Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group First Quarter 2020 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through May 13th on the Company's website under the Investors tab at www.penskeautomotive.com.

I will now introduce Anthony Pordon, the Company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead..

Thank you, John, and good afternoon everyone, and again thank you for joining us today.

A press release detailing Penske Automotive Group's first quarter 2020 financial results was issued this morning and is posted on our website along with the first quarter earnings presentation designed to assist you in understanding the first quarter and our results. As always, I'm available by email or phone for any follow-up questions you may have.

Joining me for today's call is Roger Penske, our Chairman; J.D. Carlson, our Chief Financial Officer; and Shelley Hulgrave, our Corporate Controller. Our discussion today may include some forward-looking statements about future events, including the impact links and financial expectations related to COVID-19.

Also, we may make forward looking statements about our operations earnings potential and outlook on the call today. We may also discuss certain non-GAAP financial measures such as earnings before Interest taxes, depreciation, amortization or EBITDA and free cash flow.

We have prominently presented the comparable GAAP measures, and I've reconciled the non-GAAP measures in this morning's press release and investor presentation which is available on our website to the most directly comparable GAAP measures.

Our actual results may vary because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations. I direct you to our SEC filings, including our Form 10-K, for additional discussion and factors that could cause results to differ materially.

At this time, I'll now turn the call over to Roger Penske..

Thank you, Tony. Good afternoon everyone and thank you for joining us today. Before discussing our first quarter performance, I would like to make a few comments about COVID-19. This has been an extremely challenging time for all of us, and our thoughts are with those most affected.

Our first priority is to provide a safe environment for all our employees and customers. We have quickly implemented enhanced cleaning protocols and for social distancing, and take another action to protect her employees and our customers. I'm proud of how our team has responded.

The COVID outbreak across the world has adversely impacted the global economy, causing a significant disruption to our business. In March, it began to impact all our markets. Many of our U.S. and Germany dealerships faced shelter in place orders. All operations in Italy, Spain and the UK were closed.

As a result, our overall same-store automotive retail unit sales for the month declined 40%. In the last half of March and all of April, our automotive dealerships sales and service operations were limited due to related restrictions.

In response, we implemented a hiring freeze, initiated expense reduction and deferred approximately a $150 million in capital expenditures. We also furloughed approximately $15,000 representing 57% of our worldwide workforce and initiated pay cuts for executives. We believe these actions will help us overcome the challenges of COVID-19 pandemic.

We will continue to actively monitor the situation and adjust our business model to adapt to the changes presented by COVID-19. In the quarter, we focused on liquidity and preserving cash.

During the first quarter, we generated $212 million of cash flow provided by operating activities and $145 million in free cash flow and reflect a $30 million decrease in CapEx compared to the first quarter of last year.

As of March 31, 2020, we had access to $1.3 billion in liquidity including $432 million of cash, $450 million availability through revolving credit facilities, and access to $450 million in potentially financeable real estate. We have $2.6 billion in non-vehicle debt. Net debt to total capitalization was 44.7% compared to 46% at December 31st.

Net non-vehicle debt to EBITDA was 2.9 times. Looking at the PAG balance sheet at the end of March, the balance sheet remains in good shape. Total inventory is $4.3 billion, which is flat compared to December 31 last year. Our floor plan was $3.9 billion. We have approximately 350 million in vehicle equity on our balance sheet.

Let me now turn to the details of the first quarter of 2020. In the U.S. during January and February, same-store new and used unit sales increased 7.5% while internationally same-store unit sales declined 1.1%. Due to COVID-19 in March, total same-store total unit volume declined 40% while fixed operations declined 23%.

As a result, in the entire first quarter, our revenues were down 10% to $5 billion. Income from continuing operations were $52 million and earnings per share was $0.64. Our income was impacted by the closure of all dealerships in the UK starting on March 24.

As you know, March is a registration month in the UK and is typically the largest sales month of the year. During our registration month, we would normally deliver 30% of our new and used volume during the last week. Nearly 5,000 units which represent approximately 13 million gross when on delivered.

