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Penske Corporation

Penske Corporation


2555 South Telegraph Road
Bloomfield Hills, Michigan 48302
U.S.A.
Telephone: (248) 648-2000
Fax: (248) 648-2005
Web site: http://www.penske.com

Private Company
Incorporated: 1969
Employees: 37,000
Sales: $17 billion (2005 est.)
NAIC: 532120 Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing; 441110 New Car Dealers; 551112 Offices of Other Holding Companies; 711212 Race Tracks

Founded by Indianapolis 500 racing legend Roger S. Penske, the Penske Corporation is a transportation services firm with major interests in truck leasing, auto racing, supply-chain logistics management, and retail automobile sales and service. The company has revenues of approximately $17 billion. Principal owner and CEO Penske has earned a reputation for building contenders on and off the racetrack with the simple business philosophy: "Effort Equals Results." While best known to the public as a former race-car driver and the force behind the winning Penske Racing organization, Roger Penske has earned a reputation as an astute and competitive business leader with a penchant for turning around ailing companies.

The corporation's most recognized brands include Penske Truck Leasing, a national leader in truck rentals for individuals and businesses; the United Auto Group, a publicly traded automotive retailer with nearly 250 dealerships throughout the United States, the United Kingdom, and elsewhere; Penske Automotive Group, which includes several car dealerships in Southern California; and Penske Racing, with teams competing in Indy, NASCAR, and Le Mans series. The Penske empire also includes a number of companiesVM Motori, Truck-Lite, and Davcoproducing automotive parts and systems. Penske Logistics, a subsidiary of Penske Truck Leasing, provides warehousing and supply-chain services to a broad range of manufacturers and QEK Global Solutions offers support services primarily to automotive producers.

ORIGINS IN FOUNDER'S SUCCESSFUL RACING CAREER

Roger Penske attended his first Indianapolis 500 race at age 14, and he bought his first car with money from a paper route. Although he was "addicted to racing," Penske was also pragmatic; after earning a degree in business administration from Pennsylvania's Lehigh University in 1959, he went to work at the Aluminum Company of America (Alcoa) as a sales representative. However, the world of work did not keep him from the racetrack.

In the early 1960s, while still a sales representative for Alcoa, Roger Penske became one of the most successful race car drivers around, competing in sports car, endurance, and Formula One races on weekends. His first win came in 1959, and over the next few years the accolades poured in. In 1962 Penske was voted Sports Car Driver of the Year by Sports Illustrated, the New York Times, and the Los Angeles Times. Having won five races in 1964, he left Alcoa for a job as general manager of the McKean Chevrolet dealership in Philadelphia. After winning the NASCAR Grand National in 1965, Penske retired from racing and bought the dealership. He returned to the sport in 1966 as the owner of Team Penske. The racing organization would go on to become the most successful in history.

DIVERSIFICATION CONTRIBUTES TO GROWTH

In the middle and late 1960s, Roger Penske's Chevy dealership prospered such that it generated capital for acquisitions, including a pair of specialty tire distributorships, Competition Tire East and Competition Tire West, and a small truck leasing operation. The truck leasing business soon enjoyed spectacular growth as private fleet owners discovered the benefits of leasing versus buying their trucks: purchasing, fuel supply, scheduled maintenance, and repair were left in the hands of the lessor, allowing the fleet operator to focus on the distribution and routing of their products. By 1969 Penske Leasing had 33 locations in the northeastern United States. The Penske Corporation was set up that year as a holding company for Roger Penske's automotive-related enterprises.

By 1971 Roger Penske had auto dealerships in Philadelphia and Allentown, Pennsylvania, and in Detroit. His nearly legendary attention to detail set the pace at the dealerships. Sales climbed, helping to fuel expansion into other ventures. In 1973 Penske acquired the ailing Michigan International Speedway, determined to convert the racetrack into a lean and profitable business.

On the racing front, Team Penske quickly distinguished itself from competitors, in many ways revolutionizing motor sports. J. Douglas Johnson of the Indiana Business Magazine credited Roger Penske with bringing "orderliness and professionalism to auto racing." One of Penske's racing competitors conceded to Forbes, May 28, 1979, "He markets his car and sets up sponsorship programs more effectively than anyone else." Moreover, the exposure on televised broadcasts of major racing events, including the Indianapolis 500, provided enormous value when compared with the cost of a 30-second commercial spot, benefitting Penske's other businesses immeasurably. Penske's winning image was clearly valuable to the corporation's nonracing businessesbuying a new car from auto racing's most successful team seemed just a little more appealing than buying it from an average dealer.

ACCELERATED GROWTH VIA ACQUISITION AND TURNAROUND

Although Penske's businesses enjoyed satisfactory growth throughout the 1970s, the corporation's expansion accelerated rapidly during the 1980s. Sales were $254 million in 1981, and by 1988 sales had topped $2 billion. The first business segment to swell was truck leasing. The unit had enjoyed excellent growth throughout the 1970s, but in 1982, Penske entered a joint venture with the ailing giant Hertz Truck Leasing. The Hertz unit had lost $40 million in 1981, and the company considered unloading it altogether. Roger Penske was invited to tour Hertz's operations, and soon he agreed to merge Penske Leasing with Hertz's truck operations. Penske trimmed 500 jobs and 30 locations from Hertz. After one year, the new Hertz-Penske Leasing made $1.2 million. Penske's initial stake in the company was 35 percent. By 1986 the share was increased to 50 percent, and Hertz-Penske acquired the heavy-duty truck leasing business of another major company, Leaseway Transportation, for $94 million. The company grew to become the second largest truck leasing company in the United States behind Ryder System, Inc., although a distant second, as Ryder's sales quadrupled those of Hertz-Penske.

