 sign-on bonus to compensate him for forfeiting his bonus with his previous employer. He is also entitled to receive any executive perquisites and benefits generally available to our executive officers. Mr. Jamieson received an initial equity award consisting of 33,000 stock options and 9,150 time-vested restricted stock rights granted as of his first day of employment. The aggregate fair value of the equity granted to Mr. Jamieson was within the established guidelines for similarly-situated executive officers. The stock options and restricted stock rights vest on the third anniversary of the grant date. In addition, subject to certain conditions, the Committee agreed to reimburse Mr. Jamieson for certain documented relocation costs and expenses. The offer letter describing Mr. Jamieson’s compensation package was filed with the SEC on a Current Report on Form 8-K on February 22, 2006.

      • Pension Plan Changes. During 2006, the Committee undertook a comprehensive review of our retirement program. As a result, in January 2007, our Board of Directors approved amendments to our retirement program. As a result of the changes, our U.S. pension plan and pension benefit restoration plan (excess pension plan) will be frozen effective December 31, 2007 for current participants who do not meet certain grandfathering criteria. Participants who are not entitled to continue earning benefits in the U.S. pension plan and excess pension plan will cease accruing further benefits under those plans after December 31, 2007 and will participate in an enhanced 401(k) plan and, if eligible, an enhanced deferred compensation plan. Those participants that meet the grandfathering criteria will be given the option to either continue to participate in the U.S. pension plan and excess pension plan or transition into the enhanced 401(k) plan and enhanced deferred compensation plan. All retirement benefits earned as of December 31, 2007 will be fully preserved and will be paid in accordance with the terms of the plans and legal requirements. Employees hired after January 1, 2007 will not be eligible to participate in the U.S. pension plan or the excess pension plan. The Committee believes the shift in emphasis from a traditional defined benefit plan to a defined contribution plan reflects the changing needs of today’s workforce and will address certain of the challenges associated with traditional defined benefit plans, including volatility in defined benefit expense and funding requirements often caused by outside market factors; competitive factors; and recent changes in government pension regulations. A detailed description of our U.S. pension plan and excess pension plan and the recent changes approved by the Board is included in this proxy statement on page 36 under “Pension Benefits.”

Elements of our Executive Compensation Program

In 2006, our executive compensation program consisted of the following six elements:

      (1) base salary;

      (2) incentive compensation which is comprised of (a) annual cash incentive awards, (b) cash earned under our discontinued cash-based long-term incentive plan, (c) time-vested stock options and (d) performance-based restricted stock rights (with tandem cash awards);

      (3) time-vested restricted stock rights;

      (4) perquisites;

      (5) benefits including welfare and retirement benefits; and

      (6) severance and change of control benefits.

Our executive officers do not have employment agreements. They do have individual severance and change of control severance agreements which are described in more detail under “Potential Payments Upon Termination or Change of Control.”

We do not have formal policies relating to the allocation of total compensation among the various elements. However, both management and the Committee believe that the more senior the position an executive holds, the

In February of each year (in connection with the conclusion of our business planning process), the Committee conducts its annual review of the compensation packages for each of our executive officers. Based on this review, the Committee approves (a) base salary changes, (b) any cash payout amounts earned under the previous year’s annual cash incentive awards, (c) any amounts earned under our discontinued cash-based long-term incentive plan, (d) equity grants and (e) performance targets and potential payout amounts under any incentive compensation programs for the current year. The Committee may take other individual compensation actions during the year as needed.

In evaluating each element of our executive compensation program, the Committee considers the executive compensation program and practices as well as financial performance of comparative groups of companies. Management and the Committee view this data as one factor in making compensation decisions, but do not rely solely on this information.

