* Q3 adjusted EPS $0.34: Street view $0.28
* Revenue down 13 pct to $2.6 bln
* Cost-cutting, Cash for Clunkers boost earnings
DETROIT, Oct 30 (Reuters) - Penske Automotive Group (PAG.N), the No. 2 U.S car dealership group by sales, reported a 23 percent increase in quarterly earnings Friday on cost-cutting and a boost from the U.S. government's "Cash for Clunkers" program.
Net income rose to $27.4 million, or 30 cents per share, from $22.2 million, or 24 cents per share, a year earlier.
Excluding one-time items, such as charges related to its late-September decision to scrap a plan to acquire the Saturn brand from General Motors Co [GM.UL], Penske posted adjusted earnings of 34 cents per share. Analysts, on average, had forecast 28 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell 13 percent to $2.6 billion, in line with analysts' expectations.
Other major U.S. auto dealerships also reported higher earnings this week after slashing inventories and staff as U.S. auto sales slumped to the lowest level since the early 1980s.
AutoNation Inc.(AN.N), Asbury Automotive (ABG.N) and Sonic Automotive (SAH.N), three of the other top auto retailers, said they expected that the worst of the industry's downturn had passed although the recovery would be slow.
Penske had been expected to take control of GM's Saturn brand. That deal collapsed at the end of September when Renault SA (RENA.PA) rejected a deal to supply Saturn-branded vehicles for Penske to sell through the U.S. dealership network.
Bloomfield Hills, Michigan-based Penske took a third-quarter charge of $1.9 million related to the failed Saturn deal.
It said that its Smart minicar unit expected to sell 15,700 vehicles this year. Smart, a joint venture between Penske and Daimler AG (DAIGn.DE), has seen sales drop 32 percent so far this year, a sharper decline than the overall market.
Smart had earlier targeted flat sales in 2009.
Penske operates 310 auto franchises in the United States and Britain. Sales of BMW, Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T) branded vehicles account for over half of its overall new car sales.
Like other listed dealership groups, Penske shares have slipped this week on expectations that the recovery in the U.S. auto market will remain grudging.
The shares closed Thursday at $16.99 and have lost 6 percent this week. The shares peaked in early August amid the short-lived auto sales boom prompted by the Cash for Clunkers program. Since then they are down nearly 20 percent. (Reporting by Kevin Krolicki, editing by John Wallace and Derek Caney)