Scania forges first links with Volkswagen group partners
Ever on the lookout for global events that may influence the future direction of the local trucking scene, FRANK BEETON reports on important developments within the Volkswagen family, a stalled European market, and a little-known Finnish truck manufacturer.
Global Focus has looked on, with great interest, at the beginnings of a global truck empire within the Volkswagen Group, and, in particular, the development of a relationship between former archrivals MAN and Scania. Because of the potential magnitude of this combination, it is important to remind ourselves of some key historical events forming the background to some more recent developments. In 1999, Volvo AB launched an unsuccessful takeover bid for Scania that was blocked by the European Union in terms of antitrust regulations. Then, in 2006, MAN AG declared its interest in acquiring Scania, but was unable to prevail in the face of opposition from the Swedish company’s shareholders, including Volkswagen, which had previously acquired the shareholding sold by Volvo after their failed takeover attempt.
The period immediately following this latter acquisition attempt was characterised by a great deal of public mud-slinging between Scania and MAN, and this only came to an end when, in March 2008, Volkswagen AG increased its shareholding in Scania to 69%, effectively ending the drawn-out battle for control of the Swedish firm. However, it soon became clear that Volkswagen had its own agenda for creating a truck empire, as it also took a 29.9% shareholding in MAN, and then sold its Brazilian Volkswagen Caminhöes e Önibus operation to the German truckmaker. At the beginning of 2010, it was reported that VW was preparing for a full takeover of MAN Nutzfahrzeuge AG, but this has not happened yet, although VW retains effective control of MAN through its present shareholding.
At time of writing, the “heavy truck department” within the VW Group does not yet formally exist. MAN now controls the Brazilian VW truck and bus operation, has its own alliances with Force Motors in India and Sinotruk in China, and supplies “big-bore” 11 and 13-litre engines to Navistar International in the US for use under their “MaxxForce” branding. Up until two months back, Scania, reputed to be one of the most profitable of global truck makers, stood alone, and was linked, almost invisibly, to MAN and Volkswagen through a network of shareholdings. It is important to note that a consolidation of MAN and Scania volumes has the potential to overtake Daimler and Volvo as the premier supplier to the European heavy truck market (Gross Vehicle Mass ratings above 16 tons), and to also become a leading player in the global truck and bus industries. This dynamic adds considerable weight to the important announcement issued by Scania AB in July stating that it had entered a new collaborative agreement with MAN, to study component supply and pre-development. The components to be targeted for rationalisation during the first stage of this process include Scania’s manual transmissions, and MAN’s drive axles and transfer cases, while future programmes will reportedly include the joint research of hybrid driveline componentry.
Scania has also subsequently announced that it will expand its own research and development centre capacity to include a wind tunnel that will be able to simulate varying climatic conditions, to be housed in a 3 500 m2 multi-storey building in Södertälje, Sweden. Scania claims that this truck- and bus-specific facility will be unique in Europe, and will come on stream in 2013. Meanwhile, the company has selected another VW “family” company, Porsche Engineering Group GmbH, as its partner in the development of the next generation of truck cabs. The task will include the design of the cab frame, as well as attending to its styling, functionality and preparation for production.
These moves by Scania are highly significant in that they represent a more co-operative approach from a company that has been, in the past, fiercely independent. They have been carefully selected so as not to soften highly visible brand characteristics, but rather to provide benefits from group associations where these can be obtained through broader amortisation of development and production costs. Scania’s natural competitors in the global market include the likes of Mercedes-Benz, Volvo and DAF, all of whom have access to co-operative benefits from membership of their respective Daimler, Volvo/Renault and Paccar groupings. This point has not been missed by Volkswagen, whose corporate ambitions include global motor industry leadership by 2018, and the company is steadily working towards a position where it can offer equivalent cost advantages to the members of its own alliance.
Depressed European Truck Sales Continue into the First Half of 2010.
