Roger Penske: The Interview

Roger Penske is one of America’s most respected captains of industry, a name uttered with reverence from corporate boardrooms to racetrack RV parks. Whether it’s leasing and distributing medium- and heavy-duty trucks, retailing new and used automobiles, or running wildly successful teams in NASCAR, IndyCar, and other racing series, Roger Penske is a household name. His driven, entrepreneurial sense in creating his business empire has proven unerring, though he will admit to disappointments. At Acura’s unveiling of its new IMSA race car—for a two-car team that Penske will campaign in 2018—Motor Trend sat with the 80-year-old Penske for a lengthy discussion of past, present, and future.

It’s been a few years (2012) since you won your first NASCAR championship—something you’ve said was a lifelong goal. But now that there’s been time to reflect, would you say that’s still the most personally satisfying racing victory for you?

Winning that was something we hadn’t achieved as a team. We were close. We were in the running last year. The competitive challenge of NASCAR, over 38 races, with format changes … you gotta be on your game. Certainly with teams like [Rick] Hendrick, [Joe] Gibbs, [Richard] Childress—they are obviously in the same boat we are. There are eight, 10, 12 cars that can win any race. We have good drivers and good sponsors. We are well supported by Ford.

Obviously, IndyCar is where my heart is because that’s where we got started. We have four great guys who are competing for us. We can see the championship, but we have to execute.

We also are competing in the Supercars series in Australia. That’s been our latest real challenge. I was going to Australia on business, for MAN and Western Star distribution and Detroit Diesel engines, and I wanted to have a way to build the brand there. The Supercars series would be something that could give us some notoriety and the brand-building capability. So we bought a small partnership, and we struggled in the first year because Marcos Ambrose decided after a couple races he wanted to do something else. Then we got Fabian Coulthard, and as part of building the team, we contracted with Scott McLaughlin, who is the hottest young driver with 11 pole positions and six victories. So we’re not only leading the driver championship, but we’re leading the team championship.

Our latest challenge is in IMSA with Acura. We go back to 1966 when the first race we entered was at Daytona with the Corvette. So this is a great step for us because we have the driver talent in-house to a certain extent. The Honda powertrain is well developed and reliable. The chassis almost won Le Mans with Porsche. Along with Honda Performance Development and our people, from a technical standpoint we can put together a competitive package. I have moderate expectations because we can’t walk into these partnerships and think we can have success overnight. But we’ve raced with Honda before and had success. We have six Acura stores across the country, so it’s nice to tie together the business and performance. I’m pretty excited about the opportunity.

You mentioned your car-retail holdings. Where do you see the U.S. auto market headed?

The market has a lot of push, primarily in the premium luxury sector. Land Rover and Porsche have their inventories under control, but the mix-shift from sedans to SUVs has caught some premium guys short, in terms of not having the product lines they need. Sedan residuals are off, and that’s had an impact on leasing. I see a flatter year for the next 12 to 24 months. We do see pressure on margins from the internet, TrueCar and other disruptors in the retail business, so we are looking at how do we take cost out. We probably have a little more work to do because premium luxury has been a 50, 55, 60 percent lease market. Those residuals are being impacted because of all the sedans coming back.

I’ve been concentrating on my used car superstores, and we’ve had success with CarSense (the used car superstores Penske recently acquired).

We’re also making a tremendous investment in facilities. But if we can sell cars over the internet, that will affect our parts and service business. Are we going to have to have a new franchise that is doing service remotely and have 25 bays that are empty? We have to talk to the OEMs about that. We’re not just looking at what’s happening today. We’re looking at two, three, four, five years from now, whether it’s car sharing or maintenance.

Which automaker is doing things right today?

Every one of them is looking across the bow of being more efficient and taking cost out. We’re seeing the electrification of the business where everyone has the same kilowatts and torque and fuel mileage, so now it’s about the customer experience, styling, technology. That’s what they are locking onto. We represent all the great brands, so I never say one is ahead of the other. One might have a different approach. We’re seeing a new relationship with Acura. [Brand General Manager] Jon Ikeda is focusing on performance, and that’s another way to connect with customers.

