Bloomberg News

Scania Chief Considers Plant in Russia as Orders Rise

May 03, 2007

Scania AB (SCVA) Chief Executive Officer Leif Oestling is considering producing vehicles in Russia as Sweden's second-largest maker of heavy trucks receives a surge of orders from the world's second-largest oil producing country.

``It may become necessary to make further investments in capacity and one country we are looking at closely is Russia,'' Oestling said in a speech prepared for the company's annual meeting. ``If this growth trend continues, in a few years or so, Russia is going to become Scania's largest market.''

Oestling in January compared the current need for increased transport capacity in eastern Europe and Russia to growth in western Europe after World War II. Soedertaelje, Sweden-based Scania said last month first-quarter truck orders, an indicator of future sales, rose 45 percent as eastern European orders more than doubled and profit rose 44 percent.

German competitor MAN AG, which may merge with Scania and Volkswagen AG (VOW)'s truck division, today announced first-quarter orders gained 23 percent to 4.8 billion euros ($6.5 billion), led by rising demand from eastern Europe and Russia.

Scania plans to boost production 54 percent to 100,000 trucks and buses a year by 2010 to meet the rising demand. The truckmaker, which has a third of the Russian truck market, said March 21 that it won an order for 144 trucks from X5 Retail Group, a Russian grocer.

Shares of Scania fell 4 kronor, or 0.6 percent, to 636 kronor. The stock has gained 32 percent this year, valuing the company at about 129.4 billion kronor ($19.2 billion).

Winterkorn Election

Scania investors at today's annual general meeting in Soedertaelje selected Volkswagen Chief Executive Officer Martin Winterkorn as the new board chairman, replacing former Volkswagen CEO Bernd Pischetsrieder.

Volkswagen, Scania's largest shareholder with 36.4 percent of the voting rights, also gained an additional two board seats, after shareholders voted in favor of having Volkswagen managers Hans Dieter Poetsch and Francisco Javier Garcia Sanz join.

Volkswagen, which became Munich-based MAN's largest investor last October, is set to have its Chairman Ferdinand Piech and two additional executives from the Wolfsburg, Germany-based carmaker join the MAN board next week. Volkswagen is seeking a ``friendly'' combination that would create Europe's largest truckmaker, surpassing Daimler Chrysler AG and Volvo AB. (VOLVB)

``I would like to ask about this potential conflict of interest with Volkswagen owning MAN shares,'' Gunnar Ek, a representative of the Swedish Shareholders Association, said. ``This is certainly not an optimal situation.''

Scania shareholders today also voted in favor of a proposal to hand back 10 billion kronor to investors as booming European sales leave truckmakers flush with cash. Shareholders will receive a 2006 payout of 50 kronor a share. The amount includes a cash dividend of 15 kronor, and an extra 35 kronor through a 5- for-1 stock split.

Scania, MAN and Volvo have all increased 2006 shareholder payments after posting record profit last year.

To contact the reporter on this story: Chad Thomas in Stockholm at cthomas16@bloomberg.net; Jeremy van Loon in Berlin at jvanloon@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.


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