Volkswagen’s trucking empire comes together

In his monthly review of global news for South Africa’s truckers, FRANK BEETON updates us on Volkswagen’s emerging empire strategy (venturing some comments of his own), examines Scania’s global engine platform and reports on a new transmission direction from Allison.

On November 9, 2011, Volkswagen AG completed its global regulatory process that empowered the German automotive behemoth to take control of affiliated truck, bus and engine manufacturer MAN SE. The process had been initiated late in May last year, when VW increased its existing shareholding in MAN to slightly more than 30 percent – so making an offer for a complete takeover obligatory in terms of German law.

In the interim, VW had further increased its holding of MAN’s share capital to 53,71 percent, taking control of
55,9 percent of its voting rights. In its press statement announcing the completion of the takeover, VW indicated it planned to realise closer co-operation between itself, MAN and Swedish truck, bus and engine manufacturer Scania AB in the areas of procurement, development and production, estimating that initial synergies of at least €200 million per annum could be achieved.

It was reported earlier the components to be targeted for rationalisation during the first stage of that process included Scania’s manual transmissions and MAN’s drive axles and transfer cases, with future programmes to include joint research of hybrid driveline components. Those elements have been carefully selected so as not to erode highly visible individual brand characteristics but rather to provide benefits from group associations where those can be obtained through broader amortisation of development and production costs.

This development is of immense importance to the global truck and bus manufacturing industry, as well as to many of its constituent markets, including South Africa. Global Focus has been following the developments that led to this juncture for several years – starting in 2006, when the then MAN AG declared its interest in acquiring Scania AB but was unable to realise its ambition due to opposition from the Swedish company’s shareholders. Those included VW, which had acquired Volvo’s earlier shareholding in Scania. Volvo had made the investment ahead of an unsuccessful 1999 takeover attempt that was blocked (on antitrust grounds) by the European Union. Then followed an extremely acrimonious period, during which a great deal of public mud-slinging took place between Scania and MAN, until (in March 2008) Volkswagen AG increased its shareholding in Scania to 69%, effectively ending the battle for control of the Swedish firm.

It then became clear VW was pursuing its own agenda in the truck business, as it also took a 29,9 percent shareholding in MAN and sold its Brazilian Volkswagen Caminhöes e Önibus operation to the German truckmaker. As recounted above, VW proceeded on a progressive process to gain total control of MAN, having identified the benefits of getting Scania and the German truckmaker to co-operate – despite the obvious acrimony that had previously existed between them. Then in 2010, VW – already Europe’s Number One vehicle manufacturing company – publicly announced its intent to become the world’s largest vehicle manufacturer by 2018, thus explaining much of the merger and acquisition activity (both rumoured and factual) involving Germany’s premier carmaker.

With that as background it’s interesting to speculate on where a “Volkswagen Truck Family” would rank in the global pecking order. Using the most recent statistics published by the Organisation Internationale de Constructeurs d’Automobile (OICA) for 2010, we see combined MAN/Scania production of 191 441 units would still have been some way off Daimler Trucks’ equivalent consolidated total of 367 854 units for that year. However, those numbers aren’t definitive, as the lower entry threshold for the “Heavy Commercial Vehicle” and “Heavy Bus” categories used by OICA can vary from 3,5 to 7 tons GVM in different geographic areas and, therefore, can only be considered indicative.

However, when looking at the more clearly defined European situation for vehicles above 16 tons GVM, the combined sales of MAN and Scania – at 48 742 units in 2010 – would have comfortably exceeded both Volvo/Renault (43 653 units) and Mercedes-Benz (38 033 units), making the VW “group” Europe’s biggest heavy truck seller for that year. In future years, when statistics for affiliated operations in countries such as India and China can also be added in, the global position could change. But there’s no doubting VW’s truck family is destined to become a very significant player on the world stage.

In terms of existing co-operative arrangements, in mid-2006 MAN entered into a joint venture with Force Motors of India, covering the manufacture of heavy duty trucks. Known as Cargo Line A (or the CLA Series), the range consists of 4×2, 6×2 and 6×4 units, with mass ratings ranging from 16 tons GVM to 49 tons Gross Combination Mass. Subsequently, after initially holding a 30 percent shareholding in that operation, MAN has taken on increasing responsibility: first, to a level of 50 percent and, finally, at year-end 2011 it was announced the German company was to acquire the entire shareholding in MAN Force Trucks. Force Motors will continue its involvement with the MAN-owned operation as a supplier of locally-manufactured components. However, MAN has already commenced marketing CLA Series products through its international network, which establishes a precedent for other joint venture arrangements.

