MAN -Scania Bid: now the Deaththroes.
Looks like the MAN Scania bid has finally died the death. In truth, it’s been coughing up blood in the hallway ever since Bernd Pischetsrieder received the surprise elbow from VW a month or so back, but the rejection by VW of the MAN offer – it is Scania’s biggest shareholder – has finally put the lid on things.
MAN still seems to hold out a bit of hope that things might work out to Munich’s wishes: “Our offer still stands until Jan. 31,'' Andreas Lampersbach, an MAN spokesman, said in a Bloomberg interview. “We have from the very beginning sought a friendly solution.'' Exactly what VW itself seemed to want as well.Where does this leave the three parties? Presumably Leif Östling is feeling fairly smug at present – he’s seen off a serious bid for Scania – but now he has to deliver on his assertion that the Swedish OEM has greater growth potential as an independent organization. Verticalisation is where it’s at c.2007, but the handmaiden of vertical integration is scale. Über-OEMs such as DaimlerChrysler and Volvo have scale; Scania does not. This has to be an issue moving forwards, and so we assume that Scania’s relationship with Hino will be extended. Despite Östling’s protestations to the contrary, Scania is trying to punch well above its weight, and we can’t see how it can continue to do so post Euro 5.If Leif Östling is looking smug, MAN Chief Executive Officer Hakan Samuelsson is likely to be working on his resume. Samuelsson has gone out on a limb, and it seems to have broken off, dumping the affable Swede in a heap. It seems unlikely that he can survive such a public humiliation, and we assume that he’ll be heading elsewhere.But one thing might save him. Volkswagen’s rationale behind its part in this adventure is simple. It has an operation in Latin America, but nothing else worth a mention in the heavy CV business. Samuelsson’s argument for a MAN-Scania merger is founded in the need for scale and synergy. That applies equally to VW’s enthusiasm. Hence the market rumours suggesting that, once the dust has settled, VW mill make a pitch for MAN.This makes a bit of sense. MAN has no footprint in Latin America, and VW is reliant upon a lot of Tier 1 input for its heavy CV range. MAN-VW could offer sufficient scale benefits to be worthwhile, and, from VW’s perspective, could rid the carmaker of a growing problem. On that note, it’s interesting to see that Wolfgang Bernhard, who has overseen the VW brand since May 2005, is to leave the company on January 31st.Will VW make a bid for MAN? Or will MAN make an offer for VW’s truck business? One or other seems inevitable, and our money is on the former. VW’s stake in Scania isn’t going away, and so maybe a combined German truck operation would be in a better position to go again for Scania in the future. Until then, we’ll have to find something else to talk about in the M&A arena. Paccar and Ashok Leyland anyone? Tata and Iveco?
PACCAR and Isuzu invest in the US, but aim for Europe?
The news that both Paccar and Isuzu are to develop new manufacturing facilities in the US comes at an interesting time. Isuzu is to establish a plant in Birmingham, Alabama, and, whilst Paccar is rather coyer as to its plans, we’d put some money on it opting for the same state.
Why? Try aggressive incentive packages, a good climate, no unions and ready access to ports. Little wonder then that Alabama has become a hub for US auto manufacturing in recent years, with Isuzu – and probably Paccar – joining Mercedes-Benz, Honda and Hyundai in the Yellowhammer state.But hold on a moment. Is not the US economy fast approaching bended knees? Why invest in a faltering, increasingly isolationist economy when there’s now a whole globalised world out there from which to choose? And this is where things might get exciting.The US economy is faltering, and the decline in the value of the dollar was pretty marked during 2006. Indeed, since 2002, the $:€ rate has seen the Euro steal a 35 percent march on the dollar. This is not simply because the rest of the world doesn’t like the greenback’s colour: take a look here for a more informed analysis of the dollar debacle.But US interest rates are low, and so the attracting this $75 billion takes a bit of sweet-talking. Interest rates seem unlikely to rise in the near term, and so the dollar looks set to remain soft.And what has this to do with trucks? In Paccar’s case, plenty. We reckon that the MX is due for EPA 10. The new plant comes on stream in 2009, one year before EPA 10. Importing said lump from Europe at a 30 per cent premium over 2002 Forex rates would take some selling. But how about the notion of two-way traffic? Mercedes-Benz is already punting the M-Class back into Europe from its Alabama plant, so why should Paccar not do the same with the MX? Similarly, Isuzu is reckoned to be sorting it manufacturing issues out in Europe too, with a shift from SCKD through to CKD. Would it not make sense to supply the new European Isuzu facility with CKD kits from the US as opposed to Japan?Paccar isn't saying what sort of capacity its new facility will have, but spokesman Andy Wold told me that both the 12.9 and 9.2 variants of the MX will come off the line. Moreover, he was keen to point out the huge logistical advantages offered by the South East US in terms of both domestic and international supply. Could the new facility supply EU demand? Yes is the word from Bellevue. And is you assume a forecast $:€ rate of 1.35:1 by the end of 2007, it'd be daft not to consider such a move.It’s rather ironic that one of the great battle cries in the US at present is that which bemoans the outsourcing of jobs to the likes of China, and yet the decline in the value of the dollar could yet turn parts of the US into a Maquiladora for Europe.