A Monthly Update of Global Trucking News

Compiled Exclusively for FleetWatch by Frank Beeton of Econometrix (Pty Ltd.

Who Owns Whom?
The Global Motor Industry has undergone considerable change in recent years. Driven by ever-increasing pressure on profitability - a recent survey of published annual results revealed an average margin of less than 4% for six giant international groups - manufacturers are grouping together in a desperate search for economies of scale. Informed opinion is that annual production must total between five and eight million vehicles for a manufacturer to be viable in the 21st Century!

Unfortunately, the Truck Industry is not immune to the effects of globalisation or rationalisation. Many fiercely independent names have been absorbed into major groupings - and others have quietly slipped away. According to "The Complete Encyclopedia of Commercial Vehicles" by Georgano and Marshall Naul, published in 1979, more than 2 500 separate manufacturers have participated in this industry since 1886. This review - intended to set the scene for future WorldWatch articles in FleetWatch - will focus on the eleven entities that currently make up the bulk of the World Truck Industry. Perusal of the content will reveal that the number is not yet final, by any means. 

Freightliner ... part of the world No 1 alliance - DaimlerChrysler

In broad terms, similar pressures face truck manufacturers as are confronting their light vehicle colleagues. These include low margins from intense sales competition, expensive compliance with ever-tightening environmental legislation, the challenge of e-business and its effect on distribution channels, both in-house and dealer-based, and softening economies in the First World which are piling up inventories of used trucks at an alarming rate.

Add to these the specific problems generated by fleet leasing activities where vast numbers of identical models come "off contract" simultaneously along with mounting pressure from the operator community for suppliers to help them regain profitability, and it is not difficult to understand why top truck marketing jobs carry a high risk profile these days.

Let us take a closer look at the major industry participants.

Different parameters are sometimes used to rank players in the World Truck Market, but DaimlerChrysler is Number One by most accepted definitions. The core Mercedes-Benz range extends from the Sprinter van to the line-haul Actros, covering just about every application inbetween. However, the traditional resistance to European-style vertically-integrated products in the US Class 8 market led the manufacturer to explore a different strategy in the New World. First came the takeover of Freightliner, followed by Sterling (previously Ford Louisville) and most recently, Canadian specialist builder Western Star.

The new strategy worked well, and Freightliner jumped to No.1 in the US Class 8 market. Under Jim Hebe, the company ploughed a fairly independent furrow, but now, with his departure, the direction could change. DaimlerChrysler has also absorbed Detroit Diesel and is now entering a partnership with engine manufacturer Caterpillar.

Ideally, product rationalisation between the US and European brands must be expanded for the alliance to be justified but the stubborn resistance to change inherent in American truckers - especially while there is an option - may cause the main commonisation thrust to be directed at Europe instead.

While all this is going on, DaimlerChrysler continues to grow its empire. The 34% buy-in to Mitsubishi has now been expanded to cover the latter's medium and heavy truck operation. In addition, commercial vehicle joint plans with Hyundai, in which DaimlerChrysler has a 12,17% stake, should be finalised in 2002. One short term advantage of these moves will be access to the Mitsubishi Canter, an exceptionally successful Japanese truck in Europe, which should gain additional popularity after the introduction of a semi-forward control variant at the next model change.

Mitsubishi .... 34% owned by DaimlerChrysler

Volvo Global Trucks was born under unusual circumstances. Renault purchased a structured 20% of Swedish truck giant Volvo and then promptly sold its main trucking interests to its new partner. These included Renault VI and Mack, arguably the most vertically-integrated US truck maker. The result is the World's Number Two heavy truck alliance.

It is still very early days for Volvo Global Trucks and the constituent operations are largely doing their own respective things. Both RVI and Volvo have fairly young model line-ups - the Renault Midlum is brand-new - so overlaps are inevitable. Group benefits and synergies will become more apparent in the future.

The major intrigue, however, surrounds Nissan Diesel. A joint stake of 45% is held by Renault and Nissan but no plans have yet been revealed for the Japanese company's logical integration into Volvo Global, leaving them a truck company in a car group. A recent announcement that Nissan Diesel will buy some Hino engines from 2004 has further clouded the issue. 

Paccar is the only major truck grouping with a US base. Its famous brands include Kenworth, Peterbilt, Foden and DAF. Products from their US plants are traditional mainstream "kit trucks" but access to alternative European-sourced product, particularly for export markets, is highly desirable given present US$ strength. The new DAF XF middleweight shares its cab structure with the Renault Midlum, surely an indication that common component sourcing will intensify, even between independent manufacturers, in the future. Paccar is a highly-focused truck operation and future links are likely to be truck or component-specific.