Another important consideration is the emerging partnership between the MAN SE Group and Chinese manufacturer Sinotruk, also known as the China National Heavy Duty Truck Group Corporation (CNHTC). This long-term strategic partnership agreement includes technology, management and engineering exchanges. In April last year it was announced that a new truck brand – Sitrak – would be used for marketing products from this partnership in Asia, the Middle East, Africa and the Commonwealth of Independent States. It’s anticipated MAN will use this product line to compete with the value brands that have been entering emerging markets from sources in China and India.

However, one extremely relevant question that remained unanswered at the time of writing: the confirmed negotiations between VW and Isuzu Motors that first broke cover in April last year. Since General Motors sold off its final vestige of its 45-year shareholding in Isuzu in 2006, the Japanese company has stood out as a possible candidate for alliances with other manufacturers. The relatively minor 5,9 percent shareholding subsequently bought by Toyota justified that view but is hardly likely to have dissuaded other potential partners from approaching the Japanese commercial vehicle and diesel engine specialist to explore areas of mutual co-operation.

There are at least two compelling reasons making such an association desirable to VW, including Isuzu’s leadership position in the global light truck market, equivalent to South Africa’s Medium Commercial Vehicle category. Combining Isuzu’s volumes with those of other VW Group brands would very likely establish the family as the world’s dominant truck manufacturer. The second is Isuzu’s strong historical position in North America, where (in conjunction with its erstwhile partner, General Motors) it secured long-standing leadership in the market for low cab forward medium trucks. VW’s global leadership plans also demand market coverage expansion and more sales in the United States – and Isuzu could help with both elements.

Industry analysts believe VW may well achieve industry leadership worldwide ahead of its self-imposed target date of 2018. Positioned third in 2010 behind Toyota and GM, VW had reportedly moved up a position by mid-2011 after the production problems experienced by Toyota in the wake of the tsunami and earthquake that hit Japan in March that year. Although the truck and bus sales volumes recorded by Scania, MAN and their joint venture partners are unlikely to have any major influence on the light vehicle-dominated world rankings, they will make a positive contribution to VW’s global cause. However, looking at the position in the discrete heavier commercial vehicle industry it seems VW and its affiliates are destined to play a leading – if not dominant – role in the not too distant future.

Scania’s global engine platform
Over recent years we’ve read much about the rolling out of global engine strategies by the major truck manufacturing groups. Daimler Trucks was first off the mark, and its Heavy Duty Engine Platform family (first announced in 2007) has already found applications in group products from Freightliner in the United States and Mitsubishi Fuso in Japan, and has now been identified as the power unit for the new Mercedes-Benz Actros long-distance European hauler announced last year.

The American-led Paccar group also announced in 2007 it was to build DAF-designed engines in the US and offer them in its Peterbilt and Kenworth models. Volvo was next into the fray, announcing its global engine programme in 2009. The first manifestation is the GH series (which has already appeared in UD’s latest Condor models). This mid-displacement engine family will find its way into Volvo’s FE and FL models, some Volvo buses and coaches and Renault’s Midlum and Premium trucks from 2013.

Last October, Scania announced it would also introduce a harmonised modular global engine platform. Although details in the supporting press release were fairly limited, it’s emerged that the series will consist of five- and six-cylinder power units displacing 9,3 litres and 12,7 litres respectively (those being slightly larger than the 8,9 litre and 11,3 litre units to be replaced). Interestingly, these engines have been designed to accommodate emission standards ranging from Euro 3 to Euro 6, which means they will not be denied to markets where the lowest sulphur levels of diesel fuel aren’t yet available. That’s been made possible by the in-house development of flexible engine management, fuel injection and exhaust after-treatment technologies and the lineup will offer a choice of diesel modes with Exhaust Gas Recirculation or Selective Catalytic Reduction emission countermeasures, plus gas and ethanol-fuelled derivatives. Power outputs for the entire Scania engine line-up (which includes the larger displacement V8 unit) will range from 170 kW to 545 kW (230 to 730 hp).

Developed over a five-year, US$1,5 billion programme, this new engine family is to be used in truck, bus, industrial and marine applications and will be manufactured in Sodertalje, Sweden, and Sao Paulo, Brazil. All components and production processes will be interchangeable, giving Scania complete flexibility in selecting the most appropriate engine source for any particular market. They will also be compatible with all the latest retarder and transmission technology developed by the manufacturer.

