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VW completes Scania share purchase

Volkswagen AG confirms extra purchase of shares in Swedish truck manufacturer Scania

Volkswagen AG, the German head office of Volkswagen Australia, has confirmed it will buy an extra block of shares in Swedish truck manufacturer Scania.

The shares were compulsorily acquired by Porsche when it purchased a controlling interest in Volkswagen, with local trading laws also requiring it to purchase outstanding shares in any subsidiary companies, including Scania.

Volkswagen will purchase the Scania shares to the value of approximately 395 million euros, bringing Volkswagen’s stake in Scania to about 49 percent of the capital and 71 percent of the voting rights.

This will increased from 41 percent of the share capital and approximately 69 percent of the voting rights Volkswagen held previously.

At the same time Scania has just released its 2008 calendar year results, showing a net increase in sales of five per cent, as well as a 400 million SEK (Swedish Krona) increase in operating income.

Despite this economic good news, there were downsides, with a decline in the total number of vehicles delivered in 2008, with 73,793 units finding homes, compared to 75,878 units in 2007.

Scania President and Chief Executive Leif Ostling says “financial turbulence” had a broad impact, with customers finding it difficult obtaining investment financing and business loans.

“In a number of cases, previously ordered trucks were re-specified for new customers, and inventories are higher than normal, so customers can therefore hold off on their investment decision until a vehicle needs to be placed in service,” Ostling says.

“At present, order bookings are thus not a good indicator of demand for new trucks; instead, deliveries better reflect the demand situation.”

Like many competitors, Scania had to cut back on the number of production staff, Ostling says, with nearly 2,000 fixed contract employees leaving before the end of March, reducing the workforce to about 10,000.

“Permanent production employees will receive further training during the first half of 2009 in order to accelerate efficiency improvements and strengthen core competence when the market normalises again,” Ostling says.

Despite the gloom pervading world financial markets, Ostling is upbeat about the company’s long term prospects.

He says Scania is well placed to take advantage of an expected economic rebound, helped by the company’s restructured axle and gearbox production, which is expected to generated annual savings of 300 million SEK.

“In Scania’s judgement the long-term prospects for economic growth remain good, and this will also result in an increasing need for transport equipment and services. However, due to the current difficult market conditions, the uncertainty for the coming quarters is high,” Ostling says.

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