MAN has been a strong independent for many years. Previous co-operation has been limited to some basic component sharing with Mercedes-Benz, a joint light truck venture with Volkswagen and the takeover of German competitor Bussing. More recently, MAN has been on the acquisition trail, absorbing Steyr and OAF in Austria, Star in Poland, British traditionalists ERF, and German bus builder, Gottlob Auwater, better known by its Neoplan product brand.

MAN ... a strong independent for many years ... but is a partner in the wings?

Long running low-key speculation that MAN has a partner in its future has recently intensified. A reported wish by major shareholder Allianz to sell-off parts of the group have rekindled speculation that Volkswagen is waiting in the wings for the appropriate moment. The Wolfsburg car manufacturer has recently expressed an interest in truck business participation and has purchased a surprise 30% stake in Scania, so a move on MAN would reflect consistency. MAN has acknowledged that they are talking to a potential partner.

Iveco were, themselves, formed as a result of a merger. The original Fiat truck operation pulled in competitors Unic (France) and Magirus (Germany) to create the new conglomerate. A subsequent marketing partnership with Ford in the UK has been very successful. Since the formation of Iveco, Seddon-Atkinson (UK), Ashok-Leyland (India) and the Australian International operation have joined the fold. Fiat Auto's recent alignment with General Motors does not affect Iveco, which falls under the Fiat SpA group.

An attempted merger between Scania and Volvo late in the 20th Century was thwarted by EU politics. Subsequently, Volkswagen has acquired a 30% stake in the Swedish company which has an up-to-date range of heavy trucks, buses and in-house driveline components.

The only Japanese truck manufacturer now devoid of international influence, Hino, has recently been drawn closer into the Toyota family. The Toyota shareholding is now 50,1%, and the parent company's style of engaging in technical co-operative agreements, without sacrificing its corporate independence, could well be the blueprint for any future Hino relationships.

The only Japanese truck manufacturer devoid of international influence ... Hino - part of the Toyota Family

Independent American International Truck and Engine Corporation recently entered into negotiations to purchase 12 litre diesel engines from Volvo Global Trucks and then established a joint venture with Ford to build and sell Class 6 & 7 trucks in the US. International thus find themselves heavily exposed to fluctuations in the US market, because of a relatively limited export profile.

Isuzu, owned 49% by General Motors, now finds itself as the only true truck manufacturer affiliated to the World's Number One automotive grouping. This does, of course, hold huge benefits for the Japanese company in terms of global marketing exposure through group distribution networks. In addition to a high profile presence in markets such as Australia and South Africa, Isuzu trucks are also sold widely into the US under both their own and other group nameplates, in some cases fitted with US-source GM petrol engines.

ISUZU ... owned 49% by General Motors

Isuzu's value to GM is enhanced by the provision of light truck-derived Sports Utility Vehicles and high performance diesel engines to the group. Current moves towards financial restructuring of the company may see more emphasis being placed on these activities, rather than aggressive development of Isuzu's highly reputed range of medium and heavy trucks.

Finally, two companies located in Asia have emerged as notable forces in World trucking. Indian industrial empire Telco has previously used Mercedes-Benz technology as the basis of its domestically-dominant Tata truck range. More recently, the company has entered an agreement with Cummins for the manufacture of the diesel engines in some of its trucks.

Two notable faces in World Trucking ... TATA and chinese heavyweight, FAW

Tata has historically been active in the export market, mainly to Third World countries but also with their lighter vehicles into Europe. Likewise, Chinese heavyweight FAW has exported limited numbers of its products, based on recognisable Japanese origins, into the broader world market. Recent co-operation talks between FAW and DaimlerChrysler seem to have fizzled out but both these manufacturers could well find themselves drawn into wider alliances in the future due to their vast domestic markets and considerable manufacturing resources. They may also provide viable sources for low-tech alternatives to the increasingly-sophisticated First World products being dictated by environmental legislation in Europe, Japan and the USA.

This, then, is the World Truck Industry as we find it in mid-2001. It has already experienced very considerable rationalisation and realignment but the process is far from complete. Several relationships are not yet fully developed and obvious opportunities for new joint ventures abound. It is not inconceivable that the final picture could reflect only five, or six, major groupings such are the financial, legislative and business pressures that are facing current participants.