Mastering the crisis with decisiveness and vision
Reducing costs, consolidating strengths, entering into cooperation
The global recession has the international markets for commercial vehicles in a stranglehold: lower industrial production, the falling volumes of global trade and a decreasing willingness to invest have led to a considerable reduction in the demand for commercial vehicles. After another record year in 2008, even MAN Nutzfahrzeuge was no longer able to avoid the consequences of these market developments. With its fast, flexible adjustment of production to match the development of the order situation, a rigorous cost-cutting policy and concentration on measures to reduce stocks of vehicles and stabilise the Aftersales business, MAN Nutzfahrzeuge was largely able to compensate for these developments. The fact that the profitable years had been used to make important strategic decisions and investments proved to be of great benefit to the company. In addition to managing the current crisis, MAN Nutzfahrzeuge has pushed ahead with its successful international growth strategy, which will ensure the leading supplier of commercial vehicles and transport solutions a solid platform for the coming upswing.
Results of the first half of 2009
The continued poor economic conditions and restricted availability of financing are clearly reflected in orders for commercial vehicles. Orders received by MAN Nutzfahrzeuge in the first half of the year totalled €2.66 billion, or 58% below the level of the previous year (€6.29 billion). There were big drops in particular in the Truck Division, where orders worth €2.1 billion were received, only 38% of the corresponding period in the previous year (€5.6 billion). The new orders totalling €568 million achieved by the Bus Division were worth more than three quarters of the previous year's value (€731 million). The fact that orders for buses have declined both in terms of value and the number of units is due to the receipt of a major order for 522 city buses (€83 million)) from the city of Ankara in the second quarter of 2008.
In the first six months of the current fiscal year, vehicle sales fell to 24,346 trucks and buses, a decrease of 54% by comparison with the corresponding period last year (53,307 units). In the first half of the year, the Truck Division in particular recorded a considerable drop in sales, which fell to 21,296 units, a decrease of 57% relative to this period last year (50,070 units). A comparison of the first two quarters of the current year shows that truck sales have largely stabilised at a low level (Q1: 10,921; Q2: 10,375 units).
Sales of buses and bus chassis were only slightly below last year's figures for the first half at 3,050 units (-6%). While deliveries of city buses rose 18% against those of the previous year's period, units of coaches, intercity buses and chassis dropped by 15% overall.
Sales achieved by MAN Nutzfahrzeuge in the first half of 2009 dropped by 39% to €3.26 billion relative to the same period last year (€5.38 billion). This drop is largely attributable to lower sales by the Truck Division. Sales of €650 million by the Bus Division in the first half of the year were slightly (-7%) lower than those for the same period last year (€699 million).
Owing to the big decrease in sales relative to the previous year and the higher risk and financing costs incurred, the first half of 2009 saw an operative loss of €17 million. Responsible for this were the results of the Truck Division at -€13 million and Financial Services at -€24 million. The result of the Bus Division at €21 million went a long way to counteracting the aforementioned. Here, the restructuring measures initiated in 2007 have paid off.
Reducing costs, consolidating strengths
MAN Nutzfahrzeuge positioned itself well to gain an above average benefit from the construction boom of the past years: in established markets, MAN's share rose continually, while in growing markets such as in Eastern Europe, for example, it was able to establish itself successfully. MAN Nutzfahrzeuge used "the good years" to increase productivity still further, to reduce manufacturing penetration and to improve administrative processes. Moreover, big investments were made in production facilities, new technologies and products, as well as in the world-wide Sales and Service network: these investments are standing the company in good stead during the current difficult situation.
