TROY, Mich.—When Jim Wheat took the helm at Penske Auto Centers last October, he immediately set in motion dramatic changes to reinvent the retail service outlets. Today, he said those changes are beginning to pay off.
Mr. Wheat joined Penske Auto Centers Inc., in Troy, as president and CEO after serving as Jiffy Lube International's president. He has since completely revamped the services Penske Auto Centers offers, its advertising and marketing campaign, and the number of stores it operates.
His first major move was to simplify Penske's services menu. He eliminated detailed engine repair—which he said is better handled by a dealer—and exhaust work.
Services currently offered at Penske outlets now focus on three core areas. Preventive maintenance includes primarily oil changes and fuel injector service, as well as transmission and air-conditioning unit replacement. The ride-control segment consists of brakes, shocks, wheel alignment and tires—the Goodyear and Penske brands. The electrical category includes batteries, alternators and starters.
``We wanted to be able to provide quality products and services every day in every store,'' Mr. Wheat said. ``If you look at the complexities of engines today, we couldn't do that work consistently throughout our 650 stores in 40 states.''
He pointed out that the trend in the aftermarket is for specialization of services and convenience for the customer. He cited retail outlets that focus on tires exclusively, operations that sell only batteries and facilities that provide only fluid changes.
``A retail automotive service provider has to be specialized. It can't be everything to everybody,'' Mr. Wheat said. He has worked in the retail end of the car business since he was 17.
A unique niche
Penske Auto Centers, he claimed, fill a unique niche by offering three specialized services.
``We think being specialists in all three categories creates a niche for us that is not out there today. There are a lot of retailers in parts of our business, but no one company is a direct competitor because none offers all three services in one facility,'' he said.
In fact, Penske has tens of thousands of competitors. The oil change business alone has 60,000 providers. Tire retailers? Add thousands more.
Mr. Wheat said he thinks Penske Auto Centers will attract time-constrained, convenience-minded customers who don't want to go from shop to shop for their basic maintenance services.
``If we bring more customers in for fluid changes, they are more apt to purchase their tires there,'' he said.
The paring down of Penske's service menu also allows the retailer to focus on its ``Right Now'' philosophy. The goal is to give immediate service to the customer who comes into the store, say, for an oil change.
``We are focused on exceeding customer expectations,'' Mr. Wheat said. ``We focus on taking care of the customer right now because we understand they pay the bills for everything we do.''
The simplified service menu was in operation by Jan. 2 in all Penske Auto Centers, which is a subsidiary of Detroit-based Penske Corp. While Mr. Wheat would not reveal financial figures, he indicated business is improving, adding that the oil change and tire segments are showing year-over-year increases in revenues.
Transmission services also are showing gains. In general, individual outlets are reporting year-over-year increases in revenues and profits, he said. Only stores more heavily geared toward engine work have struggled to make the shift.
`The right number'
When Penske purchased the service outlets from Kmart Corp. in 1995, it had 863 stores.
Since Mr. Wheat's arrival, that number has been narrowed to 650 after stores that had low volume and had not shown growth for years were closed .
Most were in outlying areas far from metropolitan hubs—operations that were difficult to service and staff, he said. ``We believe the current population of stores is the right number.''
That's not to say Penske won't add stores, including some freestanding outlets. It is, in fact, refurbishing its 48 freestanding stores.
The program's flagship store has opened in Warren, Mich. With more ``road appeal,'' the new ``Pure Penske'' image is colorful, clean and uncluttered, focused around the heritage of automobiles and racing.
The Penske chain also will expand services selectively, if they fit into its three core categories. For instance, this fall they will, for the first time, begin to offer radiator fluid replacement.
`No. 1 asset'
A more aggressive Penske Auto Centers marketing effort initiated by Mr. Wheat includes the first national TV advertising campaign to complement expanded local print and radio ads. TV spots, launched in February, feature a toll-free number to call to locate a nearby center.
The response, he said, has been overwhelming.
Another marketing effort is to leverage the Penske name.
``Our research and the research other auto service providers have conducted show the Penske name is synonymous with quality, credibility, trust, fairness and integrity,'' Mr. Wheat said.
``The American consumer is very high on the Penske brand. It's our No. 1 asset to use to speak to the American consumer.''
As it raises its profile with consumers, Penske Auto Centers also is looking for more relationships such as the one it recently initiated with Daewoo Motor America Inc. to build a steady customer base.
Penske provides the basic warranty work for Daewoo vehicles, a business that will grow as the Korean auto maker expands nationwide and the two companies continue joint marketing promotions.
``The opportunity is there for similar arrangements with other companies,'' Mr. Wheat said. ``It complements our core menu strategy because we're still offering basic car care.''
Meantime, Penske Auto Centers—like virtually every other retail facility offering car service to consumers—is struggling to attract and retain qualified automotive technicians. To that end, Penske has initiated two strategies.
A recruiting program targets students at vocational schools, community colleges and technical schools to promote the Penske brands.
``Anyone out there interested in working on a car knows the name Roger Penske,'' Mr. Wheat said of the racing legend and Penske Corp. namesake. ``That gives us a step up to attract quality performers.''
To retain employees, Penske Auto Centers pays bonuses to those who stay on the job. The bonuses are paid every six months and can amount to between $300 and $1,000 a year.
``It's important for us to communicate to our employees that their tenure here is important to us,'' Mr. Wheat said.