We operate in three distinct and complex business segments. Although there are other public companies that operate in one or more of our business segments, we do not believe there are any public companies that provide similar fleet management services (which represents nearly 60% of our consolidated revenues) or that provide the same mix of services, and that publicly disclose financial performance and compensation data relating to that business that can be used for benchmarking purposes. As a result, we generally have not based our compensation decisions on the compensation practices of a particular peer group. When making compensation decisions, the Committee does compare our compensation information with compensation data compiled by management and outside consultants (at the request of the Committee) for companies that are included in the S&P 500 and that are of similar size (i.e., revenue of between $5.5 billion and $6.5 billion), scope (i.e., similar industries/global) and performance. Although the Committee and management consider this data, their compensation recommendations and decisions are not based on maintaining a certain target percentile within the comparative group(s).

Base Salary

The Committee sets an executive’s base salary with the objective of hiring and retaining highly qualified executives for the relevant position and rewarding individual performance. When setting and adjusting individual executive salary levels, the Committee considers the relevant established salary range, the executive officer’s responsibilities, experience, potential, individual performance, and contribution, and comparative data provided by outside compensation consultants. The Committee also considers other factors such as our overall corporate budget for annual merit increases, unique skills, demand in the labor market and succession planning.

In February 2006, Mr. Swienton received a 3% salary increase and the other named executive officers received a 1% to 2% salary increase. These increases were effective in April 2006 and were consistent with the budgeted annual merit increase for all eligible employees. The base salaries for certain of our executive officers had been increased in October 2005 in connection with promotions and based on compensation data provided by Mercer. Mr. Swienton’s salary was not increased at that time.

Incentive Compensation

Our incentive compensation program is comprised of (a) annual cash incentive awards, (b) amounts earned under our discontinued cash-based long-term incentive plan, (c) time-vested stock option grants and (d) grants of performance-based restricted stock rights with tandem cash awards. We use incentive compensation to emphasize and reward the attainment of certain short-and long- term financial goals and, particularly with respect to incentive-based equity awards, align the interests of our executive officers and our shareholders.

Annual Cash Awards

Our annual cash incentive awards provide for payments to executive officers (as well as a significant number of our salaried employees) based on the achievement of certain levels of financial performance over one fiscal year.

      Performance Metrics. The 2006 annual cash incentive awards for executive officers were driven by a combination of the following three performance metrics:

We believe that these three performance metrics are useful in measuring our success in meeting our strategic objective of growing our business in a way that creates solid earnings leverage and earns an appropriate return on invested capital.

      Performance Targets. As mentioned above, none of our direct competitors in fleet management, our largest business segment, publicly report their financial results or estimates relating to their fleet management business. In order to avoid compromising our competitive position, we do not disclose the weight given to each performance metric or the specific performance targets. The annual cash incentive awards are designed so that target performance equals the performance reflected in our internal business plan. In addition, the 2006 awards included a performance gate which required that the EPS threshold amount had to be met in order for the executive to receive a payout under the award. We believe the growth levels reflected in our 2006 internal business plan, and therefore reflected in our 2006 performance targets, were aggressive and difficult to achieve. The maximum performance targets require significantly better performance than our aggressive internal business plan and, therefore, are more difficult to achieve.

The Committee adjusts the EPS results on which payouts are determined in order to ensure that the payouts properly reflect the earnings growth in our core business and are not impacted by non-recurring or non-operational items. Specifically, the Committee adjusted 2006 EPS to eliminate the impact of pension-related benefits and charges and benefits related to tax law changes and a stock demutualization, all of which are discussed in our financial statements and periodic SEC filings. As a result, the EPS amount on which performance was measured was $0.11 lower than reported EPS, which resulted in a reduced payout under the awards.

      Target Payout Amount. The awards provide for a threshold payout amount (equal to 25% of the target payout amount) if we meet the threshold performance targets, a target payout amount if we meet target performance and a maximum payout amount (equal to two times the target payout amount) if we meet the maximum performance targets.

For 2006, the target payout amount for all executive officers (other than our CEO) was 75% of base salary. The target payout for our CEO was 100% of base salary. These target payout amounts are designed to motivate our executive officers to act in a way that will result in us achieving significantly better year over year financial performance.

For 2006, the award payouts were 98.95% of target payout. The actual payout amounts for the named executive officers for 2006 are set forth under “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table on page 33.

