Despite a takeover by a man with a Midas touch - Roger Penske - and a more than 20% improvement in revenue, UnitedAuto Group Inc. dropped from No. 2 to No. 3 on the Top 100 megadealer list.
Although edged out for second place by Asbury Automotive Group - $4.1 billion versus $4.02 billion - UnitedAuto made some important administrative strides during 1999.
The most obvious was the April announcement that Roger Penske would buy controlling interest in the company for $83 million and succeed financier Marshall Cogan as chairman and CEO. Mr. Cogan had run into money problems, prompting the UnitedAuto transaction with Mr. Penske.
Shortly after the second installment of the deal was paid, in August, Standard & Poors affirmed UnitedAuto's single "B plus" corporate credit and single "B minus" subordinated debt rating. The company also was removed from CreditWatch, on which it had been since April 1999. Standard & Poors also noted that the UnitedAuto's "outlook is stable."
"Prior to Roger Penske, the company was on life support, mostly because of the dark cloud that was hanging over the entire Cogan empire," says Jim Davidson, UAG's executive vice president of finance. "I'd say there are major changes in the way the business is being managed. It's now being managed by a person who has been in the business for 35 years."
In late December, UAG said it was going to repurchase up to 10% of its outstanding stock over the next two years.
On the operational side of the business, UAG picked up San Diego-based Colonial Ford in May and renamed it National City Ford. The megadealer also acquired Honda of Tempe in Tempe, AZ, and Midway Ford in Collierville, TN. Midway Ford was renamed Landers Ford.
The additional dealerships and the strong market helped UAG take in $4.02 billion in total revenue, up 20.61% from last year's $3.33 billion.
So far in 2000, UAG has added Mercedes Benz of San Diego in Kearny Mesa, CA and Long Ford in Jacksonville, AR. Long Ford was renamed Landers Ford North.
One of the major questions remaining from the Penske takeover of UnitedAuto is when or if Penske's other dealerships will be rolled into UAG.
"Roger has answered that question from the beginning by saying that is not in the game plan," says Mr. Davidson. "Today, there's no benefit to combining the two. That's not to say that there might be a benefit some day in the future."
Although the two corporate entities are not formally combined, there is a lot of talent sharing taking place. UAG executive vice presidents Michael Duff and Paul Walters, senior VP Philip Hartz and Southeast Regional President Kenneth Hunt all came from the Penske organization.
"Penske has been very effective because he has great people," says James A. Mateyka, vice president of A.T. Kearney's automotive consulting practice. "That's the real strength of his organization."
Adds Mr. Davidson, "I think the future is very positive. We now have financial resources and a leader with vision and direction."
Courtesy Auto Group - Littleton, CO (#15 last year) Sold larger dealerships to AutoNation, Inc. or independent partners Tasha Automotive Group - Fremont, CA (#18 last year) Sold to AutoNation, Inc. FirstAmerica Automotive - San Francisco, CA (#19 last year) Sold to Sonic Automotive, Inc. Cross-Continent Auto Retailers - Amarillo, TX (#23 last year) Sold to AutoNation, Inc. Thomason Auto Group - Portland, OR (#38 last year) Sold to Asbury Automotive Group Lucas Dealership Group, Inc. - Cupertino, CA (#48 last year) Sold to undisclosed buyer Crown Automotive - Greensboro, NC (#66 last year) Sold to Asbury Automotive Group Ira Motor Group - Danvers, MA (#90 last year) Sold to Group 1 Automotive, Inc. Precision Enterprises Tampa, Inc. - (#97 last year) Sold most dealerships to Asbury Automotive Group