Penske Automotive Group Inc. and Group 1 Automotive Inc., two U.S. publicly traded auto retailers with U.K. operations, immediately had their stock prices drop to their lowest levels since February in the wake of Britain's vote to exit the European Union. The drops were much sharper than those of new-vehicle retailers without U.K. exposure, amid a market tumble.
Penske and Group 1 -- Nos. 2 and 3 on Automotive News' list of the top 150 dealership groups based in the U.S. -- are trying to figure out what Brexit means for them.
A Penske executive called the outcome disappointing.
"It's been a crazy night and morning," Tony Pordon, Penske executive vice president of investor relations and corporate development, said Friday, June 24. "Everybody is just speculating. The simple fact is, this is unprecedented, so we don't know how it's going to affect us."
In 2015, Penske dealerships in the U.K. contributed nearly one-third of the company's total revenue. Roughly 30 to 35 percent of profits in Penske's auto retail business come from 94 U.K. dealerships, mainly British and European luxury brands, he said.
Currency translation is the near-term risk, Pordon said. Penske converts its U.K. results from British pounds to U.S. dollars for its financial statements, so it would record lower revenue and profit from the U.K. as the pound drops against the dollar. In the immediate aftermath of the Thursday, June 23, vote, the pound's value against the dollar plunged as much as 10 percent.
Pordon praised Penske's U.K. retail network: "We have a solid business in the U.K and a strong and experienced management team."