COMPANY PERSPECTIVES


Unique in its heritage and formidable in its national and international scope, Penske Corporation is a closely held transportation services company that encompasses retail automotive sales and services, truck leasing, supply chain logistics management, transportation components manufacturing, and high-performance racing.

In June 1988 Penske Corporation bought Hertz's half of Hertz-Penske Leasing. Two months later, in August, Penske Corporation's truck leasing operations merged with General Electric Credit Corporation's Gelco Truck Services. The resulting company was a limited partnership named Penske Truck Leasing Co., L.P., with a Penske Corporation subsidiary as the general partner, responsible for operation of the firm. Penske initially owned 69 percent of the partnership and GE purchased another three percent in January 1989. The joint venture operated 400 locations and leased a fleet of more than 65,000 vehicles.

Penske Corporation's retail automotive group also made large acquisitions in the 1980s. In 1985 the nation's largest Toyota dealership, Longo Toyota of suburban Los Angeles, came up for sale. Founded by Dominic Longo in 1967, the dealership had been the number-one Toyota dealership in the United States since 1969. After Dominic Longo died in 1985, Penske agreed to buy it.

In 1988, Longo Toyota moved into a brand-new facility in El Monte, California. The new facility covered 23 acres, employed more than 360 people, and boasted 104 service bays and 54 body shop stalls. Penske's continued emphasis on service was crucial to Longo's exceptional rate of repeat and referral business. The dealership carefully targeted its market. For example, it employed special teams of salespeople who were fluent, collectively, in Mandarin and Cantonese Chinese, Japanese, Korean, Vietnamese, and Thai, as well as Spanish and English, making it easy and comfortable for Los Angeles residents originating from the Pacific Rim to do business at Longo. Roger Penske's son Greg became the general manager of the dealership; Greg went on to become president of the Penske Automotive Group, a Penske Corporationowned dealership chain that included Longo and several other dealerships in Southern California.

DETROIT DIESEL ACQUISITION BRINGS CHALLENGES, GROWTH

In December 1987 Penske Corporation made its biggest acquisition ever and plunged into the large-scale manufacturing sector at the same time with the purchase of 60 percent of General Motors' (GM) $900-millionin-sales Detroit Diesel Allison Division. Penske was approached in late 1987 by GM's investment banking firm, Salomon Brothers, with the possibility of a deal. General Motors hoped an entrepreneurial infusion could save the troubled engine-maker. Detroit Diesel's North American market share had declined from 33 percent in 1979 to 3 percent, and it had lost a total of $600 million in the previous five years. Problems with labor relations, product design, performance, and consumer service were the root of the trouble. GM lost its diesel customers to Cummins and Caterpillar, and despite sinking $100 million into an upgraded plant during the 1980s the automotive giant seemed incapable of turning the unit around by itself.

Penske Corporation's experience with fleet truck purchasing and its earlier operation of Detroit Diesel distributorships in the East made the company an excellent choice as a partner. Roger Penske's $300 million infusion bought him 60 percent of the company and control of operations. He quickly began streamlining the newly renamed Detroit Diesel Corporation. The operating budget was slashed by more than $70 million by cutting jobs, consolidating facilities, and cutting unnecessary technology costs.

KEY DATES


1962:
Roger Penske is voted Sports Car Driver of the Year by numerous media outlets.
1965:
Penske buys his first car dealership, in Philadelphia.
1966:
Penske establishes the car-racing organization Team Penske.
1969:
Penske Corporation is founded as a holding company for Penske's various automotive businesses.
1982:
Penske Leasing merges with the ailing Hertz Truck Leasing to form Hertz-Penske Leasing.
1988:
Penske buys Hertz's share in the truck leasing company, then enters a joint venture with General Electric (GE), merging with GE Credit Corporation's Gelco Truck Services.
1987:
Penske Corporation acquires 60 percent of the General Motorsowned Detroit Diesel Allison company.
1995:
Penske Corporation acquires 860 Kmart Auto Centers, renaming the business Penske Auto Center Inc.
1996:
Penske takes Penske Motorsports, Inc., public; business includes racetracks in three states as well as two Competition Tire outlets.
1998:
Penske Corporation acquires a percentage of United Auto Group; Roger Penske is named CEO.
1999:
Penske Motorsports is sold to International Speedway.
2002:
Corporation announces the closing of 563 Penske Auto Centers.
2006:
A Penske Racing driver wins the Indianapolis 500, the fourth Penske driver to do so since 2001.

GM's poor management of the unit throughout the 1980s and uncertainty about the immediate future had depressed the morale of Detroit Diesel workers. Roger Penske set out to convince his new employees that their company would be competitive once again. In August 1988, several months after he began running Detroit Diesel, Roger Penske invited his 3,000 Detroit Diesel employees to the Michigan International Speedway for the Marlboro 500. Team Penske drivers performed well that day: Rick Mears won the pole position; Al Unser, Sr., in the Detroit Dieselsponsored car, held the lead for a time; and Danny Sullivan won the race. The Detroit Diesel employees were elated. Free race tickets were not Penske's only labor relations tool. He also made a point of scheduling regular meetings with union officials and members alike, thereby fostering a spirit of unity among the workers.

