Where to for VW?

News this week has stirred up speculation about Volkswagen’s plans to expand its truck manufacturing business. By coincidence, Navistar sat down with the US truck press to talk about the company’s performance at around the same time as Andreas Renschler was taking the reins of the Volkswagen truck business.

Andreas Renschler
Andreas Renschler

Renschler’s task in the coming months and years will be to take Volkswagen forward. Currently, the commercial vehicle business consists of Scania in Sweden, MAN in Germany and a VW branded truck operation in South America. The global automotive giant will be looking for further integration of its existing holdings and, perhaps, an expansion into the North American market. China could also be on the radar for Renschler.

Speculation last year was all about VW being interested in acquiring the Paccar organisation, with its Peterbilt, Kenworth and DAF brands. Any such merger would certainly have run into regulatory trouble in the European Union, owning three of the bigger brands in the market.

Navistar are shaping up to be the most likely target. The company is no longer the debt-heavy basket case it was a few years back and the new management has made the tough decisions and got the Chicago-based truck maker back on track.

Renschler was formerly the head of Daimler Trucks globally, overseeing Mercedes Benz, Freightliner, Western Star and Fuso. He has experience of dealing with the truck market both in North America and in Asia, suggesting these are the areas targeted for expansion. He must be examining Navistar as a potential target.

Navistar has come through its turnaround period. The company reckoned it has achieved, ’10 years of progress in two years’, when talking to industry analysts last week. The company has managed to cut costs all across the operation, structural costs dropping from 15 to 12 per cent of revenue from 2013 to 2014.

Engine exhaust emission control technology has now transitioned, fully, across to the SCR technology it had famously rejected in the run up to the US EPA 2010 emissions rule change. The Cummins engine brand is back in many of the International Trucks being produced for the US market.

There is still one cloud hanging over Navistar, an investigation by the Securities Exchange Commission into statements made by the company around the time of the engine emissions debacle. The SEC is still seeking the disclosure of a number of documents.

There can be little doubt Renschler will be following events with interest. International is not quite the force it was in the past but the truck maker still holds 14.65 per cent of the heavy duty market in the US, as well as another 27.19 per cent of medium duty sales, selling just under 53,000 trucks in the US in 2014.

This makes them a serious player in the US, and the acquisition of Navistar by VW would make the German automotive giant a rival to the Daimler and Volvo groups globally. Watch this space!