It’s far too early to speculate if Scania’s new engine family will find applications elsewhere in the VW circle of influence (see first report), particularly in view of the stated intention to maintain the separate identity of the constituent manufacturers. However, it would be naïve to think that some level of power unit rationalisation won’t eventually come into play, most likely involving non-strategic “hang-on” components at first.

Economies of scale are the prime reasons for alliance-forming and there are many areas where co-operation can take place without disturbing the visible competitive balance between brands. The business models being pursued by the likes of Daimler and Volvo promise much in the way of more rapid amortisation of costs and it wouldn’t be prudent for their competitors to ignore the resulting benefits. Watch this space closely for future developments!

Allison gets ready to take on the AMTs
Back in 2010, Global Focus reviewed the alternative types of transmissions available to those transport operators wanting to simplify the workload of drivers in increasingly demanding traffic conditions. We started off by noting that vehicle manufacturers had progressed beyond the traditional choice between “manual” and “automatic” gearboxes and commented on the increasing role the “AMT” option was playing, in both urban and long-distance trucking. (“AMT” is explained by some vehicle brands as “Automated Manual Transmission”, but we prefer the less contradictory “Automated Mechanical Transmission”).

In AMT technology, a computerised electronic control module makes the choice of when, and how many, gears should be shifted and ensures all the parameters – including road speed – are appropriately aligned. We also reported on the Mitsubishi Fuso’s pioneering adoption of racing car-inspired dual-clutch transmission (DCT) technology in its latest Canter model, in which the odd- and even-numbered gears are located on separate shafts, with those shafts coupled through their own clutches to a common output shaft. By electronically managing the sequential engagement of the two clutches, almost seamless gear changes are possible.

In essence, both the AMT and DCT options had arisen due to a widely held perception that the torque converter-type “traditional” A/T compromised fuel efficiency, particularly in those applications that didn’t involve very frequent stops and starts. However, in the case of the latter operating scenario the greater smoothness and improved durability of a driveline devoid of a friction clutch was reason enough to opt for the full automatic – irrespective of a greater up-front cost – because improved vehicle availability was of more importance than any possible increase in fuel consumption. We also noted the AMT solution, while greatly easing the driver’s burden, still utilised the same release accelerator/declutch/shift/re-engage clutch sequence as a manual transmission, with its accompanying distinct “steps” and drive interruptions and that most AMTs also employ a wearing friction clutch to transmit torque from the engine’s crankshaft to the gearbox input shaft. So opportunities for further technological advances remain.

Allison Transmission is an American company founded in 1915. It spent the period between 1929 and 2007 as a division of GM before moving to joint ownership by the Carlyle Group and Onex Corporation. After an early history of component manufacture for military vehicles and aircraft, Allison began producing heavy duty automatic transmissions for commercial vehicles after World War II. However, having remained true – thus far – to the torque converter/planetary gear design philosophy, and despite adopting many electronic refinements to enhance the performance of its products, Allison hasn’t benefited fully from the recent swing to automated transmissions in medium-to-long distance trucks. That’s clearly not been to the company’s taste and it’s doing something about it.

In September last year Allison unveiled its new TC10 TS fully automatic transmission and announced it would become available to the market late this year. It’s described by the manufacturer as combining “a torque converter with a sophisticated 10-speed mechanical gearbox” and Allison reportedly claims it has provided superior performance and economy to conventional manual or AMT gearboxes during development testing. The maker’s designation indicates a twin countershaft design for truck tractor applications and Allison is aiming this product squarely at the premium Class 8 segment of the US market (15 tons GVM and above) in short and medium-distance operations. Initially rated for use with electronically-controlled diesel engines of up to 450 kW (600 hp) and 2240 Nm (1650 ft/lb), this unit, which transmits its power through wet clutches in the main five-speed gearbox and a two-speed planetary range section, will only require a synthetic fluid change at 800 000 km, with no other maintenance scheduled for the life of the unit. Warranty cover will extend for five years/750 000 miles (1,2 million km).

If the TC10 transmission lives up to Allison’s claims it could present a significant challenge to current AMT and manual change transmissions and open up a substantial new market opportunity for its manufacturer. However, reading between the lines in the product announcement statements, there are broad hints this design philosophy could be carried forward into the true long-haul/high average speed transport arena, where AMT units are gaining traction and traditional manual transmissions remain an attractive proposition where good driver skills prevail. It’s also interesting to see no mention is made of a manual override function, which would set this transmission firmly apart from current AMT practice. Interesting news, indeed.

Global FOCUS is a monthly update of international news relating to the commercial vehicle industry. It is compiled exclusively for FOCUS by Frank