We also could not deliver another potential 2,000 units representing 2.5 million gross in our used car super centers. Income was also impacted by a decline in used commercial truck gross profits from pressures on value due to the changing market conditions. Looking at the details our retail automotive, same-store units declined 15%.

In the U.S., January and February, we were up 8%, International was down 1%. In March in the U.S., we were down 41% and International was down 39%. Same-store gross profit per unit retail performs well, new vehicle $3,211 flat with last year. On used vehicle side, we're $1,375, up $48 or 4%. Our finance and insurance was $1,363, up 6% or $87 per unit.

Variable gross profit per unit was $3,493, up $86 or 2%. Our service and parts revenue declined 6%, XFX, we're down 4.4%. In customer pay, we're down 10.2% in warranty, and our collision was up 1.4%. We also had in our same-store warranty decline in our international markets are 16%.

Moving onto our used vehicle supercenter businesses, the 16 supercenter locations closed in March and remained closed through the majority of April. During the quarter, revenue declined 3% to $305 million. Same-store unit sales increased 2% in February, but declined 49% in March, including 56% in the U.S., and 47% in the UK.

Our average transaction price in our supercenters increased 4% to $15,158 and the variable gross profit was $1,953 down 2%. As we look at expansion, we had opened two locations in 2019, one in the U.S. and one in the UK. Both had successful openings and outperformed our initial expectations.

Today, we have four sites under development, but due to the pandemic we cease construction and move the completion of these sites out the 2021. Moving onto our digital initiatives, the performance of docuPAD exceeding our expectations with enhanced training and a focus on improving product penetration, F&I per unit in the U.S. increased $93 or 7%.

Our digital initiatives continue to grow online sales. Today, we have over 56,000 vehicles online through our digital channels. In Q1, under 50% of our sales in the U.S. were attributed to our digital efforts. Offsite deliveries are increasing, with many dealerships reporting over 20% during this period.

Our preferred purchase engagement increased more than 50% in April when compared to last year while several lender partners made policy changes to allow digital signing, remote identification verification, and e-contracting.

We enhanced penskecars.com and CarSense websites to provide an enhanced digital experience including updating technology to encourage more online vehicle transactions. Let me turn now to our retail commercial truck dealership business.

We experienced steady demand during the quarter, retailing over 3,500 trucks and generating almost 500 million in revenue with a return on sales of 3%. New unit sales increased 49% while same-store unit sales only declined 2%, which when compared to the overall North American market, which was down 26% in the first quarter.

Same-store service and parts revenue declined 6%, but our fixed absorption was 125%. Turning the Penske Transportation Solutions. In Q1, PTS generated 2.2 billion in total revenue and had income of 47 million.

PTS' net income declined 42 million in the quarter from a 20 million reduction and gain on sales of use revenue equipment, due to market conditions, 11% decline in rental from lower utilization, and the benefits PTS had last year from a legal settlement of 11 million.

As a result, our equity earnings were 13.6 million, compared to 25.8 in Q1 last year. In closing, our team around the globe is working tirelessly. I'm encouraged by the many positive actions taken by our team to address the changing marketplace.

Our digital initiatives continue to grow our online sales, further we've adapted sales processes to facilitate a greater e-commerce focus, curbside or home delivery, pick up and drop off for our service customers and our remote F&I process through docuPAD.

As a result, we have seen business improve from week-to-week, as we believe customers have become more comfortable with buying vehicles under the current conditions. In fact, unit sales were up 40% in the U.S. in the last 10 days of April, when compared to the last 10 days of March.

We believe that many actions taken will help us overcome the challenges of COVID-19. Thanks for joining us on the call today and for your confidence in our company. At this time, I'll open up to the operator for your questions..

Thank you. [Operator Instructions] And we'll go to the line of Michael Ward with Benchmark..

A couple of questions on the UK.