Revitalizing Detroit Diesel's workforce was a key to improving the company's fortunes. Also essential was bringing a better product to market. General Motors had invested a good deal of research and development into a new engine, the Series 60. The six-cylinder, four-stroke diesel featured integral electronic controls, improved fuel efficiency, and durability, and it was relatively low cost. The new engine was well received in the marketplace, helping Detroit Diesel turn a profit.

In September 1988 Penske Transportation bought the diesel electronic unit injector line from GM's Rochester Products Division. Penske's transportation services group also expanded Detroit Diesel's product range through an operating agreement with Perkins Engines, a British subsidiary of the Canadian machinery maker Varity, formerly Massey-Ferguson, to market Detroit Diesel engines overseas and to provide smaller diesel engines for Penske to sell in North America. The arrangement allowed Detroit Diesel to offer a wide range of diesel engines, from five horsepower to 2,000 horsepower.

Penske's leaner Detroit Diesel began to win back market share by offering its customers significant savings. By the mid-1990s, Detroit Diesel's share had rebounded to more than one-fourth of the heavy-duty North American market. A few years later, having accomplished a change in fortune for Detroit Diesel, the Penske Corporation sold its percentage to a major competitor of original owner GM. In 2000, DaimlerChrysler, which at that time owned about 21 percent of Detroit Diesel, purchased the remaining shares.

ROUGH PATCHES ALONGSIDE SUCCESSES

While the Penske Corporation generated numerous success stories throughout its history, not every venture triumphed. In 1995, Penske acquired 860 Kmart Auto Centers for $112 million and renamed the new entity Penske Auto Center Inc. The purchase allowed Penske Corporation to surpass Discount Tire Co. and become the nation's largest independent tire dealer. Under Kmart, the operation had lost $19 million on sales of $360 million in 1994. Penske hired his son, Roger Penske, Jr., as CEO of the new company, anticipating profitability and significant growth over the next few years. Inheriting many of the problems from the era of Kmart ownership, however, the Penske Auto Centers struggled, and many of the centers closed down. In 1998 the senior Penske fired his son and installed Jim Wheat, a former executive of Pennzoil Co., as the CEO. Four years later, in January 2002, Kmart sought bankruptcy protection and, amid its reorganization, began closing many of its stores. By the spring of that year, the Penske Corporation decided to shut down the remaining 563 Penske Auto Centers.

Penske Racing also hit a rough patch in the late 1990s, experiencing several years without an Indy-car championship. Team Penske came roaring back to prominence on the Indy circuit in 2001, however, fielding the winning driver of the Indianapolis 500 that year as well as in 2002, 2003, and 2006. As of 2006, Penske Racing had teams competing in the IndyCar Series as well as the NASCAR Nextel Cup Series, the NASCAR Busch Series, and the American Le Mans Series. Renowned drivers like Mark Donohue, Mario Andretti, Bobby Unser, and Tom Sneva in the 1970s; Danny Sullivan, Rick Mears, and Al Unser, Sr., in the 1980s; Emerson Fittipaldi and Paul Tracy in the 1990s; and Helio Castroneves, Gil de Ferran, and Sam Hornish, Jr., in the early 2000s helped make Penske Racing one of the most successful organizations in the history of racing, winning 14 Indianapolis 500 titles and 18 National Championships by 2006.

Just as Penske Racing worked to reestablish its presence on the track, the Penske Corporation made major changes in the field of racetrack management. In 1996 Roger Penske took his Pennsylvania, California, and Michigan racetracks, as well as the corporation's two Competition Tire businesses, public as Penske Motor-sports, Inc. During that first year, the spinoff earned $10.9 million on revenues of $55.2 million. In the spring of 1999, however, Penske Motorsports was sold to International Speedway for $610 million. The Penske Corporation continued to play a role in the racetrack business as International Speedway's second largest shareholder, owning 8.6 percent of the company.

FUELING GROWTH AND EXPANSION INTO A NEW CENTURY

Throughout the 1990s and into the 21st century, the Penske Corporation continued to expand its retail automotive empire, adding dealerships to the California-based Penske Automotive Group and, in 1998, acquiring a significant percentage of United Auto Group (UAG), a publicly traded company operating dozens of car and truck dealerships, specializing in foreign and luxury vehicles. Roger Penske became UAG's CEO in the spring of 1998 and within a year the company achieved a 245 percent increase in profits. In 2001 Penske invested additional millions into UAG, increasing Penske Corporation's ownership of UAG to 57.9 percent. That same year, UAG rose to become the nation's second largest automotive retailer. UAG began expanding globally in 2002, with dealerships in the United Kingdom, Germany, Puerto Rico, and Brazil. Also that year the company acquired the Sytner Group, a chain of luxury automobile dealerships in the United Kingdom.

During the late 1990s, Penske Truck Leasing also established a global presence, establishing interests in Europe starting in 1997, followed by operations in South America in 1998 and Canada in 2000. Strategic acquisitions and mergers over the next few years allowed the company to grow steadily and substantially. By 2006 Penske Truck Leasing employed more than 20,000 people and operated approximately 200,000 vehicles, with revenues approaching $4 billion. Beginning in the mid-1990s, Penske explored new ways to leverage its truck-leasing business, forming lucrative partnerships with manufacturers through the establishment of Penske Logistics, a subsidiary of Penske Truck Leasing, in 1995. Penske Logistics quickly earned a solid reputation for helping manufacturers manage their supply chains, operate more efficiently, and increase market share. The company expanded operations throughout North America, South America, and Europe, attracting powerhouse clients such as Pepsi, Whirlpool, Ford, and General Motors.