What is your feeling about the overall business climate, given the actions of the Trump administration?

The administration was very positive, as far as what was going to happen. With health care and taxes and smaller things he can sign himself, these haven’t affected the auto industry yet. The EPA is revisiting rules on gliders in the truck industry. But I’m not in Wall Street, so I don’t know the impact of [repealing] Dodd-Frank [Wall Street Reform and Consumer Protection Act]. Washington today certainly is an important part of the face of the U.S., and that’s my biggest concern. I go around the world, and our reputation is somewhat tarnished by our inability to get things done, and the M.O. that Trump has. [Politically] I’m straight down the middle. I want to support the administrations, whether they are Republican or Democrat. I have never relied on government to make my business better, and I’m not counting on them to make it worse. You put the effort in, and whether you are 15 or 60 you have the opportunity. That’s what keeps me active. You look at Uber and the amazing things that have taken place. Ten years from now, we’ll see which had sustainability and which were pop-ups that lost their momentum. Amazon has a tremendous market cap but needs a big return.

Speaking of sustainability, what do you think of Tesla?

Tesla has done a really good car, but I wonder about their distribution model. They want to go direct, so my concern is about captive financing because when business goes bad, the banks go away. Ford Credit kept Ford in business during the financial crisis. As Tesla goes to next level, the Model 3 will have less margin, and selling more models means more customers to be handled properly. When you look at the bottom line, there seems to be an equity infusion going into debt. There has to be a point where the business makes money, where it’s more than things people want to have. You have to ask what are their residuals and battery technology, when companies like Porsche and Land Rover are coming with similar products.

There was talk during the Recession about you becoming chairman or CEO of bankrupt General Motors. Was there any truth to that?

No. You know how stories get started. [Former Chrysler CEO Lee] Iacocca talked to me, but it was not in the cards. That was many years ago. I had my own business. I wouldn’t be a good big-company CEO. I want to go do things.

You’ve talked about human capital as the most essential piece of your business. But with 60,000-plus employees to navigate, how do you determine who would be a good fit in your organization?

We have a robust recruiting process. Look at the people who work for us, most come up through the organization. Our culture gets instilled early on. We stretch people. No one is ever ready, but nobody fails. We move them on to find what works well for them. When we look at employee surveys, one question we get is that we don’t move fast enough. For every 200 employees, we have probably one or two people who are specifically focused on human resources. That way, you can connect with someone if you have a concern. At big organizations, you can have nowhere to go. It’s hard to get in our business, and we want it to be hard to leave.

What business decision would you want to do over—either a decision you went ahead with or one you decided not to take?

We were never able to execute the purchase of Saturn from GM. I felt we had a good purchase there. Samsung would have built the cars. But at the end of the day, it was a disappointment. My biggest failure was the Kmart auto centers, when Kmart went bankrupt, and we went from 1,400 (Penske Auto) centers to 900, and we had to shut it down.

You are known as a boots-on-the-ground CEO. You’ll go out to your operations and talk to those who are interacting with customers every day. How do you interact with the one who’s running the local operation?

In the morning, I do a site walk around with the people, and I encourage our managers. I don’t go to the conference room. I walk around the facilities. In Belfast, we have a big complex with Mercedes, Audi, BMW, and Porsche, and at 7:30, I meet those managers, walk all the sites, and get up to speed.

One of the things that came from a site walk was when we bought Detroit Diesel in the ’80s. I shut down the management cafeteria and instead had management meet with the people we do business with. We put air conditioning and TVs in the employee break areas rather than have the chairs chained down like they were. We had over 3,000 grievances at the time, and we were able to bring those down and develop a very important relationship with the union. When (President Bill) Clinton came to Detroit, he came to Detroit Diesel because of the partnership we had developed with the union.

 

 

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