Long-Term Cash Awards

Cash Awards Granted from 2002 — 2004

In 2002, we adopted a long-term incentive plan (“Cash LTIP”) for executive officers which included a performance-based cash component. The cash component of the plan was designed to reward executive officers with additional cash compensation contingent upon achieving certain performance targets during a three-year performance cycle.

Long-term cash awards under the Cash LTIP were awarded in 2002, 2003 and 2004. Each award includes a three-year performance cycle. Each three-year performance cycle is comprised of three one-year performance periods. Amounts earned in each annual performance period are deposited into an investment account for the executive officer. The executive officer directs the investment of the earned amounts from a list of investment options (including Ryder stock) during the forfeiture period. These annual earned amounts (and related investment earnings) vest and are paid to the executive in two installments on the six- and eighteen- month anniversaries of the end of each three-year performance cycle. No long-term cash awards have been granted under the Cash LTIP since February 2004 and therefore 2006 is the last year in which amounts can be earned under that plan. Payments of previously earned amounts will be made upon vesting through July 2008.

      Performance Metric. The performance metric for all performance periods under the Cash LTIP was economic value-added (EVA), which is a measure that was used and reported on by each of our business segments from 2002 to 2004. EVA is net earnings less our required return on our equity capital. EVA is a useful performance metric because it measures efficient use of capital, which is critical to the success of our business model.

      Performance Targets. We do not disclose the EVA performance targets for these awards as we believe disclosing this information will put us at a competitive disadvantage. As with the performance targets for our annual cash awards, the performance targets for the awards under this plan were also derived from our internal business plan. The annual performance targets for the three-year performance cycle were set at the beginning of the three-year cycle. Although these targets were set to reward significant improvement in EVA over the three-year period, a significant increase in EVA in the first or second year of the plan cycle or unexpected changes in economic or business conditions could make it more probable that we will meet our targets for the third year of the three-year performance cycle.

      Target Payout Amounts. The target payout amount for the 2004-2006 performance cycle was 75% of base salary (as of the end of 2004) for all named executive officers (150% for our CEO). For 2006, the named executive officers (other than Mr. Jamieson, who was not employed with us in 2004) earned a 200% payout for the 2006 performance period of the 2004-2006 performance cycle. Amounts earned by the named executive officers are included in the Summary Compensation Table on page 33 in the “Non-Equity Incentive Plan Compensation” column.

Cash Awards Granted in 2005

Although having a three-year performance cycle and a forfeiture feature in the cash awards issued under the Cash LTIP encourages executive officers to remain employed with us, the annual performance periods rewarded short-term performance rather than long-term performance. In 2005, the Committee determined that a greater portion of an executive officer’s compensation should be contingent on long-term performance. As a result, in May 2005, the Committee granted long-term cash awards to our executive officers that provide cash compensation for achieving certain levels of operating revenue growth, earning per share growth and return on capital during the period from April 1, 2005 through December 31, 2007. Any amounts earned under the awards will be paid in June 2008. The target payout amount for all executive officers is 75% of base salary (other than our CEO, whose target payout amount is 150% of base salary). The awards provide for a threshold payout amount (equal to 25% of the target payout amount) if we meet the threshold performance targets and a maximum payout amount (equal to two times the target payout amount) if we meet the maximum performance targets.

Stock Options and Performance-Based Restricted Stock Rights

2006 Grants

In February 2006, the Committee approved grants of stock options and performance-based restricted stock rights with tandem cash awards to our executive officers. The Committee believes granting stock options and performance-based restricted stock rights to our executive officers encourages the creation of long-term value for our shareholders and promotes employee retention and stock ownership, all of which serve our overall compensation objectives.

The stock options were issued at the average of the high and low sales price of our common stock as reported by the NYSE on the day the Committee (or the Board in the case of the CEO grant) approved the grant. The stock options vest in three equal annual installments and expire seven years from the grant date. The stock options only have value to the extent our stock price increases over the term of the option.

