This is the way forward
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In a frank question and answer session, commercial vehicle division president Wi!fried Lochte spells out the company's place in the market and agreements with Daimler-Benz and VW. If it makes sense, MAN will discuss projects with other partners
NOW PRESIDENT of the commercial vehicle division (Unternehmensbereich Nutzfarhzeuge) of MAN and a member of the group's board of executive directors, Wilfried Lochte began his career in the commercial vehicle industry with BOssing in 1953. He was general sales manager for the German market there until 1958 when he joined MAN as truck sales manager for the domestic German market, his responsibility later being widened to include buses. In 1971 MAN took over Bussing and in 1974 Wilfried Lochte became general sales manager for MAN truck and bus worldwide. In 1979 he became an executive board member and head of the truck and bus division.
Had he known that commercial vehicle markets worldwide were soon to collapse, with one of the consequences being a 300 million DM loss for MAN in 1982/3, would he have taken that job? There is little doubt that Lochte is the determined kind of man who would not have been deterred by knowing the magnitude of the problem about to face him. Here he tells Tim Blakemore of some of MAN's solutions and how it is set to return to profitability in 1985.
Tim Blakemore: Could you first explain please how MAN fits into its parent GHH group?
Wilfried Lochte: GHH (Gutehoffnungshutte) Aktienverein to give it its correct German title, is a shareholding institution which was established many, many years ago and GHH owns more than 75 per cent of MAN Aktiengesellschaft, and has done so for many years.
T.B.: How does the truck and bus division relate to the whole of MAN?
W.L.: About 50 per cent of MAN's employees are in the truck and bus division. That makes it the most important activity of the whole MAN group. For the time being my division employs 16,500 people here in Germany.
T.B.: How has the recession affected that number?
W.L.: About four years ago we had more than 21,500 employees. We have had to reduce capacity in the whole of MAN, including truck and bus because of falling demand. For the time being 16,000 is our target. Now we are prepared to meet the lower worldwide volumes in truck and bus markets over the next years.
T.B.: There will not have to be any further staff reductions?
WI.: No. I think that during 1984, over the next few months, we will realise all the reductions we have planned.
T.B.: Will the next annual report then, due in June, show any dramatic change from last year's loss?
W.L.: Of course it will. MAN's losses will be reduced very fast. In the next fiscal year, that is 1984/5 MAN will again break even. T.B.: That would be quite an achievement in such a short time.
W.L.: That is true, but we are convinced that it will happen and we will reach this difficult target we have set ourselves.
T.B.: Is it possible to say how many vehicles MAN needs to manufacture and sell in order to be profitable?
W.L.: It is difficult to answer that question simply with a number. What we are doing is taking every opportunity to bring down the number that will allow us to break even. That has been happening over the past two or three years. In 1982/3 MAN supplied a total of around 18,000 units, that is heavy trucks, buses, and MAN-VW vehicles. In 1983/4 that total will be around 20,000.
T.B.: What level of automation is needed for your plants to make commercial vehicle manufacturing profitable?
W.L.: We are continuing to invest in the truck and bus division at a very high level, much more than hitherto. We have started to invest about three per cent of turnover during the past three or four years and we are continuing to do that. During the current fiscal year and up to the end of 1984 our most important investment programmes will be completed so that in manufacturing and assembling activities we will be well prepared. And that is one of the reasons why we could shed so many employees. I am convinced that we have improved our competitiveness a great deal. T.B.: What about investment in the longer term, beyond 1984/5? W.L.: I think we will be able to keep all our factories as modern as we need.
T.B.: And new product development? A number of your competitors have recently announced that large sums have been committed for that purpose. W.L.: That is going on in parallel with our investment in the factories. In September last year we presented a new range from nine to 14 tonnes gvw. The first has already been presented in the UK. The next one, a very important vehicle for us, the 16-tonner, will follow in a couple of months. This was presented at the Hanover Fair. We are continuing to develop engines and we are spending a lot of money to keep our heavy truck range competitive. T.B.: Many other manufacturers are finding that the high cost of development of cabs and engines, for example, is making co-operation with other manufacturers necessary. Is that your view also? W.L.: It is not necessary for us. We are developing independently everything we need for the whole range of trucks in the middle and heavy-weight ranges, especially for the heavy range. We do not need co-operation but that is not to say that we are not open to discuss it, if it would benefit both partners. However, our planning decisions have been taken without considering such a possibility. If we find a co-operation solution to a problem and it makes sense from our point of view we are prepared to discuss it, but it is not a must. I want to stress that. I think it is important that we remain independent as far and as long as possible. I think the chances of that are not bad.
T.B.: You seem quite confident that MAN will be able to remain independent. W.L.: Yes, I think so.
T.B.: There has been some speculation about General Motors being interested in acquiring MAN. Is there no substance behind these reports?
W.L.: There is nothing behind it. That is just a rumour.
T.B.: There have also been reports of a reorganisation within the MAN group resulting in quite major changes. I wonder if you could comment on that?
W.L.: Well one of the decisions has already been taken. It does not concern only the truck and bus division. The decision has been taken concerning our activities in the heavy diesel engine market. You know that B and W Diesel AS of Copenhagen (two-stroke engines) is a wholly owned subsidiary of MAN. What we are preparing to do is join Band W with MAN Diesel Engine division of Augsburg (four-strokes) to form one company. That will happen this year.
