VW bets on Scania to lead Traton’s challenge of Daimler, Volvo

Traton SE is banking on its Swedish Scania brand, one of the world’s most profitable truck makers, to beat a path to challenging industry leaders Daimler Truck AG and Volvo AB with newcomers like Nikola Corp. also making a push.

The Volkswagen AG unit is doubling down on integrating newly-acquired Navistar International Corp. in the U.S., Chief Executive Officer Christian Levin said in an interview, which will be pivotal to cracking the industry’s biggest profit pool. The manufacturer also hopes to finally deliver on long-standing restructuring efforts at the struggling German MAN brand and develop China into an additional manufacturing hub.

“We need to execute on our strategic ambitions and deliver what we said we would do—we need to walk the talk,” Levin said. Becoming more efficient and nimble as an organization will be key as “we’re often still too slow, too bureaucratic.”

Since a downsized listing in 2019, Traton has suffered a number of setbacks that’s seen its top executives abruptly swapped out twice over. Levin, 54, who also heads up Scania, took the helm in October. Putting Scania in charge marks a strategic shift for VW after Europe’s largest automaker struggled for years to generate significant savings through closer collaboration between its different commercial vehicle brands.

“It will be important to reinstate some stability,” Levin said. Tensions have flared at Traton in the wake of a poorly-orchestrated initial public offering with a small free float of about 10% of shares and parent VW retaining a dominant stake.

Daimler Pressure

Daimler AG’s move to spin off its sprawling truck division from Mercedes-Benz luxury cars last week should make the unit more nimble in pursuing new technologies in the historic shift away from diesel engines. Elsewhere, Italian rival Iveco is nearing a spinoff from CNH Industrial NV with a listing in Milan, while teaming up with U.S. startup Nikola Corp. to make electric trucks in Germany starting next year.

“Daimler Truck will be stronger after the spinoff,” Levin said.

Making good on Traton’s promises hinges on fixing MAN after multiple rounds of deep cutbacks. The Munich-based brand’s long-standing target for a return on sales of 8% through the industry’s cycle remains valid, Levin said.

MAN has been a drag on earnings for years and lost 339 million euros ($383 million) during the first nine months of the year. The manufacturer in January said it will eliminate about 3,500 positions in Germany by the end of 2022 in a revamp expected to cost a “high-triple-digit” million-euro sum.

The European truck industry’s overall market capitalization now exceeds 100 billion euros, according Jefferies analyst Himanshu Agarwal.

“It should support investor interest in the sector and improve industry discipline/operating performance through respective benchmarking,” he said.