In Munich, a new Academy has been set up, where Service staff can acquire qualifications, while in summer the new MAN Forum opened – a modern world of experiences focusing on the commercial vehicle. In the immediate vicinity the NEOPLAN Forum is taking shape. This is due to open in 2010. Thanks to the recently completed modernisation of the entire truck range there will be no heavy costs for new product launches in the near future. The investment program for this and next year will be adjusted in accordance with the current situation. In this respect, however, central research and development projects (e.g. the development of Euro 6 engines) will remain adequately funded. R&D efforts here will be focused on further improving the economy and eco-friendliness of commercial vehicles and transport solutions
Employees: MAN Nutzfahrzeuge adjusted production in step with the falling demand for trucks and by autumn of 2008 had already set up a comprehensive cost-cutting program. The number of employees dropped from 36,251 on December 31, 2008 to 32,588 on June 30, 2009. This was achieved largely by using natural fluctuation, the expiry of fixed-term contracts and a reduction in the number of temporary workers.
Kurzarbeit*: Since the beginning of the year, MAN Nutzfahrzeuge has been making use of Kurzarbeit at the German truck production sites of Munich, Nuremberg and Salzgitter, and at the Austrian truck plant in Steyr. Kurzarbeit has also been practiced in Administration in Munich and in parts of the German sales subsidiary, MAN Truck & Bus Deutschland GmbH. Similar instruments have also been applied at other sites outside Germany, for example in Turkey, Spain and South Africa. Certain areas have been exempted from Kurzarbeit: these include all areas in close proximity to the customer (e.g. Service) as well as Quality and R&D. In order to minimise employees' financial losses, the company grants extra payments that make up the difference to a maximum of 90 percent of the nominal after-tax salary.
Besides the financial aspect, Kurzarbeit has additional advantages in that it enables MAN Nutzfahrzeuge to react highly flexibly to short-term fluctuations in new orders and still retain its well-trained and skilled employees. In order to utilise the Kurzarbeit phase advantageously and ready the company and its staff for the challenges that lie ahead, MAN Nutzfahrzeuge has started a wide-ranging program of qualifications for its employees at the German sites. The HR Department and the Works Council have put together an advanced training program from which all the industrial workers and most of the salaried staff will benefit in the course of this year.
In addition to Kurzarbeit and advanced qualifications, the package of personnel measures at MAN Nutzfahrzeuge contains further elements that are attractive for the employees. They are able to take up to 36 months off to train as master craftsmen, to study or to do voluntary work for relief organisations, for example. MAN Nutzfahrzeuge guarantees that it will re-employ them, guarantees that they will be able to return to a comparable job, and includes the time off when calculating that person's period of employment by the company. This also applies to employees who want to take a temporary break (sabbatical). Moreover, MAN supports part-time employment by guaranteeing the return to full-time employment.
Consistently efficient. Innovations and products from MAN
MAN Nutzfahrzeuge combats the increasing cost pressures facing customers with a comprehensive program of transport efficiency. MAN's strategic approach goes far beyond saving fuel. MAN is already offering an extensive program to reduce your total costs of ownership. Transport efficiency, consolidated in the fields of technology, service, the driver and future expertise protects the environment and is added value for customers. Labelled "Consistently efficient", Sales and Service initiatives have been started in the established markets in order to bind Truck and Bus customers more closely to the MAN brand. In spring a free vehicle efficiency check-up was offered in Germany, the pilot market. This was also aimed at the operators of trucks of other brands with the intention of generating new sales contacts and fully utilising the Service Centers. Spring also saw the introduction of the "MAN GO2" combination offer, which enabled MAN Truck & Bus Deutschland GmbH (MTBD) to position itself anew in the lucrative telematics services market; customers who signed a maintenance and repair contract received the new MAN Data Smart TeleMatics service package free from "MAN GO2".
MAN Rental: With the slogan "Now you can rent success too" MAN began a rental and service campaign in the early part of the year. MAN Rental makes it possible for operators to cover their needs for modern trucks, trailers and semitrailers quickly and simply. Thanks to a full range of services they can thus concentrate fully on their real business – and with only a minimum of handling and financing input. MAN Rental's range of services is currently available in Germany, Poland and Hungary. Other European countries are due to follow step by step. MAN Rental is run by Truck Rental Solutions GmbH, a joint venture of MAN Finance International GmbH (MFI) and EURO-Leasing GmbH headquartered in Sittensen, Germany. MAN Rental currently reports a considerable increase in demand for rental trucks, particularly in Germany.