The performance-based restricted stock rights will vest on December 31, 2008 if Ryder’s total shareholder return (generally the change in Ryder’s stock price over the performance period plus dividends paid) meets or exceeds the median total shareholder return of the companies in the S&P 500 over the three-year period from January 1, 2006 to December 31, 2008. The restricted stock rights entitle the executive officer to receive dividend equivalents and include a tandem cash award. Specifically, if the restricted stock rights vest, the executive officer will also receive an amount of cash that is expected to approximate the amount of the executive officer’s tax liability relating to the vesting of the restricted stock rights. This design was adopted to encourage share ownership and minimize shareholder dilution. The Committee believes total shareholder return is an appropriate performance metric because it assesses whether management is focusing its efforts on the fundamental drivers of shareholder value. Given the difficulty in identifying a suitable peer group for our company, the Committee selected the S&P 500 as the comparable group because it is a broad-based, widely-used index.

The combination of stock options and performance-based restricted stock rights (with tandem cash awards) granted in February 2006 to executive officers (other than Mr. Swienton) was expected to deliver an aggregate target value equal to 175% of the midpoint of the relevant salary range for the executive’s management level, with 45% of the value being delivered in stock options, 35% being delivered in performance-based restricted stock rights and 20% being delivered through the tandem cash award. These values were converted into an equivalent number of shares based on the fair value of the stock options (using a Black-Scholes pricing model) and on the intrinsic value of the performance-based restricted stock rights. With respect to grants to our executive officers, other than Mr. Swienton, these shares were placed in a pool and were allocated and awarded to our executive officers by the Committee (based on recommendations made by Mr. Swienton). In determining the aggregate value of stock options and performance-based restricted stock rights (with tandem cash awards) to grant to executive officers, the Committee considered our performance, competitive practices, the cost to us (particularly in light of the new stock option expensing rules) and share dilution. In determining amounts to allocate to each executive officer, the Committee considered their individual responsibilities, performance evaluation, and long-term initiatives. The grant date fair value of the equity granted to the named executive officers in 2006 is set forth in the “2006 Grant of Plan-Based Awards Table” on page 34.

In February 2006, our independent directors approved a grant to Mr. Swienton of 175,000 stock options and 20,000 performance-based restricted stock rights (with a $500,000 tandem cash award). The aggregate value of the stock options and performance-based restricted stock rights exceeded the target value of 350% of the midpoint of the relevant salary range. The Committee exceeded the target value for Mr. Swienton in order to reward him for our strong financial performance and recognize his continued efforts to improve our financial position and execute our long-term strategies. The equity granted to Mr. Swienton in 2006 was consistent with the equity granted to him in 2005.

Equity Granting Practices

In February 2007, the Committee approved a Policy on Equity Granting Practices. Pursuant to this Policy, all grants of equity awards to executive officers must be approved by the Compensation Committee, or the full Board in the case of our CEO, at a Board or Committee meeting and not by written consent. The grant date of any equity awards shall be the date of the Board or Committee meeting at which the award was approved, provided that the grant date for a new hire will be the later of (i) the date of the Board or Committee meeting at which the award was approved and (ii) the date on which the new hire commences his employment. The exercise price of any stock option issued by us will be the average of the high and low sales price on the grant date (as required by our current equity compensation plans).

Time-Vested Restricted Stock Rights

For the last several years, the Committee has approved annual grants of time-vested restricted stock rights to executive officers. Generally, the restricted stock rights vest in three equal annual installments regardless of company performance. As discussed above, in 2006, the Committee granted performance-based restricted stock rights with tandem cash awards in lieu of the time-vested restricted stock rights as the Committee believes that performance-based restricted stock rights are more consistent with its compensation objectives. The time-vested restricted stock rights include a right to receive dividend equivalents.

The Committee approved a retention grant of time-vested restricted stock rights to certain key executive officers in October 2006 (none of whom were named executive officers). In addition, the Committee granted 9,150 time-vested restricted stock rights to Mr. Jamieson as part of an appropriate new hire pay package for our Chief Financial Officer.

