Penske -- A major force in So Cal
Things have been going well for the aging racing legend, Roger Penske. Mr. Penske is chairman and largest single shareholder of United Auto Group, Inc. United Auto is the second largest auto dealer group in the US and to take advantage of the "Penske" name, it just changed its name to Penske Automotive Group, Inc. and changed its New York Stock Exchange ticker symbol from UAG to PAG.
Mr. Penske's private holding company, Penske Corporation, gave up the name Penske Automotive Group which had been the business holding entity for its California-based auto dealerships. The new name of that company is Penske Motor Group, Inc. Mr. Penske's son, Greg, operates the family's private holding company while Dad runs the publicly-traded company. However, with such family control and involvement, the line between public and private probably gets blurred often.
It's not disclosed how Roger Penske or his holding company was compensated for this little name change. But let's be clear, the Penske private holdings are worth mega billions.
Mr. Penske's private holdings are generally separated into four business groups:
1. Penske Performance
2. Penske Automotive
3. Penske Capital Partners
4. Penske Transportation Services.
Here in LA/So Cal, we see the public face of Penske's private empire through its car dealerships and the Penske Truck Leasing business.
All you need to do is drive to Palm Springs to see one "small piece" of Mr. Penske's empire. When you drive through El Monte, you see the gigantic Longo Toyota/Lexus/Scion sign looming over the Interstate 10. Longo is the largest Toyota dealership ON THE PLANET. This one dealership (really a small self-contained city) has annual sales exceeding $1 billion.
Just a little further east on I-10, you get the joy of driving through Covina and West Covina. Mr. Penske has a beautiful new Audi dealership in addition to a huge new Mercedes-Benz parts and service facility on the opposite (north) side of I-10 from its gleaming (fairly new) Penske Motorcars Mercedes-Benz dealership. I'm sure that the Mercedes dealership is making room for a Smart Car franchise that will open later this year.
When you pass through Ontario, if you turn you head slightly to the south, you will see the gigantic pole sign for Penske Honda. So Cal Honda dealers sell lots of Hondas every day. As it is for Toyota, the greater LA area is the number one sales region for Honda. I'm sure business is good.
Let's not forget that Daimler (sans Chrysler) picked Mr. Penske's private company, Penske Corp., to build a dealership network for the January 2008 introduction of the Smart ForTwo city car to the US market. It didn't pick United Auto Group. Frankly, Mr. Penske's private holdings, which include logistics companies and car dealerships was a better business partner for the Smart Car division of the (very) German Mercedes Car Group. And you can be sure that Penske Automotive Group (the public corporation) will have its fingers in the Smart pie too.
Penske Corp is supposed to announce the US dealers for Smart any day now. I believe the choices and announcement date has been delayed due to the pending divorce of Daimler from Chrysler. But count on Mr. Penske's own Mercedes-Benz dealerships to get a Smart franchise.
The other ubiquitous Penske presence we see here in So Cal is the Penske Truck Leasing business. The truck leasing company is a joint venture with GE Capital. It's nice to have well-heeled financial buddies, huh? Penske Leasing Company, LP (limited partnership) is headquartered in Reading, PA, but it has operations all over North America. The company's website, GoPenske.com, says it manages a fleet of more than 200,000 vehicles, in North America, South America, Europe and Asia and has annual revenues exceeding $4 billion. It has operations in these market segments: Household rentals, Business rentals, Leasing and Logistics. Want to be more impressed, check out this business-oriented mumbo jumbo:
Penske Truck Leasing offers "full-service leasing, contract maintenance, commercial and consumer truck rental, transportation and warehousing management, global freight forwarding and supply chain management solutions."
While it's not disclosed what percentage Penske Corp owns of this business, you don't have to have a Harvard MBA to figure out that this company is worth mega-bucks and it all rides on that signature Penske-yellow color and Mr. Penske's name.
You might think that Penske is headquartered here in LA or in a So Cal city like Torrance or Gardena (think Toyota and Honda). However, this massive personal empire calls Bloomfield Hills, Michigan home. It's also the home of the public company, Penske Automotive Group, Inc.
Just reported this week, Penske Corp sold 50% of an Italian diesel engine manufacturing and technology company, VM Motori of Centro, Italy, to GM. The terms of the sale weren't disclosed; but I'm willing to go out on a limb here and say that this new "strategic partnership" with GM was very profitable to Penske. The news is good for GM Europe, as a new 2.9 liter V6 turbo-diesel engine will be used in the 2008 Cadillac CTS.
GM says it will bring more diesel engines to the US, but it's not saying if we will get a diesel Cadillac. GM's Vice Chairman, Maximum Bob Lutz, said that GM will offer new diesel engines "in a couple years" in US passenger cars. But like any "new" technology (that's new to the US, not the rest of the world), much will depend on federal and California emissions standards. Hey, maybe GM will license some clean diesel technology from Honda!
Mr. Penske's other business interests are vast, but not as visible here in LA. For whatever reason, it's hard to get us interested in motorsports like NASCAR, CART or Indy Racing. Mr. Penske owns Penske Racing which is one of the most successful teams in professional racing history.
Mr. Penske also holds significant investments in motor speedways across the country. By 1999, Mr. Penske owned four racetracks -- Nazareth Speedway, North Carolina Speedway, Michigan International Speedway and then newly-constructed California Speedway in Fontana. In 1999, Penske's speedway company merged with International Speedway Corporation. Mr. Penske holds a significant minority interest in publicly-traded ISC (NASDAQ: ISCA). Today, ISC operates 12-13 active speedways and has interests in NASCAR merchandising, broadcasting and even a NASCAR-themed amusement park.
I also learned that Penske Corp owns a controlling interest in the Truck-Lite Co., Inc. Truck-Lite together with its domestic and foreign affiliates sell aftermarket lighting systems for commercial trucks including interior/exterior lighting, mirrors and safety harness systems. Who knew?
The final major business line is logistics. Penske Logistics and QEK Global Solutions are the big players here. Consumers don't see what logistics companies do, but we all benefit from the efficiency and cost savings logistics companies bring to big manufacturing companies. It's a major task to coordinate and manage a global supply chain of goods, services and raw materials. There is big money here and Penske is a big player.
Mr. Penske turned 70 this year and he shows no sign of slowing down. Last year, he clocked in on the Forbes Magazine list of richest Americans at number 140 with an estimated new worth of $2.2 billion. I think that estimate is low. But there is no question that the legendary former race car driver managed to make a fortune in the auto business.