Was the parts and service shutdown throughout March and April as well? And what is the status of that? And then the second thing is, did you have 5,000 units on your lots ready to be delivered or are you still waiting delivery for manufacturers? And if you're still waiting on deliveries, are there additional units that are contracted to be delivered?.

Well, let me let me answer that question. As you know in the UK, most of the new inventory is stored on the OEM premises, but they are sold units and will be brought into the dealerships, done at PDI then delivered to the customer. Some of the used units obviously would be on site.

And then, we have the normal pipeline that's coming in, but that's not very strong as we look at the current situation. From the standpoint of the business from a service perspective, we were close. And when you look at the UK registrations that came out yesterday, the market was down 97%.

We had a few of our locations open for service, but mainly on an emergency basis from the standpoint of service. As we look at the business today with roughly 9,700 people in our UK, we had 90% of them on furlough for most of the period, since the pandemic started.

And we're putting back 300 this week to start up our parts and service business hopefully on May 11th, and we'll add another 300 the next 10 days and another 300 at the end towards the end of the month. And that would be based on the government opening up the ability for us to deliver cars from our sales locations..

Okay. So as we look at the UK market, typically you get the blip in March and September.

Will some of those be pushed as far back as September or will they just kind of come trickling out over the next few months as it opens up?.

Well, I can tell you that our guys are motivated to move these as fast as they can. This is a 6 months different and you have a different cycle of trades and people would be ready to, some of these are company cars, which would then cycle in the delivery sector.

And we have in the March -- at the end of March, so these cars are sold, they're on the ground in the UK and will be delivered as we look at it.

And when you look at it in total, we have the ability to deliver and there's probably, I think, I mentioned it before, 13 million of gross profit that's tied up on these vehicles being on the ground that we didn't deliver in the month of March.

And when you just take the month of March by itself, just to put it in perspective, we had 7,000 vehicles that we didn't deliver on a same-store basis in the month of March in the UK, which was 20 million less in vehicle gross profit. And we had 6 million less in parts and service.

And our bottom line was GBP20 million less in March of this year versus last year. Just to put it in perspective, the impact of that COVID situation in the last roughly 10 days of the month..

And next we'll go to John Murphy with Bank of America Merrill Lynch. Please go ahead..

Good afternoon, Roger.

Just wanted to ask the first question, if you think about the cost saves that you're implementing at the moment, how much of this do you think is going to be sticky on all the other side of the crisis? And similarly, are there any business practices or things you're learning as you're going through this crisis that you think might help the business on the other side?.

Well, I think that, we're looking at it in a number of different ways and not to break it out from the standpoint of compensation or certain fixed pieces, but I think there's $75 million to $100 million worth of costs saved that we'll have as we come out of this, which would be on an annualized basis.

So, I know that's a rounding number at this point, but I can tell you we're focused on it. And probably currently, in the next couple of months we'd probably see at least $8 million to $9 million a month coming out based on things that have taken place.

Some of that's due to interest saved on floor plan, part of that might be marketing and advertising expenses, other costs we've taken up, demos, vehicle maintenance and things like that which will, obviously some of that will come back.

Loaner cars, obviously, is a big expenses, we don't have I'm just counting on a few of them that come to mind right now. But we would expect that to continue in many of those cases. But overall, I think there are $75 million to $100 million. That's our minimum goal that we would take out on a global basis.

It would continue on an annual basis once we get through maybe as we get into this third quarter..

That's very helpful. And then a second question and it seems a little odd to ask at the moment because inventory currently isn't too low, there's not a lot of sales going on.

But I'm just curious, if we go through the month of May and even June where production is not ramped up fully, yet there is some level of sales similar to what we saw here in the U.S. go on in April and inventory didn't get pretty darn tight.

I'm just curious how you're managing that and thinking about that with not getting a lot of deliveries to your dealerships in the context of managing the inventory. But also in the context of GPUs, which appear to be fairly resolute and resilient, I should say, for both you and the industry..

