Andreas Renschler is the man of the hour at Volkswagen. A former member of Daimler board of management, Mr. Renschler has been tasked with cleaning up the truck subsidiaries of Europe’s largest automaker – MAN in Munich and Scania in Södertälje, Sweden.
The two units generated €34.9 billion ($44.89 billion) in revenues last year, but are in need of a tune-up if they are to challenge Daimler’s dominance in buses, trucks and diesel-motor production. Mr. Renschler is being asked to integrate the two companies, which so far have found little common ground under the Volkswagen umbrella.
But the 56-year-old can’t begin this difficult task until February 2015 because of a non-compete clause with Daimler. Once he does get his hands on the wheel, however, observers expect him to steer the VW truck business to success. As head of truck and bus operations at Daimler, he built global leaders out of many brands.
Since he is not allowed to show up at Volkswagen, Mr. Renschler has been spending a lot of time on the golf course, no doubt contemplating the future of MAN and Scania. His accomplished tenure at Daimler has executives in Wolfsburg salivating over what he might be able to achieve for Volkswagen, where efforts to oust Daimler as the global market leader have failed.
It is not for lack of ambition. Just two years ago, MAN Chief Executive Officer Anders Neilsen said, “As a group, we have the potential to challenge Daimler as No. 1.” Neilsen failed to turn that potential into reality.
The problem Volkswagen faces is the lack of a core strategy for its truck subsidiaries, which is hardly surprising since the company’s executives are automobile-centric. For example, Volkswagen has tried to market MAN and Scania in the same way it sells cars, but that strategy, which has worked well for its Audi and Porsche brands, has had little impact in the truck industry. Truck buyers are less interested in brand names than in how economical the vehicle will be when put to use.
Meanwhile, a fierce rivalry between MAN and Scania has developed, which is hurting both companies. According to industry insiders, Scania sales representatives tried to snatch orders away from sister-company MAN with predatory pricing. With Scania catering to the upper end of the truck segment and MAN the lower end, the two companies had the potential to put the squeeze on Daimler trucks at both ends of the price spectrum. But, as an insider said, “Scania was undercutting Daimler with prices, and thus poaching MAN’s territory.” Both companies refused to comment.
With suffering margins under such price competition, the intra-company warfare is not in the best interests of Volkswagen. Leif Östling, a member of the board of management responsible for commercial vehicles, has set an operating-margin target of 8 percent to 10 percent, but the best the company has achieved is just 3 percent.