Beginning with his career in racing and extending to his role as leader of a business empire, Roger Penske has earned a reputation as a determined competitor with an unsurpassed work ethic. A long-time resident of the Detroit area, Penske has directed some of his considerable energy toward the revitalization of downtown Detroit. As chairman of the Super Bowl XL Host Committee, Penske played an instrumental role in helping Detroit become the 2006 host of football's biggest match-up and spent years working to make the event successful. Penske's drive to win and his extraordinary attention to detail have become the stuff of legend among his colleagues and competitors and have fueled the success of the Penske Corporation in numerous automotive-related industries. Richard E. Dauch, chairman and CEO of American Axle & Manufacturing (AAM), echoed the expressions of many Penske acquaintances in a January 2000 Automotive News article: "He is one of the five most brilliant people I've ever met but he's also a competitive cuss. I tell you, he does not like to finish second."

Thomas M. Tucker

Updated, April Dougal Gasbarre;

Judy Galens

PRINCIPAL SUBSIDIARIES

United Auto Group Inc. (40%); Penske Truck Leasing (joint venture with GE Equipment Service); Penske Automotive; Penske Racing.

PRINCIPAL COMPETITORS

AMERCO; AutoNation, Inc.; Ryder System, Inc.

FURTHER READING

DeLorenzo, Matt, "Roger Penske: Multi-Talented Entrepreneur Just Keeps on Growing," Automotive News, January 18, 1988.

"Detroit Diesel to Merge with DaimlerChrysler AG," Foundry Management & Technology, September 2000, p. 11.

Finch, Peter, "Roger Penske: Running on 16 Cylinders," Business Week, June 1, 1987.

Frame, Phil, "Penske, GM Drift Apart After 20 Years," Automotive News, June 20, 1994, pp. 34.

Gallagher, John, "Chairman of the Bowl," Detroit Free Press, January 12, 2006.

Johnson, J. Douglas, "Driven," Indiana Business Magazine, May 1994, pp. 811.

Lowell, Jon, "Roger Roars Ahead: Penske Fires Up GM's Dying Diesels; Profits Replace Problems," Ward's Auto World, November 1988.

McCracken, Jeffrey, "Driven to Succeed," Automotive News, January 17, 2000, p. 41B.

Moses, Sam, "His Time Is Money," Sports Illustrated, November 21, 1988.

"Penske to Acquire Kmart Auto Service," Discount Store News, October 16, 1995, pp. 78.

Sedgwick, David, "Leuliete's Job at Penske: Expand World Business," Automotive News, November 11, 1996, pp. 12.

Smith, Jennette, "Roger Penske Has Been Detroit's Quarterback for Super Bowl XL," Crain's Detroit Business, January 9, 2006, p. 1.

Ulrich, Robert J., and David Drushal, "Penske Races to the Top," Modern Tire Dealer, July 1996, pp. 1621.

Vroom at the Top (film), New York: Association Films, 1976.

Woodruff, David, "Talk about Life in the Fast Lane," Business Week, October 17, 1994, p. 15558.

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Penske Corporation

Penske Corporation

13400 Outer Drive West
Detroit, Michigan 48239
U.S.A.
(313) 5925000
Fax: (313) 5925256
Web site: http://www.penske.com/

Private Company
Incorporated:
1969
Employees: 25,000
Sales: $4 billion (1996)
SICs: 7513 Truck Rental & Leasing Without Drivers; 7948 Racing Including Track Operations; 5511 New & Used Car Dealers

Ranked among Americas 50 largest private companies, Penske Corporation is a transportation services firm with major interests in truck leasing, diesel engine manufacture, auto racing, and retail automobile sales. Founded by former Indianapolis 500 racer Roger Penske, the company has revenues approaching $5 billion. Principal owner and CEO Penske has earned a reputation for building contenders on and off the racetrack with the simple business philosophy: Effort Equals Results. His companys stunning turnaround of ailing businesses like General Motors Detroit Diesel and Hertzs Truck Leasing is at least as impressive as his racing teams record ten Indianapolis 500 wins and nine national IndyCar championships.

The corporation operates in three distinct groups: transportation services, retail/service automotive, and performance automotive. The $1.8 billion (revenues) transportation services group includes the nations second largest full service truck leasing and renting business, Penske Truck Leasing Co., L.P., and the diesel engine manufacturing company Detroit Diesel Corporation. The retail automotive group includes six California car dealerships that collectively sell more than 35,000 Cadillacs, Chevrolets, Hondas, Lexuses, and Toyotas a year. The automotive performance group is built upon the highly successful Penske racing team and also runs the Michigan International Speedway and the Pennsylvania International Raceway. Penske took this division, including its Competition Tire businesses and racetracks, public as Penske Motorsports Inc. in 1996. The Penske groups 1995 acquisition of more than 850 Kmart Auto Centers added service to its roster and made it the nations largest independent tire dealer.

Origins in Founders Successful Racing Career

Roger Penske attended his first Indianapolis 500 race at age 14, and he bought his first car with money from a paper route. Although he was addicted to racing, Penske was also pragmatic; after earning a degree in business administration from Pennsylvanias Lehigh University in 1959, he went to work at the Aluminum Company of America (Alcoa) as a sales representative. But the world of work did not keep him from the racetrack.

