DETROIT -- Penske Automotive Group reported a 23 percent increase in third quarter profit today and said it is open to lining up new distribution contracts now that its bid for GM's Saturn has fallen through.
Net income for the nation's second-largest auto retailer rose to $27.4 million on cost-cutting and a boost from the U.S. government's cash-for-clunkers program. That compares with $22.2 million a year earlier.
The profit includes a $1.9 million charge related to Penske's late-September decision to scrap a plan to acquire the Saturn brand from General Motors Co. CEO Roger Penske said today he wanted to line up an automaker to supply vehicles after GM's production ended before he inked the sale. The dealership group determined France's Renault SA was its best option.
“Believe me, we were making substantial progress,” Penske said, referring to the negotiations with Renault. Renault eventually decided the deal wasn't profitable enough, he said, and the Saturn sale was off.
Now the dealership group can turn to a “number of” potential options it has for distributing new brands, Penske said on a call with analysts. The group handles the U.S. distribution for Daimler AG's Smart microcar.
“We like distribution, so our antennas are up for opportunities,” he said, without getting specific.
Cool on acquisitions
Acquiring new stores isn't a priority next year, he said. If the opportunity arises to buy a store, Penske Automotive might take it, especially in markets where it already has stores.
But “we're not going to take big steps like we did in the past,” the CEO said. He said annual U.S. sales rates need to be in the 14 million to 15 million range before his company would make such a move. This year's average has been about 10 million.
Instead, the dealership group will focus on building its cash, Penske said. It currently has $29.5 million in cash and cash equivalents.
Revenue fell 13 percent to $2.6 billion. Penske Automotive cut selling, general and administrative expenses by 8 percent.
“If we can see this lift that people are predicting, our fixed costs should stay the same,” the CEO said.
Penske said he expects to reinstate employees' 401(k) plans in 2010.
The dealership group has 310 franchises, about evenly split between the United Kingdom and the United States.
Like other listed dealership groups and auto suppliers, Penske Automotive shares have slipped this week on expectations that the recovery in the U.S. auto market will remain slow and uneven.
The stock closed today at $15.66, down 8 percent. It peaked in early August amid the short-lived auto sales boom prompted by the cash-for-clunkers program. Since then, the shares have lost 26 percent.
Penske Automotive's results capped a week in which all of the top six publicly traded dealership groups posted profits. They are all profitable for the year, despite U.S. sales at quarter-century-lows.
Reuters contributed to this report.