Penske Automotive Group Inc., a diversified international transportation services company based in Bloomfield Township, today announced it has implemented several proactive measures to help mitigate the financial and operational impact of the COVID-19 pandemic.
“The COVID-19 crisis is impacting our operations requiring us to take swift and decisive action to address declining business levels,” says Roger Penske, chairman and CEO. “I am confident the actions we are taking will help our business overcome these challenges.”
Company-wide actions include a hiring freeze, significant expense reductions, staffing-level adjustments, the postponement of an estimated $150 million in capital expenditures, and negotiated rent deferrals for up to 90 days at various locations.
The majority of OEMs the company represents as auto dealers, and their respective captive finance companies, have offered significant support during this crisis, including interest payment deferrals. In addition, executive and management compensation has been significantly reduced, including a 100 percent reduction in salary for the CEO and president for the duration of the crisis. In turn, the board of directors has waived cash compensation for the next six months.
Over the last 10 days, Penske’s automotive dealership operations across the U.S. have experienced a decline in unit volume and service/parts revenue. Shelter-in-place rules in many states limit automotive dealership operations to essential services. Virtual/online sales of new and used vehicles remain available in most locations, while the service departments remain open to support critical transportation needs.
Commercial truck dealership sales and service operations remain open in most locations around the U.S. and Canada providing essential services to our customers. Currently, this part of the business is experiencing a consistent flow of service customers,” according to the company. Hours of service restrictions on motor carriers have been lifted for those involved in essential business support. We anticipate this will drive near term capacity demand as motor carriers shift trucks from other industries.
The company has a 28.9 percent ownership interest in Penske Transportation Solutions. As an integral part of the supply chain and transportation infrastructure, PTS services have been largely deemed essential by government authorities. More than 70 percent of PTS business is generated by multi-year contracts for full-service leasing, contract maintenance, and logistics services. PTS serves more than 17,000 contract customers in a wide range of industries. Commercial rental utilization for tractors and trailers remains consistent. Penske Logistics is experiencing mixed demand based on the industries served with increased activity in the grocery and medical sectors, and reduced demand in automotive and manufacturing due to temporary plant closures. Liquidity at PTS remains strong with over $1 billion available.
In the United Kingdom, all dealerships closed March 24 in accordance with government order. Business conditions in the U.K. were good through most of the month, however, new and used order intake declined significantly during the past 10 days. Limited service/parts operations remain available. The U.K. has introduced the Coronavirus Job Retention Scheme whereby the government will reimburse the company for furloughed employees up to 80 percent of an employee’s monthly earnings, up to certain limitations.
All dealership locations in Italy are closed with service/parts available only on an emergency basis. The Italian government has put in place a program called “Casa Intergracion,” which started March 30, to provide benefits to displaced workers.
Virtual/online sales and service/parts operations remain available in Germany. Workshop utilization, however, continues to decline. The German government has put in place a program called “KUG” to provide benefits to displaced workers.
In Australia, all non-essential business operations have been closed by government order; however, Penske Australia has been deemed essential, and therefore, parts, service, and defense functions remain operational.
All dealership locations in Spain are closed, other than limited service/parts availability. The Spanish government has put in place a program called “ERTE,” retroactive to March 16, to provide benefits to displaced workers.
All dealerships and locations are operating normally in Japan.
Penske Automotive Group currently has access to liquidity of $1.3 billion, which includes $850 million of cash on hand and availability through non-floor plan credit facilities, and approximately $450 million in potentially financeable real estate.
Elsewhere in the Penske business empire, the 104th running of the Indianapolis 500 has been postponed from Memorial Day weekend to Aug. 23. The Grand Prix of Indianapolis road course race, rather than taking place in early May, will be run on July 4 during a historic shared weekend with NASCAR’s Brickyard 400.