MAN truck unit sees rising profit, sales as revamp pays off: CEO

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Reuters  /  April 7, 2016

A rebound at MAN is drawing near after operating profit dropped by three quarters last year to 92 million euros

Germany's MAN SE expects to revive profit and sales in coming years as the Volkswagen-owned truck maker's efforts to slim down and cut costs are finally starting to work, its chief executive said.

MAN announced plans last year to cut 1,800 jobs at its main trucks division and reshuffle production in Europe as part of a VW-led revamp to tackle high fixed costs and boost languishing profitability at the Munich-based firm.

A rebound at MAN is drawing near after operating profit dropped by three quarters last year to 92 million Euros (US$105 million) because of restructuring costs and plunging demand in Brazil, according to Chief Executive Joachim Drees.

"We are targeting an operating margin of 8 percent by 2021" (at the truck & bus division), Drees said in an interview.

"There will already be a significant improvement in 2016 results if markets develop reasonably well."

A revival of MAN's truck business, which accounts for two-thirds of the group's sales, would be welcome news for parent VW, grappling with the fallout of its emissions scandal.

Europe's largest automaker spent billions of euros on expanding stakes in MAN and Swedish peer Scania and a year ago aligned the two brands in a truck holding company to better compete with market leaders Daimler and Volvo .

To boost performance, CEO Drees is counting on growing benefits from MAN's integration with Scania, steps to improve product quality and greater efficiency in production.

MAN is reorganising production at truck and component factories in Germany, Austria and Poland to avoid costly overlaps. The steps will help increase cost savings at the trucks division by 880 million Euros (US$999.7 million) through the end of 2017, Drees said.

"That's the only way for us to generate the means we need to invest in the future," said Drees, who heads MAN's trucks unit and the group which also makes diesel engines and turbines.

VW's truck holding, which includes MAN and Scania, said on Monday it will spend about half a billion euros by the end of the decade to improve connectivity and automated features for heavy-goods vehicles.

MAN is also expanding into light commercial vehicles with the new TGE van, a sister model to the next-generation VW Crafter to go on sale next year.

The TGE will help boost deliveries of MAN trucks and busses by more than half to 125,000 vehicles by 2021, from 79,000 last year, Drees said.

The operating margin at MAN Truck & Bus is expected to surge to 8 percent by 2021 from a dismal 0.2 percent last year, putting the company on a par with Daimler which posted a 7.3 percent margin for 2015.

MAN is more exposed than Daimler and Volvo to problems in Brazil, where it’s Volkswagen brand has been the market leader for trucks of more than 5 metric tonnes for over a decade, because it lacks a presence in the growing North American market.

"I don't believe that the crisis (in Brazil) will come to an end this year," Drees said. "The market is at rock bottom. This will negatively impact the MAN group results" in 2016.