FINANCIAL REPORT
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• Early in the 1970s, the pundits were predicting a massive rationalisation of the truck manufacturing industry in Europe within 10 years. It didn't happen. In the early 1980s the experts again were saying the same thing but with more reason as over-production of trucks in Europe became a characteristic of the industry.
Now the rationalisation is taking place with Ford and lveco linking to provide the first real step to a shrinking industry.
In terms of chassis manufacturers there remain as many companies doing well as doing badly so the rationalisation will be slow to come. The 1985 financial results highlight the situation. Here's a run-down of the main profit makers.
Volvo — truck sales up 9% in 1985 to 21,548 million from £1,415 million and bus sales 25% up from £125 to 2156 million.
Iveco — turned its 1984 loss of £105 million into a profit of £32 million on a sales revenue of £2,370,000.
Daf — increased its net sales by 12% to £589.6 million from 2525.8 million in 1984 and pushed net profit to £5.4 million in 1985 from £2.6 million in 1984.
Scania — improved truck and bus sales in 1985 to
21,266 million from £1,091 million in 1984 and pushed up net profits to £167 million from £139 million.
Daimler-Benz and MAN have yet to announce their results but losses at both companies are unlikely.
The main loss makers are the ones with state control. Spain's ENASA (Empress Nacional de Autocamiones) makers of Pegaso trucks and buses, has also yet to announce its 1985 results, but it made a loss of £30 million in 1984 and a return to profit is unlikely. That leaves Renault and Leyland.
Renault Vehicules Industriels cut its losses in 1985 to £186 million from £256 million in 1984 on sales of £3.125 billion. (Mack, controlled by Renault, lost 241 million compared with £52 million in 1984).
The Land Rover-Leyland group also cut its operating loss to £41 million in 1985 from a loss of 253 million in 1984 with the Leyland Group (heavy trucks and buses) also reducing its losses, although these were still high at £52 million compared with £61 million in 1984.
In spite of the abortive talks between Leyland and GM, which firms are likely to link up remains an uncertain issue. Although ENASA and Leyland look the most likely candidates for acquisition, the presence of state influence generates a special factor which, as has already been seen with Leyland, outweighs commercial considerations.
The major components sector has seen the biggest rationalisation with Perkins following up its takeover of Rolls-Royce Diesel with the acquisition of Gardner. This lines up Perkins against Cum mins worldwide on engine manufacture — on automotiv engines especially. But the Perkins development comes at a time when Cummins its( sees an increasingly perilous situation in just producing loose engines.
Its latest report from the USA makes interesting reading because the company set out in detail the marketing strategies it has pursued in recent years. The comments go a long way towards descri ing why the company has be diversifying its interests and why it has moved into allied fields rather than into totally new ones.
It was in 1979 and 1980 th the company, realising it needed to expand the range of engines it offered, extended the engines it produced into the lower horsepower brackets.
Then between 1981 and 1983, against forecasts of slo sales in its traditional engine rkets and intensifying interlanai competition, it intensiI its new product efforts I changed pricing policies so t price increases were it to only one-half the rate nflation. A target was set educing manpower in its sel engine business by 30%.
n 1984 and 1985 it was deed to plan on no growth in ! North American heavy:y truck market and on dees in heavy construction I in the agricultural equipot market. It was
icluded that worldwide N.-capacity in the engine 3iness combined with strong ernational competition, (led Japanese producers),
!ant that the company Nled to accelerate its new duct work, redefine reians with existing customers, luce prices to meet worldle competition and intensify emal efforts to improve st, quality and delivery. The positive decision was cen at this time to expand o engine-related markets with both hardware and software. It introduced a very competitive pricing system for its three new engine families which were directly competitive with Japanese products by lowering prices by up to 40%. Cummins also reveals it has pursued a policy of achieving "reductions in supplier prices" (15% lower) and increasing plant productivity (up 35%) as well as reducing total employment in the base diesel engine business by 30%.
Among the companies it has started is Service Products Company (serving the diesel aftermarket with oil and lubricants, and service tools and test equipment). Cummins also reveals that it has invested in a large number of small high-tech ventures including Adept Technology Inc (robot manufacture for light assembly and materials handling), Energy Adaptive Grinding Inc (precision machining equipment) and Ferotec Inc (devices to measure engine torque). Since the Cummins report it has brought SCG from Leyland which takes the company into automatic transmission making. This last development doesn't take it into competition with the likes of Eaton or ZF but it is an indicator.
Eaton, in spite of its eminent position in the USA (shared only with Dana) in gearbox manufacture, like Cummins reveals its worries about market forces in its latest report. Imports form the main headache. Eaton's chairman, E M de Windt, reports its operations as healthy in 1985, despite the decline in North American factory sales of heavy-duty trucks from 1984. Imported passenger cars and light trucks continued to increase their share of the US market and imports were an increasing, though still small, factor in the medium truck market. This was a matter of concern because the US producers are major users of Eaton automotive products, he points out. Like Cummins, Eaton has been diversifying in truck and passenger car components and sees a prime opportunity in military trucks.
Eaton emphasises its strength in having manufacturing facilities in 40 countries, a stength which Britain's leading components supplier, GKN, is endeavouring to emulate. It reveals in its 1985 report that it has particular hopes for its sintered metal and composite leaf-spring activities in global terms.
The moves by companies like Perkins, Eaton, Cummins and GKN reflect that even where producers of major components have slimmed down to a handful in the coach production sector the companies involved still regard themselves as vulnerable. A wider range of activities and as competitive a level of production as possible are regarded as mandatory in order to survive.
by George Malcolm