Total truck is winning
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THE ARGUMENT between truck manufacturers over whether it is best to make their own major components or buy them in will linger on. But there is no doubt in my mind as to who is winning the race at the moment — the build it all yourself boys! Volvo is in the forefront here — and they are doing better than anybody. In the past five years Volvo has succeeded in increasing its share of the world market for heavy duty trucks from 4 to 8 per cent. That surely speaks for itself. Volvo is about the only company that has not seen its sales slide in the recent period of world truck recession.
Volvo announced recently that it was recruiting more than 100 employees in the Gothenburg area to cope with increased truck demand. Sten Langenius, president of Volvo Truck Corporation, announcing this at a press conference last month in Gothenburg, also reported particular sales successes in the USA, where Volvo White Truck Corporation — which made heavy losses in 1982 and 1983 — is now operating at a profit.
Certainly there are signs of optimism among the US producers. In a recent statement International Harvester said it expected heavy-duty truck sales to double this year.
This happier outlook for the industry in the USA was confirmed by Langenius who said that the demand for trucks had increased tremendously in the past six months. In 1983, a total of 75,000 heavy duty trucks were registered in the USA, he pointed out, adding that so far, during 1984, the registration figures indicated a total market corresponding to 130,000 heavy trucks. In other words, an increase of 75 per cent. In all, Volvo estimates sales for itself in excess of 10,000 trucks in the USA during 1984.
After referring to the fact that Volvo, in 1983, had built 34,300 trucks worldwide he predicted that this year it would hit 40,000. This production increase meant that the manufacture of Volvo trucks would increase by 10-15 per cent compared with 1983. This was why it was increasing its labour force in Gothenburg.
Scania did not do quite as well as Volvo in 1983 — but it did a lot better than most other companies. And now it reports that, as a result of a substantial rise in demand, it has significantly increased its production and forecasts that in 1984 last year's production will be exceeded by around 30 per cent. To cope with this, Scania's truck production plants in Sweden are to recruit more than 1,000 persons — 900 more than Volvo. Scania, of course, is another company wedded to manufacture of its own main components.
Scania reports that, since last autumn, orders have increased substantially. A main one is an export order received from Iran for 2,000 forward control R112 tractive units. Deliveries have started and will be completed during 1984.
Scania says that from 1982 to 1983, the production rate decreased at Sodertalje by about 3,000 vehicles. This drop concerned mainly chassis delivered for assembly abroad in the form of parts and components. Due to the large influx of orders during the current year this loss will be compensated by more than 5,000 complete trucks, The "make your own components" theme is not regarded as practical by the manufacturers who are not doing so well at the moment. Leyland is a classic case. But there are others. For example in the USA recently Mack announced that to stem its losses it is to stop making its own parts in the machining and fabrication divisions at the Allentown plant. Although Mack in 1983 cut its net losses to 26m dollars from 32m dollars in 1982, the loss was on sales of 1.2bn dollars; in 1982 the sales level was 1.3bn dollars. Mack is 45 per cent owned by France's Renault; former majority shareholder Signal has a 10 per cent holding.
The problem for manufacturers is where to invest and the level of investment. From its position of strength Volvo is continuing to invest heavily in product and components' development. During 1983 alone, a sum of more than Skr 1,200m (£100m) was invested in product development and investments on the truck side of the business.
Daf is also investing heavily despite its loss of HfL27m (E6.3m) in 1983. The loss was on net sales of HfL 1,646m (E391m) compared with HfL 1,6 3 4 (£388m) in 1982 which predictably is attributed to "the situation in the international commercial vehicle market".
In its annual report for 1983 Daf has just reported the finalising of the external financing for an ambitious innovation plan costing around HfL 6 0 Om If 150m). Full implementation of this is planned by the end of the eighties and is concerned with the renewal of vehicle components, widening of the product range and the application of new production techniques. Presumably the investment is to be over a number of years (possibly six) so it's a fraction of Volvo's but so of course is its turnover. It is a small company in international terms.
It acknowledged that market developments in recent years created surplus capacity at the company and then revealed interesting measures taken to combat them. To bring capacity more into line with the market demand without compulsory redundancies, working hours were cut on August 15 last by 10 per cent at the company's plants in Holland. To finance this, the employees had been persuaded to accept a drop of around 10 per cent in their gross annual wages.
Meanwhile the situation with British cv makers remains not so hot at all. Leyland's situation is well known, the Land Rover Leyland Group of BL having increased its losses in 1983 to £66m from the £42m of 1982. Land Rover Leyland International Holdings profits of £18m were off-set by Land Rover UK, comprising Land Rover and Freight Rover, which lost £14m. This stemmed from the Land Rover operation as Freight Rover contributed small profits. However, the big loss maker was Leyland Vehicles which was £70m in the red. This came entirely from the truck side, the parts and bus sectors both contributing profits.
Bedford made losses too in 1983. In fact the company's operations were the main cause of General Motors' losses on its UK activities, rising from £37.9m to E53.3m on sales of £340.15m. More money is to be sunk into Bedford, however, with the aim of profitability in three years.
Bedford is to spend £70m over the next three years on reconstructing its van lines at Luton and on producing a 1-tonner based on the Japanese Isuzu WFR later this year.
General Motors recently announced the strengthening of its Bedford representation in world commercial vehicle markets with the formation of a new international export sales organisation. Let's hope this improves Bedford's performance.
So what about Ford? The answer is, of course, that even the mighty Ford Motor Co. Ltd had a deficit last year — a £103m loss compared with a £192m profit in 1982. How much of this (if any) came from its cv operations is not clear but Ford can in an event be expected to weather 1 the storm.