In the early 1960s, while still a sales representative for Alcoa, Roger Penske became one of the most successful race car drivers around, competing in sports car, endurance, and Formula One races on weekends. His first win came in 1959, and over the next few years the accolades poured in. In 1962 Penske was voted Sports Car Driver of the Year by Sports Illustrated, The New York Times, and The Los Angeles Times. Having won five races in 1964, he left Alcoa for a job as general manager of the McKean Chevrolet dealership in Philadelphia. Having won the NASCAR Grand National in 1965, Penske retired from racing and bought the dealership. He returned to the sport in 1966 as the owner of Team Penske. The racing organization would go on to become the most successful in history.

Diversifications Contribute to Growth in the 1960s and 1970s

In the middle and late 1960s, Roger Penskes Chevy dealership prospered such that it generated capital for acquisitions, including a pair of specialty tire distributorships, Competition Tire East and Competition Tire West, and a small truck leasing operation. The truck leasing business soon enjoyed spectacular growth as private fleet owners discovered the benefits of leasing versus buying their truckspurchasing, fuel supply, scheduled maintenance, and repair were left in the hands of the lessor, allowing the fleet operator to focus on the distribution and routing of their products. By 1969 Penske Leasing had 33 locations in the northeastern United States. The Penske Corporation was set up that year as a holding company for Roger Penskes automotive-related enterprises.

By 1971 Roger Penske had auto dealerships in Philadelphia and Allentown, Pennsylvania, and in Detroit. His nearly legend--ary attention to detail set the pace at the dealerships. Sales climbed, helping to fuel expansion into other ventures.

Started as a business, Team Penske in many ways revolutionized motor sports. J. Douglas Johnson of the Indiana Business Magazine credited Roger Penske with bringing orderliness and professionalism to auto racing. One of Penskes racing competitors conceded to Forbes, May 28, 1979, He markets his car and sets up sponsorship programs more effectively than anyone else. Moreover, the exposure on televised broadcasts of major racing events, including the Indianapolis 500, provided enormous value when compared with the cost of a 30-second commercial spot, benefiting Penskes other businesses immeasurably.

Renowned drivers like Mark Donohue, Mario Andretti, Bobby Unser, and Tom Sneva in the 1970s; Danny Sullivan, Rick Mears, and Al Unser Sr. in the 1980s; and Emerson Fittipaldi and Paul Tracy in the 1990s helped make Team Penske the most successful organization in the history of racing, winning more than 80 IndyCar races, among them a record nine Indianapolis 500 titles by 1994 and eight IndyCar National Championships. Penskes winning image was clearly valuable to the corporations nonracing businessesbuying a new car from auto racings most successful team seems just a little flashier than buying it from an average dealer.

Accelerated Growth Via Acquisition and Turnaround in the 1980s

Although Penskes businesses enjoyed satisfactory growth throughout the 1970s, its expansion accelerated in the 1980s. Sales were $254 million in 1981, but by 1988 sales had topped $2 billion. The first business segment to swell was truck leasing. The unit had enjoyed excellent growth throughout the 1970s, but in 1982, Penske entered a joint venture with the ailing giant Hertz Truck Leasing. The Hertz unit had lost $40 million in 1981, and the company considered unloading it altogether. Roger Penske was invited to tour Hertzs operations, and soon he agreed to merge Penske Leasing with Hertzs truck operations. Penske trimmed 500 jobs and 30 locations from Hertz. After one year, the new Hertz-Penske Leasing made $1.2 million. Penskes initial stake in the company was 35 percent. By 1986 the share was upped to 50 percent, and Hertz-Penske acquired the heavy-duty truck leasing business of another major company, Leaseway Transportation, for $94 million. The company grew to become the second largest truck leasing company in the United States behind Ryder System, Inc., although a distant second, as Ryders sales quadrupled those of Hertz-Penske.

In June 1988 Penske Corporation bought Hertzs half of Hertz-Penske Leasing. Two months later, in August, Penske Corporations truck leasing operations merged with General Electric Credit Corporations Gelco Truck Services. The resulting company was a limited partnership named Penske Truck Leasing Co., L.P., with a Penske Corporation subsidiary as the general partner, responsible for operation of the firm. Penske initially owned 69 percent of the partnership and GE purchased another three percent in January 1989. The joint venture operated 400 locations and leased a fleet of more than 65,000 vehicles, but remained second to Ryder System in market share in the early 1990s.

Penske Corporations retail automotive group also made large acquisitions in the 1980s. In 1985 the nations largest Toyota dealership, Longo Toyota of suburban Los Angeles, came up for sale. Founded by Dominic Longo in 1967, the dealership had been the number one Toyota dealership in the United States since 1969. After Dominic Longo died in 1985, Penske agreed to buy it.

In 1988, Longo Toyota moved into a brand new facility in El Monte, California. The new facility covered 23 acres, employed more than 360 people, and boasted 104 service bays and 54 body shop stalls. Penskes continued emphasis on service was crucial to Longos exceptional rate of repeat and referral business. The dealership carefully targeted its market. For example, it employed special teams of salespeople who were fluent, collectively, in Mandarin and Cantonese Chinese, Japanese, Korean, Vietnamese, and Thai, as well as Spanish and English, making it easy and comfortable for L.A. residents originating from the Pacific Rim to do business at Longo. Roger Penskes son Greg serves as general manager of the dealership. In 1989 Penske started Longo Lexus; for both 1990 and 1991 this dealership was the Lexus retail sales leader in the United States.

