DETROIT -- Penske Automotive Group Inc.'s sales of Toyota-brand vehicles are on pace to fall 12 percent this month as the automaker's recall crisis ripples through the second-largest U.S. dealership group.
Sales of used Toyotas will be flat, Chairman Roger Penske said today, while service business will surge as the retailer tends to its share of Toyota's called back vehicles. Penske Automotive has already repaired more than 18,500 vehicles. The company relies on Toyota Motor Corp. vehicles for about 19 percent of its U.S. sales.
“Our customers have been very understanding during this process,” Roger Penske said on a conference call. “Toyota is on the ball. They're communicating with us daily and are taking the necessary steps to restore customer confidence in the Toyota products.”
Penske said an increase in service revenue will help make up for the decline in new car sales. Repairs for Toyotas with potentially sticky accelerator pedal take about 42 minutes and bring in about $70 per repair order. Repairs to address pedals that can be trapped in floor mats take about two hours and generate about $220 per repair order.
The executive provided an update on the Toyota recall in a conference call discussing fourth-quarter financial results. The company reported net income from continuing operations of $19.3 million, compared with a loss of $506 million a year earlier.
Penske Automotive's net income of 21 cents a share beat analysts' average expectation of 17 cents, according to a Reuters poll of analysts. Revenue climbed 13 percent to $2.4 billion.
The company operates 312 retail franchises and 25 body repair shops in representing 40 brands globally.
The dealership group's earnings announcement did not address the potential financial impact of Toyota's global recalls of more than 8.5 million vehicles.
Penske said sales at its BMW dealerships generated 22 percent of fourth-quarter business -- the largest percentage of any brand.
New vehicles accounted for 51.4 percent of Penske's revenue during the quarter, up from 48.3 percent during the same quarter of 2008. The used-car business generated 26.5 percent of quarterly revenue, up from 24.5 percent.
Penske's Smart USA brand, which posted a 41 percent sales plunge in 2009, sold 998 units in the fourth quarter, compared with 7,725 during the same time in 2008.
Smart is opening its first dealership in Puerto Rico. The new dealership will be called Smart Center San Juan. It is owned by a Penske Automotive subsidiary, the Triangle Automotive Group, the largest automotive group in Puerto Rico.
Penske shares rose 3 cents today to close at $15.38. Standard & Poor's reiterated its buy recommendation on the shares.
“With 95 percent of sales from import and premium brands, we believe PAG will benefit from a rising mix toward premium brands reflecting economic growth and the absence of government scrappage programs favoring less-expensive vehicles,” S&P analyst Efraim Levy wrote in an e-mail report.
Penske, of suburban Detroit, ranked No. 2 on the Automotive News list of the top 125 U.S. dealership groups, with 171,872 new-vehicle sales in 2008.
Reuters contributed to this story.