With the global financial crises of 2009 still very fresh in their memories, analysts are still desperately seeking firm evidence of a recovery in the world’s economy. Unfortunately, the news from the Western European truck market for the first six months of 2010 would not have provided them with a great deal of comfort. Total sales for the period, at 260 047 units, fell by a further 3.5% when compared to the equivalent result of one year earlier, which, in turn, had been 37% down on the 2008 outcome. Further analysis did reveal some encouragement in the light commercial category, however, with those sales up by 7.4% year-on-year, but the continuing deterioration in medium trucks (-14.2%) and heavies (-19.7%) provided worrying evidence of a weakening market mix, a sure sign that levels of overall business activity still remained subdued, and asset financing availability was still under pressure.
In the context of this report, “Western Europe” is made up of France, Germany, Italy, Spain, the United Kingdom, Ireland, Belgium, Luxembourg, the Netherlands, Denmark, Finland, Norway, Sweden, Austria, Switzerland, Portugal and Greece. “Light commercials” are positioned between GVM parameters of 3.5 and 6.0 tons, “medium trucks” are defined as those with GVM ratings between 6.1 tons and 15.9 tons, while “heavy trucks” gross at 16 tons and above. There is no distinction, in this mass segmentation model, between two-axled and multi-axled units, as European regulations allow the heaviest two-axled models to operate at an all-up mass of 19 tons.
As reported, in the light commercial category, the total market volume of 167 751 units recorded for this period was 7.4% greater than the equivalent result of one year earlier. Mercedes-Benz was the overall segment leader, with a share of 20.5%, followed by Iveco with 14.2%, Ford with 13.9% and Fiat (reported separately from Iveco) at 12.0%. LCV manufacturers recording improved year-on-year market share performance for the whole of Western Europe in the first half of 2010 included Iveco, PSA Peugeot-Citroën, Mercedes-Benz and Volkswagen, while Ford, Fiat Auto and Renault lost some ground. Of the individual national markets, Greece, Finland and Denmark still languished in negative growth territory with year-on-year comparisons of -29%, -18.1% and -9.4% respectively. All other national markets registered growth, ranging from a miniscule 0.3% in Belgium to an impressive 57.6% in Ireland. Mercedes-Benz was the premier brand in Germany, Belgium, the Netherlands, Denmark, Finland, Sweden, Austria, Switzerland, and Greece, whereas Ford maintained its traditional leadership of the UK market, Iveco was the winner in Italy and Spain, and Fiat Auto topped the lists in Luxembourg.
In the medium truck category, the total market volume for this period ended 14.2% lower than in the first six months of 2009, with an absolute volume result of 22 795 units. Mercedes-Benz was the overall market leader, achieving a penetration of 28.8%, Iveco followed in second place, with 24.6% market share, MAN placed third with 16.4%, and Paccar, through its European brand DAF, recorded 9.2%. Market share performance gains were recorded by both Mercedes-Benz, and its independently reported affiliate Mitsubishi Fuso, while MAN and Volvo held steady, and Iveco, Paccar and Renault lost penetration. Of the individual national markets, Ireland was the only country to record absolute market growth, at 15.5%, while all the others contributed to the decline in the Continent’s aggregated volume performance. Individual countries followed the normal tradition of supporting home-based brands, with Mercedes-Benz prevailing in Germany, the Netherlands, Finland, Switzerland and Greece, Iveco dominating in Italy, Spain, Belgium, Denmark and Norway, MAN ahead in Austria, Volvo leading in Sweden, Paccar in the UK (thanks to the location of its major plant at Leyland in Lancashire), and Renault in France. Notable exception was the position of Japanese-sourced Mitsubishi Fuso, as the clear leader in Portugal.
In the heavy truck classification, the total market volume of 69 501 units was nearly 20% down on the equivalent result of 86 585 sales recorded one year earlier, which, in turn, had decreased by 41% from the first-half 2008 result. Once again, Mercedes-Benz emerged as the clear market leader with 21% penetration, ahead of Paccar (16.2% share), MAN (14.8%), and Scania (13.8%). Winning brands in this market during the first half of 2010 included Iveco, Paccar and Scania, the latter clearly benefiting from the launch of its new R-Series lineup, while Mercedes-Benz, MAN, Volvo and Renault lost some market share. Of the individual nations, Spain stood alone as the only country to record absolute volume growth, at 8.0%, while all other markets suffered a decline, the worst of which was Denmark with 55.3% volume loss. The rankings in those individual national markets playing host to resident vehicle manufacturers reflected the usual strong preferences for local players, with Mercedes ahead in Germany, Luxembourg, Switzerland and Greece, Iveco in Italy, Renault (reported separately from parent Volvo) in France, Paccar in Spain, the UK, Belgium, and the Netherlands, and MAN in Austria. Of the two Scandinavian manufacturers, Scania enjoyed a clean sweep in Denmark, Finland, Norway and Sweden, while Volvo took the honours only in Ireland.