Late 1980s Acquisition Brings Challenges, Growth

In December 1987 Penske Corporation made its biggest acquisition ever and plunged into the large-scale manufacturing sector at the same time with the purchase of 60 percent of General Motors $900-million-in-sales Detroit Diesel Allison division. Penske was approached in late 1987 by GMs investment banking firm, Salomon Brothers, with the possibility of a deal. General Motors hoped an entrepreneurial infusion could save the troubled engine-maker. Detroit Diesels North American market share had declined from 33 percent in 1979 to three percent, and it had lost a total of $600 million in the previous five years. Problems with labor relations, product design, performance, and consumer service were the root of the trouble. GM lost its diesel customers to Cummins and Caterpillar, and despite sinking $100 million into an upgraded plant during the 1980s the automotive giant seemed incapable of turning the unit around by itself.

Penske Corporations experience with fleet truck purchasing and its earlier operation of Detroit Diesel Allison distributorships in the East made the company an excellent choice as a partner. Roger Penskes $300 million infusion bought him 60 percent of the company and control of operations. He quickly began streamlining the new Detroit Diesel Corporation. The operating budget was slashed by more than $70 million by cutting jobs, consolidating facilities, and cutting unnecessary computer costs.

GMs poor management of the unit throughout the 1980s and uncertainty about the immediate future had depressed the morale of Detroit Diesel workers. Roger Penske set out to convince his new employees that their company would be competitive once again. In August 1988, several months after he began running Detroit Diesel, Roger Penske invited his 3,000 Detroit Diesel employees to the Michigan International Speedway for the Marlboro 500. After watching Team Penske drivers Rick Mears win the pole position, Al Unser Sr. in the Detroit Diesel-sponsored car lead for a time, and Danny Sullivan win the race, the Detroit Diesel employees were elated. But free race tickets were not Penskes only labor relations tool. He also made a point of scheduling regular meetings with union officials and members alike, thereby fostering a spirit of unanimity among the workers.

Revitalizing Detroit Diesels work force was a key to improving the companys fortunes. Also essential was bringing a better product to market. General Motors had invested a good deal of research and development into a new enginethe Series 60. The six-cylinder, four-stroke diesel featured integral electronic controls, improved fuel efficiency, and durability, and was relatively low-cost. The new engine was well received in the marketplace, helping Detroit Diesel turn a profit.

In September 1988 Penske Transportation bought the diesel electronic unit injector line from GMs Rochester Products Division. Penskes transportation services group also expanded Detroit Diesels product range through an operating agreement with Perkins Engines, a British subsidiary of the Canadian machinery maker Varity, formerly Massey-Ferguson, to market Detroit Diesel engines overseas and to provide smaller diesel engines for Penske to sell in North America. The arrangement gave Detroit Diesel a wide range of diesel engines, from five horsepower to 2,000 horsepower.

Penskes leaner Detroit Diesel began to win back market share by offering its customers significant savings. Confident of the subsidiarys future, Penske upped its stake to 100 percent in 1994. By that time, Detroit Diesels share had rebounded to more than one-fourth of the heavy-duty North American market.

The 1990s and Beyond

In 1995, Penske acquired 860 Kmart Auto Centers for $112 million and renamed them Penske Auto Center Inc. The purchase allowed Penske Corp. to surpass Discount Tire Co. and become the nations largest independent tire dealer. Under Kmart, the operation had lost $19 million on sales of $360 million in 1994. Roger Penske Jr., CEO of the new division, expected to double the business by 1999. The acquisition helped increase corporate revenues from around $3 billion in 1994 to an estimated $4 billion in 1996.

Roger Penske took his Pennsylvania, California, and Michigan racetracks, as well as the corporations two Competition Tire businesses, public as Penske Motorsports, Inc. in 1996. Early the following year, Penske Motorsports moved to acquire a controlling interest in the North Carolina Motor Speedway, Inc. In 1996, the spin-off earned $10.9 million on revenues of $55.2 million.

Although it is clear that Roger Penske Sr. has come a long way from his first win on a motor speedway, he likens business to racing, noting, If you want to get ahead, you have to make things happen. If you rest on your laurels for five minutes, theres always someone ready to pass you. As the champion driver and CEO neared his 60s, he appeared to be far from ready to rest on his laurels.

Principal Subsidiaries

Detroit Diesel Corporation; Penske Truck Leasing Co.; Diesel Technology Co.; Longo Toyota; Longo Lexus; Penske Honda; Penske Racing; Penske Cars, Ltd.

Further Reading

DeLorenzo, Matt, Roger Penske: Multi-Talented Entrepreneur Just Keeps on Growing, Automotive News, January 18, 1988.

Finch, Peter, Roger Penske: Running on 16 Cylinders, Business Week, June 1, 1987.

Frame, Phil, Penske, GM Drift Apart After 20 Years, Automotive News, June 20, 1994, pp. 34.

Johnson, J. Douglas, Driven, Indiana Business Magazine, May 1994, pp. 811.

Lowell, Jon, Roger Roars Ahead: Penske Fires Up GMs Dying Diesels; Profits Replace Problems, Wards Auto World, November 1988.

Moses, Sam, His Time is Money, Sports Illustrated, November 21, 1988.

Penske To Acquire Kmart Auto Service, Discount Store News, October 16, 1995, pp. 78.

Sedgwick, David, Leulietes Job at Penske: Expand World Business, Automotive News, November 11, 1996, pp. 12.

Ulrich, Robert J., and David Drushal, Penske Races to the Top, Modern Tire Dealer, July 1996, pp. 1621.

Vroom at the Top, (film) New York: Association Films, 1976.

Woodruff, David, Talk about Life in the Fast Lane, Business Week, October 17, 1994, p. 155158.