Well, number one. Let's talk about our inventory right now. If you go back to the end of March, our new car inventory on a global basis is down $100 million, and our use inventory is also down 100 since the end of March now. It's probably holding down 100, if you look at 331.

We obviously when you look at our use inventory, we got 11% of our inventory over 90 days. And we got 25%, our inventory new vehicles over 120. Now that was exacerbated, because we did no business when you think about the month of April. But I think we're going to have a big issue on incoming inventory from all the manufacturers.

You've seen the German manufacturers starting and then stopping from the standpoint of a new production. I know from Daimler's perspective in Mexico. They pushed off heavy duty trucks like two months.

It's not the fact that they don't want to open or not meeting the protocols in the plant is the fact that the supplier base -- in the old days, maybe back in '08 and '09 at least OEMs are more vertical from the standpoint of the supplier their parts for their vehicles. So that's not the case today.

So, they have to rely on many, many suppliers and I think that's going to be key. The only good news out of that is, when they do go back, they're going to build the cars we want the ones that they make most of the money on the SUVs.

And unless the whole marketplaces changed socially, because of maybe Uber and Lyft and things like that won't be on first choice. People will be looking for some type of transportation. They might go back to the smaller sedans. But I think we got to watch inventory and for sure, we're going to watch our gross profit.

And I think that to me that's going to be key. On the other hand, if you're sitting here today and want to buy a car, to me, the zero for 60, 72 or 84 months is there extending lease payments, all the things that the OEMs are doing to try to attract new customers. And there's no question that all these things will merge at some point.

But your question on inventory I know gives you a long answer. I think it's something we got to watch both domestically and internationally..

That's incredibly helpful and then just maybe lastly, on parts and service. I mean, there's going to be some pent up demand on deferred maintenance we gets released to some degree as we get out of this mess.

But also, it does seem like there may be an opportunity for you to attract some talents on the technician side to bolster your main capacity, if you will. I mean, how do you think about that, and I know, you've done a lot of work on training.

Is there may be the opportunity even to train some of your folks that are on furlough that might not be hired back, as different kinds of workers that might come back as tax? Or is there a broader opportunity in the economy now, as there's more folks out of work for you to get them trained and really take advantage of this parts and service work it's out there even beyond this crisis?.

Well, I think really what we've done in the past, we bring in apprentices, many, many students from UTI which, obviously they've gone through good training, and we would expect that we could extend that through our own training, working side by side with A&B mechanics.

But remember, what we have to do today is we have to balance our manpower, match our manpower with our demand, whether it's on the sales side, or parts of service. We're seeing through our BDC centers that both internationally, specifically in the UK, that we're making a lot of appointments for people to come back, so there will be a surge.

I'm not sure it's an initial surge. People have been driving their car, but what will happen as we come out of this and maybe 60 to 90 days. So, I want to be careful that we don't add people back. But in the meantime, we can offer to our people to have additional training, and I think some of that might not be available now unless we did it in house.

And I think quite honestly, I don't think we have a program set up specifically to start that today, because the main thing we're doing is trying to get ready to move service into gear.

In fact, in the UK, I think I mentioned before we have 300 people just back in the UK in our shops; number one to clean them properly, to meet the specifications required by the government; number two to recalibrate our machines as we go back.

So, that's where we're spending our time with people that are on, that are back to work and not on lay off at this point. So, again, the last couple of weeks, we've seen sequential increases here in the U.S. of about 9% per week increase in our parts and service business..

Our next question is from Rick Nelson with Stephens. Please go ahead..

Question for you about online as digital continues to grow.

How do you see the profitability there compared to an in-store transaction? Do you get similar F&I per unit? And if you had vision overtime that this could, in fact be a lower cost transaction?.

Well, it depends on if we're going to have remote sales people in the future that would be a new model. Obviously, everybody's been operating remote. Some people might rather work from home we'll find that out, as we bring people back.

But, as we've looked at our grosses, that we've been able to sell, I know in the UK we've looked at over 1,200 transactions that grosses are in line with the current say January, February numbers and we see the same thing in the U.S., and what we have done is taken our docuPAD with the use of Zoom.