Perquisites

The Committee prefers to compensate our executive officers in cash and equity rather than with perquisites. However, we do provide a limited number of perquisites to our executive officers that we believe are related to the performance of their responsibilities. Each executive officer receives an annual car allowance equal to $9,600 per year. Given the complex structure of certain elements of our compensation, we reimburse our executives for up to $6,000 per year for amounts paid by the executive for financial planning and tax preparation services. We also provide an annual executive perquisite of $5,000 for all executive officers and $7,500 for our CEO (plus a tax gross-up) that is designed to provide the executive with an amount of money that can be used by him or her to pay for community, business or social activities that may be indirectly related to the performance of the executive’s duties but are not otherwise eligible for reimbursement as direct business expenses. For security reasons, we provide up to $5,000 for the installation of a new or upgraded security system in the executive’s home and pay any related monthly monitoring fees. Certain of our named executive officers also receive a country club membership for which there is no incremental cost to us. The total amount of perquisites paid to the named executive officers during 2006 was only a small percentage of each executive’s total compensation. These amounts are set forth in the Summary Compensation Table on page 33 under the “Other Compensation” column and related footnotes.

Benefits

During 2006, executive officers were eligible for the following programs offered to all U.S. salaried employees: qualified pension plan, pension benefit restoration plan (excess pension plan), 401(k) savings plan (including company contribution based on company performance), medical, dental and prescription coverage, company-paid short- and long- term disability insurance, and paid vacation and holidays.

All officers, including executive officers, receive certain additional welfare benefits not available to all salaried employees. We provide executive life insurance coverage equal to three times the executive’s current base salary in lieu of the standard company-paid term life insurance; provided that executive officers are limited to an aggregate of $3 million in life insurance coverage under the policy. We also purchase individual supplemental long-term disability insurance policies for each executive officer, which provides up to $15,000 per month in additional coverage over the $8,000 per month maximum provided under our group long-term disability plan.

Retirement Benefits

      401(k)/ Deferred Compensation Plan. We maintain a tax-qualified 401(k) plan that provides for broad-based employee participation and a deferred compensation plan for certain employees, including the named executive officers. Company contributions to our current 401(k) plan are limited to a discretionary company contribution based on company performance. Under the deferred compensation plan, eligible participants may elect to defer receipt of their cash compensation (which includes salary, bonus and amounts earned under our cash-based long-term incentive plan). Any deferred amounts are unfunded and unsecured obligations of the company and are part of our general assets. Contributions to the 401(k) and deferred compensation plans are credited with hypothetical earnings based on hypothetical investment options selected by the employee, including Ryder common stock. Our current deferred compensation plan does not provide for company contributions or above-market or preferential earnings. Our previous deferred compensation plan, in which one of our named executive officers currently participates, entitles all participants to received interest on deferred amounts at a rate equal to the average annual base (prime) rate, with a minimum of 5% and a maximum of 12%. Under each deferred compensation plan, the compensation may be deferred until the later to occur of a fixed date, or separation of employment due to retirement, disability or removal, and is payable in a lump sum or in installments. Upon a change of control, however, all deferred amounts will be paid immediately in a lump sum.

      Pension Plan. A description of our pension plan and excess pension plan is set forth in this proxy statement under “Pension Benefits” on page 36. In January 2007, our Board of Directors approved amendments to our pension and excess pension plans, our 401(k) plan and our deferred compensation plan. These changes are also described in this proxy statement under “Pension Benefits.”

Severance and Change of Control Benefits

Currently, all officers (including all executive officers) are entitled to certain severance benefits under the terms of a Severance Agreement and a Change of Control Severance Agreement, forms of which are on file with the SEC. Severance benefits are intended to ease the consequences of an unexpected termination of employment and give the executive an opportunity to find another job, which for senior executives can take a significant amount of time. The change of control benefits are designed to preserve productivity, avoid disruption and prevent attrition during a period when we are, or are rumored to be, involved in a change of control transaction. The change of control severance program also motivates executives to pursue transactions that are in our shareholders’ best interests notwithstanding the potential negative impact of the transaction on their future employment.

