Penske Corp. President Tim Leuliette is still bullish on Penske's Detroit Diesel Corp. despite DaimlerChrysler's overtures and Wall Street's lack of interest in the company's stock. He spoke with Staff Reporter Aaron Robinson last week. Here is an edited transcript.
Last year you said 'Detroit Diesel is not on the block, not for sale.' Is that still the policy? What are your other options?
With Daimler as a major shareholder, obviously there is a venue for a variety of strategic discussions. Up until now, Daimler's investment has been one of a financial nature. We have not engaged in technical collaborations with the Mercedes car group; we have not engaged in any joint engine programs; it has been purely financial.
So DaimlerChrysler has not made an offer despite what Chairman Juergen Schrempp said?
In the discussions that we have from time to time, nothing of a concrete nature that was viable has ever been put on the table. We will have record earnings this year, but our share price is trading in almost the lower quartile of its trading range since it has been a public company. It would be inappropriate to the shareholders to do some modest premium to the price at this time - which is in a time frame when industrial stocks are out of vogue - and say that the shareholders got a decent return. We know this is a $30 stock company, and we've got to deliver that to the shareholder. It's not decades away, but our plans to put that in place are very real.
How long are you willing to stick it out before you give up on boosting the share price and just sell?
The investment community is coming around. Caterpillar was just upgraded, and I think it's just a matter of time before we follow suit. I think they're waiting for this earnings announcement to make sure we're still walking the talk, but I think you will start to see some movement. I have faith in the almighty dollar and capitalism.
Would Penske, which is mainly a service company, be better off without a manufacturing company in its portfolio?
There is a certain credibility to the Penske group of companies that comes from having the financial and managerial acumen to run a multibillion manufacturing company. It opens more doors for you sitting with someone like the French trade ambassador than owning 10 dealerships does.
Is there anything you can tell us about Detroit Diesel's performance this year?
I think the Street will be pleased with the performance of the company. One of the yardsticks is over the last two years our earnings from continued operations are up 41 percent over the past two years, Caterpillar's are up 16 percent, and Cummins is down 10 percent. We have said to the Street that our earnings this year would be up 15 percent from 1998 on an annualized basis, and I think we'll clearly meet that goal for the first quarter.