MAN SE’s Lutz Makes Costs, Brazil Priorities, Not Scania Linkup
March 17, 2010, 4:40 AM EDTBy Andreas Cremer
March 17 (Bloomberg) -- MAN SE, the German truckmaker that failed to take over Scania AB in 2007, will focus on reducing labor costs and expanding in Brazil this year as a merger with the rival is unlikely, Chief Financial Officer Frank Lutz said.
“Our present top strategic priority is to develop MAN’s market position without Scania as there are no positive signs from Scania” about cooperation, Lutz said in a telephone interview. “Our readiness to cooperate with Scania still exists.” Volkswagen AG owns stakes in both manufacturers.
The recession led to a 55 percent drop in deliveries at Munich-based MAN last year and a 41 percent decline at Scania. Combining the manufacturers would create a company with revenue exceeding 18 billion euros ($24.8 billion), compared with Volvo AB’s 20.6 billion euros. Volkswagen Chairman Ferdinand Piech said this month that he expects the truckmakers’ cooperation to accelerate, possibly leading to parts and technology sharing.
“It’s beyond any doubt whatsoever that MAN and Scania could reap major synergies through joint purchasing and by pooling development costs,” said Tim Schuldt, an analyst at Equinet in Frankfurt with a “buy” recommendation on MAN. “They have no other choice but to carve out their own market position if Scania shuts the door on a tie-up.”
Erik Ljungberg, a spokesman at Soedertaelje, Sweden-based Scania, referred questions on a potential linkup with MAN to VW. Volkswagen is MAN’s biggest investor with a 29.9 percent stake and controls 71 percent of Scania’s voting rights. Scania and Wolfsburg, Germany-based VW are exploring cooperation in areas including light materials and electronics, Ljungberg said.
Stocks’ Gains
MAN has risen 6.1 percent in Frankfurt trading this year, compared with a 26 percent increase for Scania in Stockholm. Volvo, Europe’s second-largest truckmaker, is up 16 percent. Daimler AG’s truck division is the market leader.
Orders at MAN’s main truck division as well as the diesel- engine and turbine units have risen for the past four months, Lutz said yesterday from his office in Munich, without giving figures.
The net loss in 2009, MAN’S first since at least 1989, totaled 270 million euros. Costs included a writedown on the value of its 8.4 percent holding in Scania and fines related to a bribery probe. Scania’s profit slumped 87 percent to 1.13 billion kronor ($160 million).
MAN owns the Scania stake following a four-month hostile takeover bid that ended in January 2007. Volkswagen helped block the transaction by accumulating stock in both companies and joining with Investor AB, then Scania’s second-biggest shareholder, to oppose MAN. Volkswagen said at the time that it wanted to combine the two truckmakers with its commercial- vehicle unit in Brazil. VW sold the unit to MAN a year ago.
‘Desirable’ Tie
An alliance with Scania “would be desirable and make good economic sense,” Lutz said. There are currently no talks with the Swedish competitor, he said.
MAN’s March 2009 purchase of VW’s Resende, Brazil-based truckmaking division, the country’s biggest commercial-vehicle manufacturer, cost 1.2 billion euros. Sales at the unit totaled 1.4 billion euros last year, according to MAN’s annual report.
Other business in Brazil includes a 300 million-euro order to supply Grupo Bertin with generating equipment for six power plants that MAN’s diesel-engine unit won last month.
Lutz was named CFO in December, a month after MAN’s top three executives, including Chief Executive Officer Hakan Samuelsson, stepped down.
MAN aims to save 180 million euros in 2010 alone by shortening workweeks, Lutz said. The company will suspend truckmaking for 50 days in the first half of this year. MAN may scale back cuts in production in the second half should demand and orders continue to increase, he said.
Sales Drop
Revenue dropped 40 percent last year at the main truck and bus division to 6.4 billion euros and fell 5.2 percent to 2.41 billion euros at the diesel division while increasing 4.4 percent to 1.39 billion euros at the turbine business. MAN is scheduled to release first-quarter figures on April 29.
Andreas Renschler, head of Daimler Trucks, forecast on March 10 that the western European truck market will bottom out in 2010, with a “slight” increase in deliveries for the full year. U.S. industrywide demand will rise by about 15 percent and Brazil, China and India will continue to post “stable” growth, according to Renschler.
MAN is “more cautious than others” with forecasts, even after a “slight upward trend,” Lutz said. It’s “too early to say” that the financial crisis is over, and the risk of a “double-dip” of the truck market persists.
“We’re looking at some improvements on the customer- financing side and the volume of goods transported is also growing,” Lutz said. “If orders keep growing through the middle of the year, we’ll be able to say that a trend change has been achieved.”
--With assistance from Ola Kinnander in Stockholm. Editors: Kenneth Wong, Tom Lavell.
To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net.
To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.
