Penske Automotive Group (PAG) has lots of lots. The #2 publicly traded auto dealer in the US, behind AutoNation, PAG operates 320 auto franchises from California to New York and Puerto Rico, and abroad, mainly in the UK. The company sells cars made by more than a dozen automakers. Non-US brands, including AUDI, BMW, and Honda, generate roughly 95% of sales. PAG also sells used vehicles and provides collision repair services and financing. UK subsidiary Sytner Group operates some 140 franchises, selling more than 20 brands of mostly high-end models. Additionally, PAG holds a 9% stake in Penske Truck Leasing (PTL), known for commercial leasing, rental, and contract maintenance. Chairman Roger Penske leads PAG.
The global financial crisis, tight credit environment, and uncertain economy have impacted automotive sales at PAG. After tumbling more than 25% between 2007 and 2009, year-over-year sales rebounded roughly 10% in 2010 and again in 2011. The rise was driven by an uptick in unit sales attributable to dealership acquisitions coupled with higher selling prices. Correspondingly, earnings, which dipped into the red in 2008, soared approximately 40% and 60% in 2010 and 2011, respectively, over their prior year results.
Sales in the US, which account for more than 60% of PAG's revenue, however, remain below the average level rung up in the last 10 years. PAG's long-term strategy focuses on offering a mix of mainly premium-brand vehicles and related services that stay apace with the continued recovery in the US automotive market. During 2011 premium brands accounted for nearly 70% of sales, foreign brands accounted for more than 25%, and US brands less than 5%.
Growth is further targeted through acquisitions and alliances. In 2012 the company entered the Madison, Wisconsin, market by buying the Jon Lancaster Toyota Scion and Lexus of Madison dealerships. PAG also acquired Savage BMW/MINI of Ontario, California, to strengthen its presence in Orange County and contribute some $125 million in annualized revenue. In 2011 PAG acquired seven US franchises, estimated to deliver about $500 million in annual revenue. Outside of the US, PAG expanded by purchasing 13 dealerships from the Isaac Agnew Group in the UK, the third largest retail automotive market in Western Europe. Like the US acquisitions, the group is anticipated to contribute around $500 million in revenues. Eyeing operations that fell outside of the company's goals, PAG also disposed of 16 franchises, most of which were in the US. Mid-year, PAG's subsidiary smart USA, the distributor of the smart fortwo vehicle in the US and Puerto Rico, was sold to Daimler Vehicle Innovations, part of Mercedes Benz USA.
PAG is simultaneously taking steps to diversify its international presence beyond the UK and Germany. To this end, the company struck up a joint venture in 2012 with Andrea Mantellini; the Mantellini family owns a BMW/MINI group of dealers in Bologna, Italy. The venture, which marks PAG's first step into Italy, paves the way for taking over and operating dealerships across northern Italy. The venture was jumped started by the purchase of a BMW/MINI dealership in Monza, a Milan suburb. Its location is integral to the venture's momentum; Milan is among Europe's top 10 business and financial centers, and the top 20 worldwide. Earlier in 2011, PAG agreed to acquire 50% of Alliance Motor Tyumen, a Russia-based Lexus car dealer. Alliance Motor Tyumen is owned by Japan's Mitsui & Co., Penske's second-largest shareholder.
Penske Corporation, through various affiliates, is PAG's largest shareholder, owning about a third of the company. Mitsui holds about a 17% stake in the company. Together they control slightly more than 50% of the shares and consequently control the composition of the board of directors and the direction of the business. – less