Rather king in Sweden than farmhand in Germany

[kscarbel2]

Lotta Engzell-Larsson, Dagens Industri  /  June 2, 2016

Di wrote on Wednesday about how Volvo will continue to recruit aggressively from the worst competitor Scania.

The two companies have a long history of rivalry, but the Sodertalje truckmaker [Scania] has for over two decades had the best trucks, the best production processes, and the best profitability.

When the British magazine Commercial Motor last year ranked the world's best truck of all times, the models must have at least ten years old to qualify, the Scania 3 series won first place. Volvo F88 came in second. The two companies are the only ones who have more than one model at the top-ten music charts.

The trademarks and cultures of the two truckmakers are quite different, and both have strong identities. There have been recruited by the competitor, but it has been unusual. But the last year something has happened.

Scania CEO Martin Lundstedt took over as CEO of Volvo, then came Scania veteran Lars Stenqvist from Volkswagen's research and development to head R&D at Volvo Trucks. Previously there was CFO Jan Gurander, also a Scania veteran who spent some time at MAN. The latest addition is German Andrea Fuder, who is leaving Scania to become purchasing manager for Volvo. Also on the lower level, people have jumped.

The reason is of course the feeling that it is Volvo potential lies ahead. For although Volkswagen's new truck chief Andreas Renschler claims that increased integration, the development of a common platform and common components will not to dilute Scania’s independence and identity as a Swedish truck, there is concern that an era has ended.

And anyone who has ever worked with a merger knows that the point is to preserve the superficial differences that are visible to customers, and reduce the real, less visible, which means that you can produce more units at a lower unit cost.

It is common for acquired companies to lose both key personnel and focus when they are purchased. In Scania's case, it took an unusually long time. Volkswagen has been a major shareholder in Scania since 2000, but it remained a Swedish company until 2014 when it became wholly owned by VW Group.

This opened for the integration of MAN and Scania to provide savings amounting to 8 billion per year. The person holding the baton, Andreas Renschler, from archrival Daimler. It's like placing a Christian, a Jew and a Muslim in a room and letting one of them decide which religion henceforth will be followed. It is laid out for dropouts.

Large mergers always have their proponents: In the investment banks that earn money selling and administration of the business. At the CEO who receives additional bonus to push through the merger and then a higher salary to lead the larger, combined company. Shareholders are attracted by the promised value.

But Professor Rikard Larsson of Lund University has shown that half of all mergers fail, in the sense that the promised synergies do not materialize. It is difficult to increase, or even maintain, the profitability for a large merger. If one omits one-time costs, it becomes more difficult to recoup.

The losses of human flight and selling pins are also difficult to calculate. Martin Lundstedt had been CEO of Scania for less than three years when he accepted the Volvo offer. Probably because of Volkswagen, he was not even division manager, even if he had held the CEO title. But at Volvo, he is “really” number one.

All moves, and sometimes it is healthy with new blood in the organization. But the movement we now see from Scania is no coincidence. As an independent company sucked into a larger group and to subordinate themselves so many lose the desire.

The smaller maneuver the acquired company gets, the harder it is to recruit the best, most active, creative people. The owners should keep in mind the next time they are looking to buy or sell. Perhaps we should do more often an issue if you want to grow?

Right now, the feeling at Volvo trucks is that they have everything to gain and nothing to lose. At Scania? Well, in a few years, the company may nothing more than just a brand [like Mack].

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