DOW JONES NEWSWIRES 
 

Penske Automotive Group Inc.'s (PAG) second-quarter income dropped 63% on continued weak sales, but earnings beat expectations.

Auto dealerships have experienced smaller sales declines in recent months, suggesting the epic slump related to reduced consumer spending may be nearing a bottom. Meanwhile, price increases - reflecting auto makers' efforts to make a profit on lower overall sales volumes - have raised fears that the recovery could become stunted.

The company - which is run by motor-racing mogul Roger Penske - posted income of $14.1 million, or 15 cents a share, down from $37.8 million, or 40 cents a share, a year earlier. The latest results included a 7-cent loss from discontinued operations.

Revenue decreased 30% to $2.32 billion.

Analysts polled by Thomson Reuters expected earnings of 15 cents on revenue of $2.36 billion.

Gross margin rose to 17% from 14.9%.

New-vehicle sales slumped 37%, while used-vehicle sales fell 19%. The company said total retail revenue fell 28% amid a 31% drop in same-store sales.

Inventories were down 20% so far this year.

Roger Penske said performance improved over the first quarter. He added the company's cost-cutting plan helped it remain profitable despite falling sales, and said he is encouraged that sales levels are improving sequentially.

Standard & Poor's Ratings Services said last month it was considering a cut to Penske's credit ratings following the news that Penske intends to acquire General Motors Co.'s Saturn unit for as much as $200 million. Analysts have said the road to recovery for the slumping Saturn brand will be challenging.

Penske's shares closed Tuesday at $19.21 and haven't traded premarket.

-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; kerry.benn@dowjones.com