Thomas M. Tucker

updated by April Dougal Gasbarre

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"Penske Corporation." International Directory of Company Histories. . Retrieved August 21, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/penske-corporation

Penske Corporation

Penske Corporation

13400 Outer Drive West
Detroit, Michigan 48239
U.S.A.
(313) 592-5000
Fax: (313) 592-5256

Private Company
Incorporated: 1969
Employees: 10,000
Sales: $2.80 billion

Penske Corporation is a transportation services company with major interests as diverse as truck leasing, diesel engine manufacture, auto racing, and retail automobile sales. Founded by former Indianapolis 500 racer Roger Penske, the company has revenues approaching $3 billion. Principal owner and CEO Penske has earned a reputation for building contenders on and off the racetrack. His companys stunning turnaround of ailing companies like General Motorss Detroit Diesel Allison and Hertzs Truck Leasing is at least as impressive as his racing teams record eight Indianapolis 500 wins and seven national IndyCar championships.

The corporation operates three distinct groups: transportation services, retail automotive, and automotive performance. The transportation services group includes the nations second largest full service truck leasing and renting business, Penske Truck Leasing Co., L.P., and the diesel engine manufacturing company Detroit Diesel Corporation. The retail automotive group includes Longo Toyota, Penske Cadillac, and Penske Honda in California. The dealerships collectively sell more than 35,000 Cadillacs, Chevrolets, Hondas, Lexus, and Toyotas a year. The automotive performance group is built upon the highly successful Penske racing team, and also runs the Michigan International Speedway and the Pennsylvania International Raceway. The group also participates in a joint venture, Ilmor Engineering of Great Britain, with Chevrolet, to build the V-8 engine used in the vast majority of winning Indianapolis race cars in the late 1980s and early 1990s.

In the early 1960s, while still a sales representative for the Aluminum Company of America, Roger Penske became one of the most successful race car drivers around, competing in sports car, endurance, and Formula One races on weekends. In 1962 Penske was voted Sports Car Driver of the Year by Sports Illustrated, The New York Times, and The Los Angeles Times. Penskes love of cars convinced him to leave the aluminum company, and in 1963 he became general manager of a Chevrolet dealership in Philadelphia. Two years later, Penske bought the dealership and gave up racing to pursue his business interests, but he soon returned to the sport as the owner of a racing team that became the most successful in history.

In the middle and late 1960s, Roger Penskes Chevy dealership prospered. Penske acquired a pair of specialty tire distributorships, Competition Tire East and Competition Tire West, and a small truck leasing operation. The truck leasing business soon enjoyed spectacular growth as private fleet owners discovered the benefits of leasing versus buying their truckspurchasing, fuel supply, scheduled maintenance, and repair were left in the hands of the lessor, allowing the fleet operator to focus on the distribution and routing of their products. By 1969 Penske Leasing had 33 locations in the northeastern United States. The Penske Corporation was set up that year as a holding company for Roger Penskes automotive-related enterprises.

By 1971 Roger Penske had auto dealerships in Philadelphia and Allentown, Pennsylvania, and in Detroit. His nearly legendary attention to detail set the pace at the dealerships. Sales climbed, helping to fuel expansion into other ventures.

Started as a business, Team Penske in many ways revolutionized motor sports. One of Penskes racing competitors conceded to Forbes, May 28, 1979, He markets his car and sets up sponsorship programs more effectively than anyone else. The exposure on televised broadcasts of major racing events, including the Indianapolis 500, provided enormous value when compared to the cost of a 30-second commercial spot.

Penskes businesses, too, benefited from the publicity generated by the racing team. Renowned drivers like Mark Don-ohue, Mario Andretti, Bobby Unser, and Tom Sneva in the 1970s; Danny Sullivan, Rick Mears, and Al Unser Sr. in the 1980s; and Emerson Fittipaldi and Paul Tracy in the 1990s helped make Team Penske the most successful organization in the history of racings greatest eventthe Indianapolis 500 with a record eight wins by 1991. Penskes winning image was clearly valuable to the corporations nonracing businessesbuying a new car from auto racings most successful team seems just a little flashier than buying it from just an average dealer.

While Penskes businesses enjoyed growth throughout the 1970s, that growth accelerated in the 1980s. Sales were $254 million in 1981, but by 1988, they had topped $2 billion. The first business segment to swell was truck leasing. The unit had enjoyed excellent growth throughout the 1970s, but in 1982, Penske entered a joint venture with the ailing giant Hertz Truck Leasing. The Hertz unit had lost $40 million in 1981, and the company considered unloading it altogether. Roger Penske was invited to tour Hertzs operations, and soon agreed to merge Penske Leasing with Hertzs truck operations. Penske trimmed 500 jobs and 30 locations from Hertz. After one year, the new Hertz-Penske Leasing made $1.2 million. Penskes initial stake in the company was 35%. By 1986 the share was upped to 50%, and Hertz-Penske acquired the heavy-duty truck leasing business of another major company, Leaseway Transportation, for $94 million. Hertz-Penske was then the second-largest truck leasing company in the United States behind Ryder System, Inc., although a distant secondRyders sales quadrupled those of Hertz-Penske.

In June 1988 Penske Corporation bought Hertzs half of Hertz-Penske Leasing. Two months later, in August, Penske Corporations truck leasing operations merged with General Electric Credit Corporations Gelco Truck Services. The resulting company was a limited partnership named Penske Truck Leasing Co., L.P., with a Penske Corporation subsidiary as the general partner, responsible for operation of the firm. Penske initially owned 69% of the partnership and GE purchased another 3% in January 1989. The joint venture operated 365 locations and 55,000 vehicles, but remained second to Ryder System in market share.