And we're actually going through the customer through the Zoom and able to sell the backend products quite profitably. So, we see probably more interest in our salespeople, they're getting more comfortable using these tools rather than just a face to face in the dealership.

So, I think overall, we see an increase in F&I, and I think probably from a front end perspective, there's so much action right now from the OEMs. It's probably hard to know what we'll get in bonuses in order to see what the old and gross profit is.

But I think the process is good, I think the customer is coming in with more information because he's spending more time online. And what we have to do is, is make the time to market to deliver this car. We need to take that cycle time down, which going to be able to do with a current technology.

And I think, from docuPAD, it's made a tremendous impact on us from the standpoint we put that across our entire enterprise here in the U.S..

The home delivery, you mentioned that is a growing part of your business.

Do you think customers prefer that the home delivery to say curbside pickup in a store?.

Well, look, I think right now with the social distancing, and all of the mandates coming federally, statewide locally with people I think are confused to a certain extent, we're going to go to restaurants now, how are we going to sit? What are we going to do in movie theaters? But right now, we're using it as a tool, obviously, until these markets open up, we always quite on the premium side, I think we've always offered pickup and delivery service cars, and certainly the same thing from the standpoint of new vehicle.

But there still will be a connection, I think with the dealership from the franchise perspective, due to identification, due to other wet signatures that are needed in the future. The other thing is the protocol that we've established using a partner we have obviously a safety claim that we use on the race teams.

They really come to the party with us or across the country. And we really have a process we've had some positive cases, in the service departments in some of our locations. We shut them down immediately and within 24 hours, safety comes in.

So, we can we can give the customer some sense of comfort that we are addressing the protocol and that's what we would expect to do. And we all obviously, whether we're delivering at home or not, we sanitize the vehicles..

Our next question is from Stephanie Benjamin with SunTrust..

I was hoping you guys could just touch on the improvement that you saw in just gross probably per unit really across both new and used in the quarter, despite the declines and revenue in March.

So maybe just you can speak to what initiatives are put in place to drive such a year-over-year improvement?.

Well, I think it's been a constant focus, not on volume. And remember, we're the premium luxury side. A lot of these releases probably 50% to 55% of our business is leases on the luxury side. And from a percent where we were 7.7% last year on our gross margin, on new we went to 7.5.

Not a big reduction, we kept our volume for and flat and obviously domestic went up. So, to me, with the U.S. moving up, I think it's a focus and having the right inventory and everybody is looking at day supply. And I think that, our reduction in inventory, when you look at it from the standpoint of used, we're not in a position.

We're just wholesaling at the retail level..

Got it. And then just sticking on the use -- the standalone stores, and the -- you're really of opinion in terms of seeing the demand returns from as store -- as a lot of governments start to open back up in areas.

So could you just speak to the demand you saw prior to COVID? And then as you start to rebound, what you think those stores can really start to see an improvement when the store is open?.

Let me just position, our 2% in the UK, they've been shut down since the last 10 days of March. They're still not open. And from a U.S perspective, they've been closed from the 21st of March, and they're just -- we've just opened one store just to deliver cars in Pennsylvania. So anything we've done since February really has been under some duress.

But when you look at February, quarter to date, we were up 19%. On a same-store, we were up 4%. And internationally, we were up nine. And on the same-store basis, we were up 2%.

So, the good news is when we see the total, we were up because we -- both of the new stores with one in Bristol, England, the other in Glen Mills, Pennsylvania, both had good openings and there was a lot of interests. So, we see that as all of our peers do use being a real focus. We don't have the CapEx to worry about.

And when I talk about CapEx, just as a data point, I look at that in the future, we're expecting to reduce CapEx by a 150 million, 30 of it came out already. We're going to work with the OEMs, what I call reduce the cosmetic CapEx. So let's look at the operating CapEx, i.e. electrification or something like that.

