MAN Chief's Departure Removes Obstacle to VW Alliance

(chinatrucks.com, Nov. 25, 2009)MAN SE Chief Executive Officer Hakan Samuelsson's surprise departure removes a key obstacle to a three-way combination with Volkswagen AG and Sweden's Scania AB to create Europe's largest truckmaker.

Samuelsson, who quit on Monday, sparred with Scania CEO Leif Oestling during a failed takeover bid in 2006 for his former employer in which the two executives personally rebuked each another. Samuelsson's decision precludes the possibility of a power struggle between the two men to run one company.

"Samuelsson's presence was like a red flag to the Swedes,"said Christian Aust, an analyst at Unicredit in Munich who has a "hold"rating on MAN shares. "There's no doubt that his resignation is making a possible trucks alliance under Volkswagen's roof more realistic now."

Volkswagen Chairman Ferdinand Piech is seeking to expand his car and truck units, saying in September Europe's largest automaker may add two brands following its purchase of Porsche AG. He said last year that a heavy-truck alliance could save 1 billion euros ($1.5 billion) annually, reductions that would help Wolfsburg, Germany-based VW as truckmakers'profits drop.

"One shouldn't underestimate Piech's role in all of this,"said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. "He's dreaming of that all-encompassing car empire including trucks and motorbikes and wants it done on his conditions."

Wiedeking, Pischetsrieder

Piech has a history of pushing out executives who stand in his way. In May, he raised questions about Porsche CEO Wendelin Wiedeking's decisions. Two months later, Wiedeking stepped down and VW's takeover of Porsche, the sports-car maker controlled by Piech's family, moved forward. In the beginning of 2006, Piech expressed concern about VW board support for then-CEO Bernd Pischetsrieder. By the end of the year, Pischetsrieder was no longer running the company.

Scania spokesman Erik Ljungberg declined to comment and referred all questions on the company's ownership to Volkswagen. Spokesmen at VW and MAN also declined to comment.

Volkswagen controls 71 percent of Scania's voting stock and is Munich-based MAN's largest shareholder with a 29.9 percent stake. MAN in turn owns 17.4 percent of Scania's voting rights.

MAN fell 76 cents, or 1.3 percent, to 58.94 euros in Frankfurt trading. Volkswagen lost 5.32 euros, or 5.6 percent, to 89.04 euros. Scania added 1.3 percent to 100.50 kronor on the Stockholm exchange.

Sales Slump

VW sold its Brazilian heavy truck unit to MAN last December. VW CEO Martin Winterkorn has said a fusion would likely result in the retention of both brands. The combined truckmaker would leapfrog rivals Daimler AG and Volvo AB to become Europe's largest maker of commercial vehicles.

Samuelsson's resignation comes as truckmakers'sales and earnings have plunged as a result of the economic downturn. European nine-month sales of heavy trucks plummeted 47 percent to 131,078 vehicles, forcing companies to idle production and reduce their workforce. Volkswagen said prior to the downturn that there was no need to move forward with a combination because Scania and MAN were posting record orders and profit.

"It is a logical step for the opportunities to share technology and thereby reduce overall costs,"Stephen Pope, chief global market strategist at Cantor Fitzgerald in London. "It's an opportunity that has to be seized."

'Fresh Start'

Samuelsson, who quit after five years as CEO, said in a statement yesterday he was "convinced that there should be a fresh start at the highest level of the company."Georg Pachta-Reyhofen will temporarily take over as CEO of Europe's third-largest truckmaker while continuing duties as head of the MAN Diesel unit.

Samuelsson's tenure was marked by a transformation from an industrial conglomerate to a company focused on commercial vehicles and mechanical engineering equipment.

The 58-year-old executive brought new production methods to MAN's commercial vehicles division, which he learned during his 23 years at Scania, Europe's most profitable truckmaker. Among them was a decrease in the number of different models MAN made and a delivery system that stressed having parts delivered just as they were needed.

"Samuelsson was without a doubt a great CEO, who restructured the MAN Group,"said Jose Asumendi, an analyst with RBS in London who has "hold"ratings on Scania and MAN. "VW will offer clear long-term leadership, a strong industrial business to leverage on and in addition the chance to work with Scania to create a truck leader."

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