Penske Corporations retail automotive group also made large acquisitions in the 1980s. In 1985 the nations largest Toyota dealership, Longo Toyota of suburban Los Angeles, came up for sale. Founded by Dominic Longo in 1967, the dealership had been the number-one Toyota dealership in the United States since 1969. After Dominic Longo died in 1985, Penske agreed to buy it.

In 1988, Longo Toyota moved into a brand new facility in El Monte, California. The new facility covered 23 acres, employed more than 360 people, and boasted 104 service bays and 54 body-shop stalls. Penskes continued emphasis on service was crucial to Longos exceptional rate of repeat and referral business. The dealership carefully targeted its market. For example, it employed special teams of salespeople who were collectively fluent in Mandarin and Cantonese Chinese, Japanese, Korean, Vietnamese, and Thai, as well as Spanish and Englishmaking it easy and comfortable for L.A. residents originating from the Pacific Rim to do business at Longo. Roger Penske s son Greg serves as general manager of the dealership. In 1989 Penske started Longo Lexus; for both 1990 and 1991 this dealership was the Lexus retail sales leader in the U.S.

In December 1987 Penske Corporation made its biggest acquisition ever, and leapt into the large-scale manufacturing sector at the same time with the purchase of 60% of General Motors $900-million-in-sales Detroit Diesel Allison division. Penske was approached in late 1987 by GMs investment banking firm, Salomon Brothers, with the possibility of a deal. General Motors hoped an entrepreneurial infusion could save the troubled engine-maker. Detroit Diesel had reportedly lost $70 million in 1987. Its North American market share had declined from nearly 30% in 1979 to 3%. Product and consumer service problems were the root of the trouble. GM lost its diesel customers to Cummins and Caterpillar, and despite sinking $100 million into upgraded plant during the 1980s the automotive giant seemed incapable of turning the unit around by itself.

Penske Corporations experience with fleet truck purchasing, and earlier operation of Detroit Diesel Allison distributorships in the East, made the company an excellent choice as a partner. Penske took control of operations and quickly began streamlining the new Detroit Diesel Corporation. The operating budget was slashed by more than $70 million by cutting jobs, consolidating facilities, and cutting unnecessary computer costs.

GMs poor management of the unit throughout the 1980s and uncertainty about the immediate future had depressed the morale of Detroit Diesel workers. Roger Penske set out to convince his new employees that their company would be competitive once again. In August 1988, several months after he began running Detroit Diesel, Roger Penske invited his 3,000 Detroit Diesel employees to the Michigan International Speedway for the Marlboro 500. After watching Team Penske drivers Rick Mears win the pole position, Al Unser Sr. in the Detroit Diesel-sponsored car lead for a time, and Danny Sullivan win the race, the Detroit Diesel employees were elated.

Revitalizing Detroit Diesels work force was key to improving the companys fortunes. Also essential was bringing a better product to market. General Motors had invested a good deal of research and development into a new enginethe Series 60. The six-cylinder, four-stroke diesel featured integral electronic controls, improved fuel efficiency, durability, and was relatively low-cost. The new engine was well received in the marketplace, helping Detroit Diesel turn a profit.

In September 1988 Penske Transportation bought the diesel electronic unit injector line from GMs Rochester Products Division. Penskes transportation services group also expanded Detroit Diesels product range through an operating agreement with Perkins Engines, a British subsidiary of the Canadian machinery maker Varity, formerly Massey-Ferguson, to market Detroit Diesel engines overseas, and to provide smaller diesel engines for Penske to sell in North America. The arrangement gave Detroit Diesel a wide range of diesel engines, from 5 horsepower to 2,000 horsepower.

Penskes leaner Detroit Diesel was able to offer significant savings, and began to win back market share. Confident of the subsidiarys future, Penske Corporation bought another 20% in 1988, and by 1990 the subsidiary was 80% owned by Penske Transportation, with GM owning 20%.

Penske Corporations three groups, retail automotive, transportation services, and automotive performance, operate under Roger Penske s philosophy of maximizing performance while minimizing expenses. Undoubtedly, the 1990s will offer new challenges to transportation companies, but Penske Corporations play-to-win philosophy likely will serve the company well across its varied business segments.

Principal Subsidiaries

Detroit Diesel Corporation; Penske Truck Leasing Co.; Diesel Technology Co.; Longo Toyota; Longo Lexus; Penske Honda; Penske Racing; Penske Cars, Ltd.; Michigan International Speedway; Pennsylvania International Speedway; Indy Car Grand Prix Corporation.

Further Reading

Finch, Peter, Roger Penske: Running On 16 Cylinders, Business Week, June 1, 1987; DeLorenzo, Matt, Roger Penske: Multi-talented entrepreneur just keeps on growing, Automotive News, January 18, 1988; Moses, Sam, His Time is Money, Sports Illustrated, November 21, 1988; Lowell, Jon, Roger roars ahead: Penske fires up GMs dying diesels; profits replace problems, Wards Auto World, November 1988.

Thomas M. Tucker

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"Penske Corporation." International Directory of Company Histories. . Encyclopedia.com. 21 Aug. 2017 <http://www.encyclopedia.com>.

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"Penske Corporation." International Directory of Company Histories. . Retrieved August 21, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/penske-corporation-0