So we feel in the used car side, the super centers that that number is considerably less. But I think demand is there. I think the fact that we might see people getting out of a third party chauffeured cars, i.e.

Uber, Lyft, do we see them buying lower priced use, which would fall right into our super center, vehicles that we're selling somewhere between 15,000 and 20,000 MSRP..

And next goes to the line of Armintas Sinkevicius with Morgan Stanley. Please go ahead..

Thank you for taking the question. I was hoping, we've spent a lot of time talking about March and April, and I know we're just, in the early days of May.

But maybe you could talk about the trends you're seeing in May and what you expect over the next week or two? I'm sure there's not much visibility beyond that, but if you could speak to sort of the current trends as you're bringing, particularly as you're bringing back employees in the UK, that would be helpful?.

I was hoping you were going to ask that question. I'm just kidding you. No, on a serious note, if you look at April, I'm talking about the U.S., we were down 53% on new. And through yesterday, we were down 28.5%. And on the used side, we were down 42% in April. And we're down 17.7% through yesterday on used. And that's the entire U.S.

Of course, we're not open in the UK, so really there's no number to talk to you there. So that gives you some idea what the market is doing. And obviously, we're putting technicians back in. We're going to put about 500 people back in the U.S.

And the majority of those would be on the parts and service side was certainly aligning the demand on sales with a number of salespeople we bring back and still keep some people, obviously, on the role working from home..

And then, I was hoping you could talk a little bit more about Penske truck leasing. That was down year-over-year. Last year, there was some one-time gain on sales. And, there's some mixed dynamics taking place in that business with deliveries up these days, but other parts of the business down a bit.

If you could speak to that, that'd be helpful as well? Just how we should be thinking about that business going forward as well?.

Well, I think for the first three months, I think, we reported that we were up 2.8% revenue to $2.2 billion. All product lines obviously were active. First, let me talk about you talking about used truck pricing..

And the truck leasing..

No, I was just going to talk about used trucks how it impacted truck leasing from a gain on sale. We were down $20 million on gain on sale for the quarter. And the majority of that really is impacted because what happened to the market, the overall heavy-duty market was a banner year last year, one of the largest over 300,000.

Well, that pushed a number of used trucks into the first quarter from a used perspective, which drove values down from 4000 to 6000 on tractors. But then with a pandemic that came out there really wasn't any wholesale market. So there's a number of vehicles we have we got to continue to divest of the off lease vehicles or rental vehicles.

And therefore, we had $20 million in gain. We had a good game, but $20 million less for the quarter. And also on the rental side, we'd reduce our rental fleet by about 6,000 units, if you go back a year. And of course with a lower rental fleet, it generated less rental revenue. And when you look at our business or rental side, we call it lease extras.

Most of our lease customers don't lease the maximum number of units that they need. They'll do a minimum and then we offer a lease extra at a reduced price. But with business being down here for the last four to six weeks let's say, all of those lease extras have come back. So, we have those in our fleet. So that's reduced revenue.

So that lower used truck prices, lower rental revenue obviously, and then we had the gain of $11 million that was part of a pension issue that we saw from a legal standpoint. And we picked up $11 million last year, which we reported during the quarter last year..

[Operator Instructions] And we'll go to Rajat Gupta with JPMorgan. Please go ahead..

I just wanted to get a sense about the online transaction and you talked about a large portion of the sales you done because of the digital efforts.

How do we think this impact the cadence? I mean, like if you were delivering the vehicles online and through home delivery? What kind of insights are you seeing on the trades-in? Because a lot of these transactions are typically traded in with the used vehicle, and then relatively what kind of impact are you seeing on the F&I from the online transaction? And I have a follow-up thanks..

Let me talk about the online transactions from the back end, I think that's exactly what I tried to cover earlier with the use of docuPAD and Zoom. We've been able to connect those with the customer remotely, and be able to go through the same process that we would do, sitting across from each other to sales at the sales desk.

