Penske Automotive Group, Inc. (PAG - Free Report) recently announced that it is implementing a number of actions to boost the firm’s cash position and preserve financial flexibility in the face of rising uncertainty due to the coronavirus crisis.
The company has enforced a variety of measures, including a company-wide hiring freeze, substantial cost cuts, staffing-level adjustments, postponement of $150 million in capex, and negotiated rent deferrals at different locations for up to 90 days, to counter the pandemic-led crisis.
Additionally, executive and management compensation has been drastically slashed, including a 100% pay cut for the CEO and president during the crisis. The board of directors has also suspended cash compensation for the next six months.
Further, the coronavirus pandemic has affected businesses across all markets of Penske, with several dealership operations being suspended or significantly reduced.
In the United States, Penske’s automotive dealership operations have suffered a drop in unit volume and service revenues due to shelter-in-place orders issued in several states. However, online sales of new and used vehicles remain available at most locations, while the service departments remain open to meet essential transportation needs.
In the U.K., all dealerships closed on Mar 24 to avoid the spread of the virus in compliance with government order. The U.K. government has introduced the Coronavirus Job Retention Scheme, whereby it will compensate Penske for furloughed employees for up to 80% of the employee's monthly salary, subject to certain limits.
Further, in Italy, all dealership locations have been shut down with service available only on an emergency basis. Although online sales and service operations remain available in Germany, the use of the workshops continues to decline. The Italian and German governments have put in place programs called the Casa Intergracion and KUG, respectively to provide benefits to displaced workers. Moreover, in Spain, all dealership locations are closed, other than limited service availability. The Spanish government has also set up a program –– ERTE –– to provide advantages for the displaced employees.
In Australia, all non-essential business operations have been closed by government order. However, Penske Australia has been deemed essential, and therefore, parts, service, and defense functions remain operational. However, in Japan, all dealerships and locations are operating normally.
Meanwhile, the company has $1.3 billion in liquidity, including $850 million in cash on hand and availability via non-floor credit facilities, and around $450 million in potentially funded real estate, which will be used to combat downturns caused by production shutdowns and revenue declines.
Penske currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The rapidly-spreading coronavirus pandemic has become a concern for other global auto biggies as well, including Tesla (TSLA - Free Report) , Honda Motor (HMC - Free Report) , Toyota Motor (TM - Free Report) , Volkswagen AG, Goodyear Tire, Nissan, Harley-Davidson and Hyundai Motor. Several automakers have closed their factories and suspended production, while the others plan to change manufacturing processes and cut production levels in their plants, in line with the nation-wide campaign addressing the crisis. The pandemic has not only dampened consumer sentiment and marred vehicle demand but also distorted the global supply-chain balance.
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