Penske Corp. has joined forces with a group of New York investors to raise $1 billion to make acquisitions over the next three years.
The venture, dubbed Penske Capital Partners LLC, will consider investments in automotive parts suppliers, retail service operations and truck transportation.
To raise money, Penske has tapped Chase Capital Partners, a New York firm that manages investments worth $4 billion. Chase has access to deep pockets. Its sole limited partner is Chase Manhattan Corp., a bank holding company with assets of $340 billion.
To run the operation, Penske has tapped James Hislop, a senior investment banker at Merrill Lynch. Penske Capital Partners will be based in New York, with offices in Detroit.
The new organization should be able to line up other investors this summer, predicted Penske Corp. President Tim Leuliette.
'We think the timing is good,' Leuliette said. 'We don't think we are at the end (of the economic expansion). The economy has some legs, especially in the businesses that are near and dear to us.'
For example, heavy-truck sales in the United States are likely to hit 180,000 units this year, up slightly from 1996. That's a good sign for Detroit Diesel, which is introducing two new heavy-truck engines this year.
Startup costs related to those two new products will depress Detroit Diesel's profits this year, but long-term profits should look better, said Christopher Mecray, an industry analyst for Alex Brown & Sons Inc. in Baltimore.
This year, Mecray predicts Detroit Diesel's net income will be $1.15 per share, rising to $1.50 in 1998.
'They are working to diversify,' Mecray said. 'They have a lot of opportunities.'
Penske, a diversified transportation services company based in Detroit, shied away from major acquisitions in 1996, but in previous years has been eager to expand. Past acquisitions include:
Penske Auto Centers, a string of repair shops purchased from Kmart Corp. in 1995.
VM Motori S.p.A., an Italian maker of diesel engines purchased in 1995.
AG Kuhnle, Kopp and Kausch, a turbocharger manufacturer purchased in 1994.