It was notable that the aggregated situation in Central Europe (Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia) was slightly less encouraging, with January-June 2010 sales being 5.7% down on the equivalent result of one year earlier, at 23 337 units. In this case, however, heavy trucks produced the best relative result (11.7% growth), while mediums were 13.7% off their 2009 level, and lights fell by 13.6% in the same comparison (vehicle classification breakpoints as per Western Europe). The market leaders in each category were PSA Peugeot-Citroën (lights), Iveco (mediums) and Paccar/DAF (heavies), with segment penetration levels of 21.4%, 30.4% and 20.5% respectively.
Sisu Changes Ownership and Component Sourcing Arrangements.
In these days of free information flows via the Internet, it is a rare to encounter a European truck brand that is unknown in South Africa. Although we have identified quite a few formerly unknown brands in our recent observations of the Chinese and Indian markets, it still comes as a surprise to learn that more than 2 500 separate truck manufacturers have been active globally since 1886. While many of these have been absorbed into global families, many others have completely disappeared, and, by 2001, it was possible to count only 11 independent entities, mostly groups of companies in their own right, that dominated the world truck manufacturing industry. Since then, the numbers have increased slightly, mainly because of the emerging Asian brands, but it is highly unlikely that we will ever witness again the kind of proliferation that prevailed in the period between the two World Wars.
However, back to Sisu. This is a relatively small Finnish truck manufacturer, with a 200-strong work force producing around 500 trucks per annum at a plant located at Karjaa in Southern Finland. The company was founded in 1931, and has developed into a highly specialised provider of customised commercial and military transport solutions, using aggregates bought in from the major manufacturers, and ready for immediate use by the customer when the vehicles leave the factory. In the 1950s, Leyland diesel engines were favoured, and these were joined in the catalogue by Rolls-Royce power units in the 1970s. In 1974, Sisu was acquired by the Finnish state, and switched to Cummins power. Then, in 1997, Sisu signed a partnership agreement with Renault VI, and phased in cabs, engines and axles sourced from the French manufacturer. The current commercial product range typically consists of three, four- and multi-axled truck models optimised for Finnish regulations, which include operational limits of 60 tons GCM, and 24 metres overall length, using Sisu-built frames and “lazy” axles.
Early in July, Oy Sisu-Auto Ab made two important announcements that signaled significant upcoming changes to the company’s ownership, and its future sourcing of major components. Firstly, it was announced that the company’s senior management had made an offer to purchase the enterprise, and it has subsequently emerged that over 90% of the current owners had accepted the offer. The conclusion of the intended transaction will return the company to a similar family ownership profile that prevailed when it was first founded in 1931. Secondly and possibly more significantly to the outside world, was the decision to enter into a Memorandum of Understanding with Daimler AG for the future supply of Mercedes-Benz cabs, engines and transmissions for fitment in Sisu products, from 2011 onwards.
The international media were quick to point out some factors that may have been instrumental in prompting these announcements. Subsequent to Sisu’s engagement with Renault in 1997, the French truck manufacturer entered into an alliance with Volvo, which also happens to be Sisu’s major competitor in the Finnish truck market. The subsequent evolution of EU emission standards has prompted the rationalisation of components in Renault and Volvo products, and some of the “Renault” power units currently being supplied to Sisu are, in fact, Volvo engines. This understandably weakens Sisu’s position when it comes to servicing, and providing parts for the vehicles it has sold. It has also been noted that the initial aggregates to be supplied from Daimler to Sisu are derived from the Mercedes-Benz Actros range, which is now anticipated to run out in Europe towards the end of 2011. This raises questions over the long-term availability of these units, and the possible future use of Daimler’s HDEP global engine platform in-line range of diesels in Sisu trucks.
Global FOCUS is a monthly update of international news relating to the commercial vehicle industry. It is compiled exclusively for FOCUS by Frank