| BUSINESSWEEK ONLINE : MAY 17, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN BUSINESS
Scania: A Big-Rig Brawl (int'l edition) The battle over the truckmaker could change the face of the industry Swedish heavy truckmaker Scania could be forgiven for thinking Volvo had lost interest. After negotiations between the companies broke off in late February, Volvo stayed quiet--though it hung on to the 13% stake it had acquired in its rival. Then in late April, without warning, Volvo struck again, acquiring big blocks of Scania shares and options overnight and boosting its stake to 20%. The Wallenberg family, which controls Scania through holding company Investor, counterattacked with huge swap deals that raised its voting stake in Scania to 49% from 42%. It's a first-class brawl over an unglamorous but flourishing business. For years, heavy trucks have been overshadowed by the more exciting car industry. But in the age of shareholder value, company chiefs and investment bankers are paying closer attention to trucks, which can be more profitable than cars. Like autos, the truck business is fast consolidating. Kurt J. Lauk, DaimlerChrysler truck chief, figures that the industry will be down to seven big players by 2000, compared with about a dozen at present. In the coming shakeout, Scania stands out as the premium brand among trucks of 16 tons or more, rumbling behemoths that sell for up to $130,000. If a rival gains possession of this crown jewel of Nordic industry, that company would grab the lead in European heavy trucks. SAVING FACE. It will be a struggle. For the Wallenberg family, throwing in the towel would be a disastrous debut for Marcus Wallenberg, who took the reins at Investor on Apr. 14. Doing so would invite raids on all the Investor companies, from mobile phone maker Ericsson to heavy machinery maker Atlas Copco. Meantime, Scania insists Volvo is the wrong partner and that the two companies would find it impossible to defend their combined 30% market share after a merger. ''We have a total overlap when it comes to products and customers,'' says Scania CEO Leif Ostling. There is also a lot on the line for Volvo Chief Leif Johansson. In January, Johansson took a big risk and sold his car division for $6.5 billion to Ford Motor Co. If he doesn't find productive ways of spending his cash, Volvo too could wind up in a predator's game bag. DaimlerChrysler could join the hunt. The company's truck unit has become profitable under Lauk--though its 5% operating margins last year don't approach Scania's 8%. DaimlerChrysler is already the leader in the U.S. market for medium and heavy trucks, where it recently added Ford's truck operations to its Freightliner Corp. Facing such competition, the Swedish rivals must be calculating whether they have the money and breadth to remain independent. ''They know that at some point they will have to go to bed with someone,'' says Peter Schmidt, analyst at Automotive Industry Data Ltd. in Warwick, England. Lauk says Investor approached him last year about taking a stake, but he demurred because the asking price was too high. Volvo's latest gambit forces Investor to once again think about bringing in a white knight. Lauk says he still finds the price too rich. But Fiat, Renault, and Volkswagen are among other possible suitors. Volkswagen CEO Ferdinand Piech recently asked shareholders for $10 billion worth of new shares, enough to acquire Scania. Count on Investor to strike a tough bargain--if it deals at all. Wallenberg argues that it would be foolish to sell Scania now, just when the cyclical truck business is looking up. Scania just reported a 97% increase in operating earnings, to $148 million for the first quarter. Because he has the votes, Wallenberg doesn't have to do anything right away. But he will feel the heat from shareholders if Scania's stock price sinks. Johansson's position is also uncomfortable. His new buys of Scania stock have mainly called attention to his own cash pile and stiffened Investor's resolve. Volvo says it will return $1.2 billion to shareholders if Swedish law is changed to permit such moves. It is also doubtless eyeing other potential acquisitions, including truckmaker Navistar International Corp. in the U.S. But Johansson may end up wishing he had lined up something to buy before he sold his precious cars to Ford. By Stanley Reed in London, with Karen Lowry Miller in Frankfurt and Heidi Dawley in London _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Scania: A Big-Rig Brawl (int'l edition) TABLE: What's Riding on Scania INTERACT E-Mail to Business Week Online | |||
