Friday, 17 October 2008

Company Focus - MAN AG – Samuelsson's Challenge

Hakan Samuelsson, CEO of MAN (and ex-exec at Scania) recognised the size of the challenge when he moved across to the German conglomerate that operates the primary 3 main divisions of: MAN Nutzfahrzeuge AG (Truck, Bus & Military Vehicles), MAN Diesel SE [Engines] and MAN Turbo AG [Systems].

Although it has an illustrious past, involvement from the very beginning with Rudolf Diesel's, the engineering concern is best known for its Truck division; seen plying freight across the European road network. Unfortunately, the MAN brand is predominantly German-centric, and although Europe-wide has been the historical 'poor cousin' to the likes of Daimler, Scania, Volvo, Renault even within its own territory, and takes only a sliver of international sales given regional predominance of other European, American, Japanese and emerging Asian marques. Marques like: Freightliner, Mack, International, Hino, Isuzu, Nissan and Daewoo Heavy Industry.

As well reported, Samuelsson's initial ploy was to endeavour and buy market-share and gain synergistic efficiencies and economies via a buy-into Scania, taking 15.6%. But a canny and stronger VW / Ferdinand Piech, then took a 51% ownership of Scania, in turn took a 20% stake in MAN. The cross-shareholdings seem to place VW in perhaps the strongest position, with the agenda of integrating MAN-Scania and its own Brazilian truck operations. But that hasn't happened (as of yet) possibly because of Piech's own influence, and so Samuelsson's own perceived Scania buy hasn't generated results as expected. Thus it begs the question “did Samuelson infact realistically act as a proxy for Piech so he could latterly piece together the jigsaw?”

MAN and VW do appear to share similar ambitions in terms of focus on diesel engines and turbo systems, both recognise the rationale to assemble whole vehicles in Germany & even E. Europe is diminishing, that it makes sense to orientate commercial activities around those high-value powertrain and ancillary systems and the associated services that surround them. This could possibly even lead to Piech and Samuelsson respectively re-creating VW & MAN in the mould of Porsche - as both vehicle manufacturers and specialist engineering consultants to their respective global sectors.

[Note that MAN Diesel SE is an SE appointed enterprise related to European corporate legislation, as is Porsche Holdings SE. This dual status simplifies merger possibility]

With that ideology in mind, MAN would be looking to create relationships with major Asian players that need the technological and know-how leap that MAN can provide. The obvious candidate is TATA given its massive Indian domestic sprawl and international growth ambitions. Of course Ratan Tata has FIAT Board seat, so a close connection to the Italian conglomerate that is effectively TATA's European equal. But that does not preclude relationships with others that can fill TATA's competencies gaps where FIAT cannot. And whilst there is an obvious car, LCV and agri-vehicles alignment, FIAT cannot assist in updating TATA's reliable yet aged truck range. That truck range is largely derived (licensed and tooling supplied) from Mercedes 1970s truck range; which although the sin qe non of Indian Trucks is in global terms archaic, and in domestic terms, leaves the company open to virulent attack from the powerful global truck-makers.

MAN could be a possible ally to both provide advanced diesel-emissions knowledge and possibly powertrains to assist TATA's ecological efforts, and step by step create a JV that allows MAN (as a proprietary brand or OEM for TATA) to enter the growing Indian economy - matching its Chinese & Russian habitation within the critical BRIC 4 [VW already present in Brazil]. Such an alliance could ensure that the yesteryear alliance between TATA and Daimler was not re-forged and extend its own Indian sales reach spanning the full spectrum of MHV to HGV segments, 4.5T to 44T aswell as mid and large bus products. TATA would be unlikely to immediately re-badge MAN vehicles as its own, but could encourage the JV to initially cover the generally unsupported Class-7 sector. A sector which has the capability, because of its container-carrying orientation, to transform the logistics capabilities of Indian haulage, especially regards import and export trade. And of course the opportunity for TATA to build labour intensive MAN products (both Vehicles & Engines) as a cost-reduction, out-sourced, production partner is obvious.

(This effective freight rationalisation would of course partially diminish the very high labour content of Indian logistics course brings about the issue of employment. But Indian authorities recognise that their own age-old labour policies keep them in a psuedo 19th century economic trap, so they must continue to reform).

Thus, these are, very briefly, the prime internal and external situations facing Samuelsson. & MAN AG. It does have the potential to transformation and could be part of an ongoing German attempt to consolodate Deutsche AG; as witnessed by Schaeffler-Continental. But as the downturns in Trucks & Marine Vessels (key to MAN Diesel's order book) start to bite, now looks to be a good time to start to execute a possible grand plan that secures MAN's position and provides renewed strong revenue streams and operating profit into the next decade.