Penske Automotive Group's service and parts operations raked in roughly $260.3 million in overall retail automotive gross profit during the first quarter of 2015. This marked a 5.8-percent year-over-year increase and also accounted for 41.4 percent of the company’s gross profit mix in the quarter.
When asked how much of a tailwind recall services were adding the parts and service business at Penske, the group’s chairman, Roger Penske, said the results were a bit “lumpy.” But they certainly have provided a chance to connect with consumers.
“We looked at what the recall activity, how does it really impact us, and I think it goes from 5 to 10 percent of our business,” Penske said. “It’s kind of lumpy. You get a big surge of recalls, then you might not have any for three or four months."
Penske went on to point out that "any little defect that's found on an automobile" nowadays, ever since the General Motors' ignition switch recall, becomes its own recall due to the government safety regulations put in place by the NHTSA.
This was a sentiment shared by AutoNation’s chairman, president and chief executive officer Mike Jackson, who also said this quarter that the general consensus among automakers seems to be “if in doubt, recall.”
Penske is also one among many that sees the service push put on the industry by recalls as a part of the business that will persist for the time being.
“So we’re the depository for that work,” Penske said. “And I think we’ll continue to see that as part of our income stream on a going-forward basis.”
But the situation is not at all a doom-and-gloom condition to the Penske chairman, who sees a relationship-building and vehicle acquisition possibility with every recall the company sees come into its service bays.
“I think recall business is good,” Penske said. “We welcome it. I think that’s why we’ve committed to the large fixed operations that we have in order to be able to handle it as it comes in. And I think it also gives us the chance — think about this one — it gives us the chance many times to see vehicles which we haven’t seen. So, it gives us the chance to connect with a customer with an older vehicle and in many cases we’re converting those into used-car or new-car sales.”