MAN trap
Scania, a Swedish truckmaker, rejected a euro9.6 billion ($12.2 billion) takeover bid from MAN, a German rival. Scania's two leading shareholders, Volkswagen and the investment arm of Sweden's Wallenberg family, believe the offer undervalues the company. But a battle for control seemed certain after MAN received the support of Renault, which holds a 5% voting stake in Scania.
Will MAN take over Scania?
“WE WANTED the main shareholders' support for our bid,” says Hakan Samuelsson, the Swedish boss of MAN, a German truckmaker. He says his company has been talking to the biggest shareholders of Scania, its Swedish rival, for a couple of months about a friendly takeover of the company that employed him for 23 years before he joined MAN six years ago. But a leak to a press agency obliged him, he says, to choose between abandoning his plan and going ahead without the backing of Scania's main owners.
Mr Samuelsson's hostile move caused consternation at Scania. Over the weekend its nine-member board unanimously rejected his takeover proposal. Three members are representatives of Volkswagen (VW), a German carmaker and Scania's biggest shareholder with 18.7% of the capital and 34% of the votes. Two speak for Investor, a Swedish investment company controlled by the Wallenberg family, which controls 29% of the votes. On September 18th, when Mr Samuelsson launched a €9.6 billion ($12.2 billion) cash-and shares bid anyway, VW and Investor issued statements within hours to turn down MAN's offer.
MAN and Scania are a good match. Scania's strong brand, juicy margins and engine know-how make it one of the most attractive companies in the industry. The two firms have talked about co-operating in the development of gearboxes and axles, though the discussion ended acrimoniously. Scania's focus on heavy trucks would complement MAN's on lighter vehicles. Mr Samuelsson and several other former Scania managers who recently defected to MAN know Scania well. The combination would create the market leader in Europe, a strong firm in emerging markets and the global number three by sales.
Analysts have been predicting consolidation in the European market since the start of the year. Bigger is better: DaimlerChrysler Truck Group, the market leader by a large margin, and Volvo Trucks, the number two, are reaping the benefits of economies of scale in research and development (R&D), sourcing of components, marketing and distribution. This puts both in a strong position to weather a coming storm. The truck business is booming in most countries, but new carbon-emission standards in the North American Free Trade Area and stronger competition from Asian and Eastern European producers are likely to hit sales next year.
Mr Samuelsson is undeterred by the big shareholders' rejection. He is betting on winning over Investor with a better price and VW with a bigger stake in the merged company. Investor is unlikely to be keen on becoming a minority shareholder without multiple-voting rights in a Societas Europaea (SE), the European Union's newish form of company that Mr Samuelsson wants the merged firm to assume. Dual-class shares are common in Swedish companies, but do not exist in SEs. VW, meanwhile, could be tempted by an offer to incorporate its undersized truck business in Brazil, which would increase its stake in the new company.
Much depends on how he sweetens his offer, but Mr Samuelsson's strategy may well succeed unless an attractive rival bid emerges. Analysts at JPMorgan, an American investment bank, say that PACCAR, an American truckmaker, could afford a counterbid for Scania and might reap greater synergies than MAN. MAN says it will be saving some €500m a year, mainly in component sourcing, administration and R&D within the next three years. Even so, say JPMorgan's analysts, PACCAR will probably shy away from a bidding war.
Could Scania turn the tables and bid for MAN? The “Pac-Man” defence remains an option for Leif Ostling, Scania's boss for 17 years. Yet Mr Ostling is opposed not only to this merger but to any. He thinks Scania is better off on its own. Its smaller size, European focus and emphasis on heavy trucks have made it the most profitable company in its peer group with average margins of 9.4% over the past 15 years. In 1999 Mr Ostling fought hard against a hostile bid by Volvo, a Swedish carmaker, and won when the deal was blocked by the EU's antitrust watchdog. Three years ago he rejected a previous advance by MAN. This could be the trickiest—and possibly the last—battle of his time at Scania.
Ford said it had employed the services of Sir John Bond, Vodafone's chairman and a former chairman of HSBC, as a part-time financial consultant to Bill Ford, the carmaker's chairman. Last week investors showed little enthusiasm when Mr Ford unveiled plans for 10,000 more white-collar job cuts and two additional plant closures.
Detroit's woes continued as DaimlerChrysler's boss, Dieter Zetsche, predicted that Chrysler would make a loss for the year, rather than a previously forecast profit. As it continues to lose market share in North America, the carmaker is making additional cuts to vehicle production this year.
Chrysler joins General Motors and Ford in deep trouble
Reuters
Fired, sort of
NOT even appearing in adverts on American television as the jocular Dr Z, a mustachioed caricature of himself, enabled Dieter Zetsche to boost sales of Chrysler vehicles. The boss of DaimlerChrysler was forced to admit on September 19th that his efforts to turn the American carmaker around had stalled. Its mounting losses could cut the group's operating profits by €1 billion ($1.3 billion) this year.
America's third-biggest carmaker had started to convince people that it had turned the corner. After all, it was growing while its Detroit neighbours, General Motors (GM) and Ford, were having to close plants and lay off thousands of workers. (This week Ford said it would suspend its quarterly dividend and cut 14,000 salaried workers, rather than the 4,000 originally planned; it also emerged that Ford and GM even briefly considered an alliance.)
But earlier this year some in Motown began to suspect something was wrong: thousands of new, unsold Chrysler vehicles began to fill up car parks at the airport and other locations around the city. As fuel prices soared, unwanted people-carriers, pick-up trucks and sport-utility vehicles were piling up on dealers' forecourts. Such vehicles account for around 70% of Chrysler's sales, but consumers were suddenly reluctant to buy them because of their high fuel-consumption.
Chrysler's executives hoped that a big marketing push would clear the glut. Hence the $100m “Dr Z” campaign. But it didn't work, because GM and Ford also had vast numbers of similar unsold vehicles—and, being more desperate, offered bigger discounts. “Hope may not be the best basis for a management decision,” Mr Zetsche conceded this week. Chrysler is now cutting production by almost a quarter and readying new, more fuel-efficient vehicles for market. Fuel prices are now falling, but experts predict consumers will continue to be wary of big gas-guzzlers.
Mr Zetsche is a popular figure in Detroit, where he arrived in 2000 to sort out Chrysler, which had merged with Germany's Daimler-Benz in 1998. He undertook a huge restructuring, much like those now under way at GM and Ford. His success helped him win DaimlerChrysler's top job in July 2005.
With hindsight, Mr Zetsche's decision to appear in his firm's advertisements was itself a bad omen. Lee Iacocca, Jacques Nasser and Bill Ford all tried it too. While it is not unusual for American bosses to pitch their own products, it smacks of desperation. Yet Mr Zetsche, rather cleverly, did not really appear as himself—so he could sack his alter ego with impunity.
Bookmarks