MAN TopUsed: MAN TopUsed offers customers all services with respect to used vehicles under one roof: international used-vehicle guarantees of up to 24 months/1,000,000 km, purchasing and trade-ins, leasing, financing and lease-purchase agreements with MAN Financial Service and complete service and maintenance offers. MAN TopUsed is counteracting negative developments on the used vehicle market with the help of Sales and Marketing initiatives. For example, since the beginning of the year it has been possible to retrofit old Euro 3 trucks to quasi Euro 4 standard. They are then treated as Euro 4 vehicles for toll purposes. This also applies to the issuing of the green emission sticker. Online searching in MAN TopUsed has now been live for a few weeks, enabling interested parties to view used trucks and buses from around the world so that they can find attractive vehicles fast and easily from the comfort of their homes or offices.
MAN Bus TopService: MAN officially starts its new MAN BusTopService at the busworld fair in Kortrijk. The service will initially be available from selected outlets in six countries - Germany, Austria, Spain, Portugal, France and Great Britain. The BusTopService offers customers a complete service for all MAN and NEOPLAN models. Every outlet with BusTopService employs at least two specialists who have completed an additional two-year training course. The outlet is also equipped with the most modern diagnostic systems and carries a comprehensive range of spare parts.
International growth and cooperation
The international growth strategy initiated in recent years has resulted in one record year after another for MAN Nutzfahrzeuge. Irrespective of the difficult market situation at present, MAN will continue following this successful strategy. The reason for this is that in the medium term, the demand for transport in the so-called BRIC countries will rise again considerably and their infrastructural expansion will be driven on. In the medium term, then, demand for buses and trucks in these countries will rise correspondingly.
Brazil: With the purchase of Volkswagen Truck & Bus (now MAN Latin America) in Brazil by MAN SE, MAN Nutzfahrzeuge has gained access to the South American bus and truck market. MAN Latin America's existing network of dealers will initially sell the heavy trucks of the MAN Trucknology Generation® in Brazil, with the adjoining countries following later. In return, MAN Latin America will profit from the know-how of its German sister company, in the area of engines with high emissions standards, for example. Thus in the medium term the economical MAN D08 common-rail engine will also power the VW Constellation. n the long term, the development of joint truck and bus platforms is conceivable.
Russia: In the past few years MAN Nutzfahrzeuge has been successful in establishing itself on the Russian truck market. Its share of the market for vehicles imported from Western Europe rose from 11.2% in 2005 to 30.3% last year, which is the equivalent of 6% of the entire Russian truck market. During this period, an extended and highly qualified Service network has been built up for MAN's customers in Russia.
India: MAN Nutzfahrzeuge has been active on the Indian market since 2006 in the form of the MAN FORCE TRUCKS joint venture in Pithampur. Production start-up was more difficult than at first expected, due in particular to the initially inadequate quality of locally-manufactured components. At the end of 2008 MAN Nutzfahrzeuge increased its share of the joint venture from 30% to 50%, and in so doing, took over more responsibility for the continued expansion of activities in India.
China: The entry of MAN SE into partnership with the Chinese truck manufacturer Sinotruk was a strategic milestone. MAN will in future hold 25% plus one share in the leading manufacturer of heavy trucks in China. This gives MAN access to the world's biggest and fastest-growing truck market, where it will profit from its Chinese partner's widespread sales network. In return, Sinotruk will be able to use the technical know-how of MAN Nutzfahrzeuge. The two partners will jointly develop a truck series based on MAN technology. Sinotruk will market this series in China while MAN will have exclusive marketing rights for the export of these rugged and competitively priced vehicles.
*a temporary reduction in working hours with assistance from Germany's federal employment agency to make up part of the resulting shortfall in employees' wage.