T.B.: Returning to the truck and bus division, could you say how you see your markets developing over the next five years? Where will your efforts be concentrated?
W.L.: We will be concentrating first of all on the West German market. Our present position here is a good one. We hold about 24-25 per cent, more when you consider only heavy trucks. In the future our priority will be to maintain and develop our position here in Germany. Second, but really equally important, our efforts will be Europe wide. We intend to sell 75 to 80 per cent of our capacity in Western Europe (including Germany). We consider the Western Europe market more and more as a developing domestic market. We intend to strengthen our position in every Western European country.
I should say that the structure of our UK importer, a joint venture between MAN and a strong partner (VAG), with MAN holding only a small share, is an example we intend to follow elsewhere. We have already done it in the Netherlands and Norway and we have a quite similar solution in Denmark and Belgium. We intend to develop similar solutions in France, Spain, Italy Switzerland, Portugal and the rest of Europe. Our position in Austria is different with our own subsidiary (OAF) holding a strong position already of the heavy truck and bus market.
T.B.: You disagree then with DaimlerBenz, Volvo and Renault that the only way to expand sales of commercial vehicles nowadays is to enter the US market? Do you not see that as an area for expansion?
W.L.: It could be. I think you have to consider the possibilities in North America very carefully. We have been there for about 10 years, we introduced the articulated bus in the United States. We have been, very successful as you know and we have established a factory in North Carolina which now employs 700 people and we are market leader in this sector of articulated buses. We have sold more than 1,300 articulated buses to 20 major cities in the United States. We are now preparing step number two, that is to introduce our 40ft bus to the USA.
For many years we have considered the situation of the US truck market. It is the biggest truck market in the world, as you know, so it could be an advantage sometime for us to introduce and/or manufacture trucks in the USA, but we have to be very careful. The competition is very strong there and to be successful you need a very strong dealer and aftersales organisation, and to prepare that needs time, and money too! But I would remind you that the name of our company in the US is MAN Truck and Bus Corporation.
T.B.: It would be fair to say then that you are watching this market carefully but have no positive plans?
W.L.: Not for the time being, but I am positive that European buying patterns, that is with much less customisation, will spread to the US and of course that would make it easier for us to sell there.
T.B.: As next year's Frankfurt show approaches I am reminded of MAN's X90 project vehicle which aroused so much interest at the 1979 show. Could you tell us what has happened to that?
W.L.: This prototype vehicle is still in our plant at Saltzgitter. I think it was a good idea to show how cab development could proceed but I think a new truck generation of MAN will be developed in a different way from that.
T.B.: Are you prepared to say any more about the next generation of MAN vehicles?
W.L.: It is far too early. The Frankfurt Show is in September 1985 and now it is April 84.
T.B.: Talking more generally about European motor shows, there has been some disquiet expressed recently about having so many high-cost shows. What are your views on this?
W.L.: Well, I do agree with that view to an extent but in spite of that we should consider that every show, I am talking about bus and truck shows only, has a certain influence on individual markets. The RAI in Amsterdam, for example, is very important in my view for the Netherlands market and I could not imagine that UK operators would miss the Birmingham show and go to Geneva or Frankfurt instead. So from my point of view we do need all of the major exhibitions in Western Europe. I do not think that we have to go to all of these shows with our whole range, but a certain selection of what we are offering is certainly helpful for our organisations in all these countries.
T.B.: One point I would like to recap on is this question of MAN's collaboration or co-operation agreements. I wonder if you could just remind us of exactly the ones MAN is currently involved in?
WI.: For the time being we have two co-operation agreements. The oldest one, 13 years old now, is the one with Daimler-Benz. We exchange certain parts. One of the partners manufactures enough to satisfy the demand of both and that gives each manufacturer a certain economy of scale. We supply Mercedes-Benz with certain engine parts, those which are not typical for the character of the engine, while MercedesBenz manufactures other engine parts for us. We do the same with rear axles. I think this co-operation works and makes sense for both of us in spite of the very strong competition in Germany, and worldwide, between Mercedes-Benz and MAN.
The second co-operation we have is with Volkswagen. We started in 1977 to negotiate with Volkswagen and we started in 1979 to produce our joint range between six and nine tonnes gvw. The reason, the target of this co-operation, was and still is not to realise a huge volume of turnover. The final target for both partners in this co-operation is a turnover of only 350 or 400 million DM, no more, which is not a great sum for either Volkswagen or MAN.
The objective of this co-operation was and still is to create the possibility for both organisations to offer a whole range beginning in the Transporter or LT section of Volkswagen up to 40 tonnes gvw of MAN. The market volume of the six to nine-tonne sector is very limited, worldwide, and nobody, neither VW nor MAN would have developed solely such a range. We found that we were not competing with Volkswagen in any market sectors; we do not manufacture passenger cars and VW does not manufacture heavy trucks or heavy diesel engines or turbines or whatever, so it made sense for both companies. You know the result of the joint venture as far as marketing organisation is concerned in Britain, for example. The marketing organisations have been brought together and we co-operate with VW in Britain as in the Netherlands, Norway and elsewhere.
We have no further joint ventures planned for the time being but as I said before, if it makes sense we are prepared to discuss other possibilities with other partners.