So that's been very helpful and in fact from an overall standpoint, I think that we've been in good shape. From the standpoint of trades, obviously, when you're doing an online transaction, the customer on his own has the opportunity to look at what his trade value is, and then there's some negotiation online, with our consultant and the customer.

But in the meantime, we would pick up the trade when we delivered. If we would delivery we made directly to the home or business, we would pick up the trade at that point and bring it back to our location. So that would be normal anyhow, as I said earlier, we've done the home delivery many times over the past years.

I think it's accelerated a little bit right now. Not a little bit probably because everybody's sitting at home. There's no question that, we're up overall, but I think will mean to go back probably to a more level pace there.

The one good thing has happened, I think all of our sales associates and consultants are now much more comfortable using the online tools. We've seen more traffic on preferred purchase, in our case, at penskecars.com.

And all of these, I think are going to help us be better and also takes some costs out of the sales process, along with cycle time for the customer. And I don't think we lose one penny of gross profit by doing business online..

That's super helpful.

And then follow-up, I just wanted to get your views on industry consolidation, and how do you view the space post this crisis? I mean, did you expect consolidation to pick up some of the independence from the used side? Find it how to invest digital capabilities and compete in online omni-channel?.

Let me just say that, we certainly as a company are learning every day. What we don't know about omni-channel and how we can take care of the customer on the use side, there's no questions, and we certainly have some lead horses out there doing that.

Obviously, many of these products that we have that are customized that we do ourselves, people like Cox and other people are going to have products going to be available to all dealerships from an OEM perspective, whether available, obviously for used car dealerships, I don't know.

But, typically, small used car operators are under real pressure they don't have. They don't have the OEM captives support on used car financing, for the customers and I see some of that will just probably they will go out of business and we'll pick that up individually or collectively, around the country.

But from a consolidation basis of the industry, and I'm thinking more of dealerships that would be available when you go back to the crisis, financial crisis, at that time, the OEMs we're in a fistfight with him. They wanted to reduce the number of dealers. You remember there were lawsuits to General Motors and Chrysler, et cetera.

And at this point, the OEMs are being so supportive. So, it's really a dynamics are entirely different. On top of that, at that point, we had the parts and service open, but I think we're going to be opportunistic. We're certainly not going to go into a market we don't have scale.

I don't know what our peers will be doing, but I think they probably think the same way. On the other hand, and we were able to buy the two Lexus businesses in Austin, Texas, if they came up again, we'd probably move quickly on that.

So I think it's going to be brand-by-brand where you have your strengths and also we have scale where you can consolidate some of the fixed costs, but I think it's too soon to look at that. There have been some big deals out there that have not been completed, but that doesn't mean they weren't good deals at the time.

So, we certainly are looking at our capital allocations. We can look at, certainly whatever CapEx we have, we've got our dividends, we got our stock buyback. And these are things that we can look at that and what do we want to use for our acquisitions.

And we would focus today, probably investing in the used car business from the superstore perspective and also look at expanding our footprint get on commercial trucks side..

Just one last one for me. Just to follow up on an earlier question. On the cost saves from the furlough action, could you help us quantity what the savings are just from the furlough actions? I thought you mentioned 8 million to 9 million per month, but I assume those were like outside the headcount reduction.

But would you be able to give us a sense of just the headcount related costs saves near-term?.

I don't know that it's near-term, I think what we have to do is understand what will be the footprint of our business. How much will be digital? How much will be done from home? How many people we have actually working in the operations? And any of this compensation what have we looked at based on the model.

But I do think, is we look at the overall cost phase by look at the next 12 months annually or sequentially by month, I think that we can get somewhere between 75 million and 100 million out completely.

Now, again, we don't have a lot of data on that, but as we see the number of people we have furloughed and as a business all going to be decided by how business comes back. I can assure you, our concern about our people in many cases here in the U.S., we've provided extra support on the healthcare side.

So, on the benefits, and we'll continue to do that where possible..

And Mr. Penske, no further questions in the queue..

All right, John, and thank you everyone for joining the call. We'll see you next quarter..

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect..