Daimler’s Global Investments Fend Off Rivals Such as VW-Scania-MAN, Renschler Says

Bloomberg News

Daimler AG’s truck division, the world’s biggest truck maker, said spending on a global presence will help it fend off competition from a manufacturing alliance Volkswagen AG is forming with Scania AB and MAN SE.

“We will reap now what we’ve invested in the past” on developing a common engine and a modular-vehicle strategy for heavy-vehicle units worldwide,” Andreas Renschler, the head of Daimler Trucks, said in a June 25 interview  in Frankfurt, Germany. “Our position in emerging markets is unparalleled.”

Daimler’s Indian brand BharatBenz began building trucks in late June, and the German company’s joint venture in China to make Auman models is on schedule to start in the third quarter. Truck brands owned by Daimler include Mercedes-Benz in Europe and Brazil, Freightliner in the United States and Fuso in Asia.

Daimler, Stuttgart, Germany, plans to increase truck sales 17% by next year from 2011’s figure.

“Daimler is still No. 1 among the Western truck makers, but the gap with the Volkswagen group is getting smaller,” said Albrecht Denninghoff, an analyst at Silvia Quandt & Cie.

Daimler Trucks contributed 27% of group revenue in 2011, and it has a target of increasing deliveries to 500,000 trucks in 2013 from 425,756 in 2011. The unit plans for sales to rise to more than 700,000 vehicles by the end of the decade.

Volkswagen, which owns controlling stakes in Scania and MAN, appointed veteran Scania CEO Leif Oestling on June 1 to lead their integration. Georg Pachta-Reyhofen, the head of MAN, received additional responsibilities overseeing the groupwide engine business for VW, Wolfsburg, Germany, Europe’s biggest automaker.

“Volkswagen is a global player in cars, and they seem to have big plans for their truck activities as well,” said Roman Mathyssek, head of truck research at IHS Automotive consulting company in London.

Renschler said he doesn’t see additional competition from the new Volkswagen alliance.

“It will take years before they will be able to reach significant synergies,” he said.

The future of a light truck-making partnership between Daimler and Volkswagen is under discussion as the current contract runs out in 2016, the manufacturers’ executives have said.

Mercedes-Benz has been building Volkswagen’s Crafter on the same assembly line as its own Sprinter model since 2006. Daimler plans to “come to a conclusion this year” on the question, said Heinz Gottwick, a spokesman.

MAN plans to develop a light-truck platform, and “working together with the Volkswagen Nutzfahrzeuge division would make a lot of sense,” MAN chief Pachta-Reyhofen said at the Frankfurt conference.

Daimler is looking for growth in emerging markets to make up for a contraction in demand for trucks in Europe.

European Union commercial-vehicle sales in the four months through April fell 10%, according to a European automotive manufacturers’ association in Brussels. The heavy-truck segment declined 4%, led by drops of 24% in Italy and 20% in Spain.

Some European producers have already reacted to the declining demand. Volvo AB, Gothenburg, Sweden, the region’s second-largest truckmaker, has allowed contracts of hundreds of temporary workers in its home market to lapse.

Scania is cutting production by about 15% this year.

Daimler is investing about $900 million (700 million euros) in the BharatBenz site in Chennai and wants to offer a line-up of 17 models ranging in weight from 6 to 49 tons by 2014.

“Our Indian activities are very promising,” Renschler said.

Auman trucks, being produced in cooperation with Beiqi Foton Motor Co., involved a total investment of $1 billion, and planned production capacity is 160,000 vehicles annually.

Mercedes-Benz is scaling back production in Brazil, where it has the second-biggest market share, after sales dropped following a change to emissions rules.

“We still expect the Brazilian market to improve in the second half of the year,” Renschler said.

The German truck maker also builds vehicles with Russian market leader OAO KamAZ, in which Daimler controls a 15% stake. Daimler’s van unit cooperates with another manufacturer in Russia, OAO GAZ, and the companies said that production of the Sprinter will begin in the first half of 2013.

Renschler said he’s confident Daimler Trucks will reach a target of raising earnings before interest and taxes to 8% of sales as of 2013. The return on sales last year increased to 6.5% from 5.5% in 2010.

The full effects of the shared-parts strategy will unfold starting in 2014, Renschler said.