In January 2007, based on the results of the Committee’s comprehensive evaluation of our severance and change of control severance programs and practices, our Board of Directors (based on the recommendations of the Committee) decided to terminate all existing severance and change of control severance agreements and adopt a new program that would reflect a number of changes to the current severance and change of control severance benefits. Although the Committee and management determined that our current severance and change of control benefits are reasonable, they believe the approved changes are more in line with current market standards and emerging governance trends.

A description of the current severance and change of control severance benefits (which will be in effect for all current executive officers until January 31, 2008) and the recently approved changes to the severance and change of control severance benefits (which will be in effect for all current executive officers beginning after January 31, 2008 and for all new executive officers appointed after January 1, 2007) as well as a summary of potential payments relating to these and other termination events, can be found under the heading “Potential Payments Upon Termination or Change of Control” on page 39.

To demonstrate the importance of linking executive management and shareholder interests, we established formal stock ownership requirements for all of our officers. The CEO must own company stock or stock equivalents (including any unvested restricted stock rights) having a value equal to at least two times his annual base salary, and all other officers must own company stock or stock equivalents having a value equal to at least one times their base salary. The ownership requirements must be proportionately satisfied within five years of being appointed an officer. As of December 31, 2006, all executive officers were in compliance with their stock ownership requirements.

Tax and Accounting Implications

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended, precludes public companies from taking a federal income tax deduction for compensation in excess of $1 million paid to our named executive officers unless certain specific and detailed criteria are met, including the requirement that compensation be “performance-based” and under a plan approved by our shareholders.

We review all components of our executive compensation program based upon the requirements of Section 162(m) of the Internal Revenue Code. Stock-based awards under our current equity compensation plan meet the requirements of Section 162(m), and accordingly, stock options and other stock-based awards granted to the named executive officers under this plan are eligible for the “performance-based” exception to Section 162(m). Our 2006 annual cash incentive awards were granted under the Ryder System, Inc. 2005 Equity Compensation Plan, which was approved by our shareholders in May 2005. While the long-term cash incentive awards granted from 2002 to 2004 are performance-based, the relevant plan was not submitted to our shareholders for their approval and, therefore, we will not be able to deduct amounts paid under those awards in calculating our taxes.

The Committee believes that preserving its flexibility in awarding compensation is in our best interest and that of our shareholders and may determine, in light of all applicable circumstances, to award compensation in a manner that will not preserve the deductibility of such compensation under Section 162(m).

Nonqualified Deferred Compensation

On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law, changing the tax rules applicable to nonqualified deferred compensation arrangements. While the final regulations are not yet effective, we believe we are operating in good faith compliance with statutory provisions that were effective on January 1, 2005. When the regulations are finalized, we will assess the impact on our compensation programs and make appropriate amendments.

Accounting for Share-Based Compensation

Beginning on January 1, 2006, we began accounting for share-based compensation awards, including our stock options and all restricted stock rights, in accordance with the requirements of FASB Statement 123R, “Share-Based Payments.” Before we grant stock-based compensation awards, we consider the accounting impact of the award as structured and under various other scenarios in order to analyze the expected impact of the award.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The following report of the Compensation Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that Ryder System, Inc. specifically incorporates it by reference into a filing.

Our Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Submitted by the Compensation Committee of the Board of Directors.

John M. Berra (Chair)

David I. Fuente

L. Patrick Hassey

Lynn M. Martin

Christine A. Varney

EXECUTIVE COMPENSATION

The following table sets forth the 2006 compensation for:

We refer to the executive officers included in the Summary Compensation Table as our “named executive officers.” A detailed description of the plans and programs under which our named executive officers received the following compensation can be found in the Compensation Discussion and Analysis beginning on page 23.

Summary Compensation Table

2006 Grants of Plan-Based Awards

Outstanding Equity Awards as of December 31, 2006