MAN Broadens Labor Union Talks to Trim Costs Amid Trucks Slump

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Bloomberg / March 18, 2015

MAN SE has broadened its union negotiations to include non-production jobs as it seeks to slim operations amid what the company has warned will be the second straight year of declining orders for trucks.

MAN started union talks last year over three key plants in Germany and Austria and has reduced hours for nearly 6,000 factory workers. Negotiations now include white-collar workers, particularly at the Munich headquarters, said Juergen Dorn, who leads the MAN workers council and sits on the supervisory board for the truckmaker and its parent Volkswagen AG.

The cost cuts are intended to offset slowing deliveries due to a recession in Brazil and slowing growth in China and other markets. Still, both management and union representatives aren’t seeking job cuts, Dorn said. Employees in Munich or at the three affected factories may instead be re-assigned to other roles within Volkswagen, or the company may try to bring more functions in-house to keep jobs filled, he said.

“Our plants in Munich, Steyr and Salzgitter each do pretty much the same thing, but none of them have satisfactory capacity utilization rates,” Dorn said in a telephone interview. “We’re investigating the potential to concentrate certain functions in one location, so that each plant can develop core skills.”

The three production sites employ a total of about 7,900 workers, while about 5,300 people work in office jobs such as research and development and finance at the Munich head office, the company said in an e-mail. Sacha Klingner, a spokesman, declined to comment on the details of the talks or their expansion to include white-collar workers.

Sales at MAN, Europe’s third-largest truck manufacturer, dropped 10 percent last year to 14.3 billion euros ($15.1 billion), and operating profit widened to 2.7 percent of revenue from 1.9 percent. The company has stepped up cost cutting in all divisions, Chief Executive Officer Georg Pachta-Reyhofen said on March 11.

Global Rival

Volkswagen, which took full control of Swedish truckmaker Scania last year and MAN in 2013, has yet to reap significant cost savings from sharing development efforts. The Wolfsburg, Germany-based carmaker, the world’s second biggest, said last week it wants to create the world’s most profitable truckmaker, a global unit to rival Daimler AG’s truck division and Volvo AB.

One step toward that goal was the hiring of Andreas Renschler, former head of Daimler’s commercial vehicles unit. He started his new role on Feb. 1 and was asked to devise a unifying strategy and boost MAN’s profitability.

Recent conversations with Renschler have touched on how to improve cooperation to save costs on items such as gearboxes, axles and framing parts, according to Dorn. Talks also included implementing a shared production architecture for trucks, similar to Volkswagen’s strategy for producing passenger cars more cheaply.

“Mr. Renschler, coming from Daimler, is in a neutral position,” Dorn said. “I expect him to succeed in uniting both brands and on our profitability goals.”