Truck Talk Renschler Readies Himself For VW Challenge

The ex-Daimler chief knows how to run a truck division, but bringing VW's three commercial vehicle companies together is going to demand all his skill.
Scania is a Swedish company that is proud of its heritage.

One year ago, when Andreas Renschler announced his move to the executive board at Volkswagen after many years at Daimler, it was considered almost sacrilegious. There’s an unwritten law in the car industry, that once you join Volkswagen, Daimler or BMW, you stay there. This is particularly true of senior executives such as Mr. Renschler, 56, who most recently ran car production for Daimler after previously leading its truck unit.

It was this expertise in the truck sector that led Volkswagen Chairman Martin Winterkorn to lure him to Wolfsburg from Stuttgart. Volkswagen needed a lot of help in this area. Although the company has acquired two heavyweights in the past two years, Scania and MAN, it hasn’t quite known what to do with them.

The two companies operated almost independently and in parallel to Volkswagen’s existing commercial vehicle unit. But this side-by-side existence will end with Mr. Renschler’s arrival this week. While the Stuttgart native has a jovial personality, colleagues say, he is absolutely serious about what he wants to achieve.

He has had ample time in the past twelve months to plan the future structure of the truck division, in a way that allows for maximum synergies to be leveraged from the two heavy-duty commercial vehicle producers. Continuing efforts to develop new exhaust systems, motors and other components in two different locations within Volkswagen makes little financial sense.

“First of all, he will visit the company sites and listen,” a source said. Important groups, like the works councils, will be high on this list – it is widely acknowledged that no smooth restructuring of the truck operations can proceed without their active involvement.

Mr. Renschler will need years to develop a box of common building blocks for trucks, but organizational measures are simpler.

Sources say Mr. Renschler’s successful strategy at Daimler will serve as a blueprint for a Volkswagen turnaround. Often seen as a procrastinator within Daimler, he nonetheless made the Daimler, Fuso and Freightliner truck brands into powerful, global-market leaders. At Volkswagen, he can expect considerable resistance to his restructuring as both Swedish-based Scania and Munich-based MAN insist on their independence.

Scania, a role model in the industry with strong annual revenues, wants as little as possible to do with Volkswagen, but the situation is much different at MAN. The Munich truck makers failed to capitalize on globalization and still cling to the declining European market. As a result, 7,500 MAN employees are currently on part-time shifts and for the fourth time in ten years, the company has sought subsidies from the German federal employment office.

But a number of high hurdles must be cleared before a turnaround is possible. The European market won’t reach the pre-crisis level of 2007 in the foreseeable future while close technical meshing, similar to what Volkswagen has mastered with its car brands, is impossible to achieve quickly in the truck sector. Production numbers are too low, development cycles too long and MAN and Scania are too far apart to begin with.

Mr. Renschler will need years to develop a box of common building blocks for trucks, but organizational measures are simpler. MAN and Scania will soon be brought together under the umbrella of “Truck AG” of Volkswagen to achieve more effective corporate governance. Meanwhile, Anders Nielsen, a long-time Scania executive who has been chief executive officer since September 2012, will exit this summer when his contract expires.

The need for quick action is greatest at MAN. Even employees agree MAN suffers from an ill-conceived structure, yet Mr. Renschler is prohibited from closing any company plants because part of the deal when Volkswagen acquired MAN was job security. That makes the main plant in Munich and the motor works in Nurenberg off limits.

Furthermore, the site in Munich seeks additional use. While Scania is supposed to build transmissions for MAN, sources within the company say all axles for MAN and Scania vehicles may be built in Bavaria. A Volkswagen spokesperson refused comment, but said joint projects are being discussed.

An assembly plant in Steyr, Austria, also should feel safe. The union in Austria is much stronger than Germany’s IG Metall. Additionally, it’s believed Ferdinand Piëch, an Austrian who is chairman of the supervisory board of Volkswagen Group, will protect the plant. Plants in Salzgitter and Kraków in Poland also seem likely to survive, as closures generally are not part of Volkswagen’s corporate culture.

Nonetheless, it’s likely the 4,000 employees in Salzgitter will need to prepare for changes. The plant has been poorly utilized for years, but its location among the constituency of Minister for Economic Affairs and Energy and Vice Chancellor Sigmar of the center-left Social Democratic Party makes any job cutting unthinkable. But that doesn’t mean it cannot be retooled to produce components for all the products of the Volkswagen Group. The company made no official comment, but such a move would be very helpful to Mr. Renschler’s strategy.

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Markus Fasse reports for Handelsblatt from Munich. Martin Murphy reports on the auto industry from Handelsblatt in Frankfurt. To contact the authors: [email protected], [email protected]