Friday, 26 September 2014

MAN and Scana to co-develop truck gearbox

MAN and Scania, heavy truck makers under the Volkswagen AG umbrella, link arms to develop a new transmission for their joint use, but how will ZF react?

The first fruits of their joint endeavours are likely to appear in 2016 and it is understood that vehicles carrying prototype components are already under evaluation.

Both OEMs have to tread carefully in their new joint venture; each is keen to maintain the high value of its brand image. On the other hand, Volkswagen, as the parent company, is equally keen to see the two truck makers take advantage of the benefits of scale.

Joint development of a ‘common’ gearbox is but the first step along a road that may have many stages. Much will depend on the success of the first stage. Many components are hidden from view and could be co-developed.

It is understood that starting 2016 Scania gearboxes will be installed in MAN TGS and TGX vehicles, though each company will develop its own strategic software that will differentiate the brands.

The longer term aim is for the two partners to employ collectively-innovative transmissions in future vehicles; components that set global benchmarking standards in commercial vehicle technology.

The situation is not unlike a father with two sons. The father orders the reluctant sons to get along together for the sake of the family name, even though at times they may distrust one another

Transmissions are strategically important items in any medium-to-large commercial vehicle, in the same way that so too is an axle or even an engine.

While at this stage there is no hint of engine sharing, the matter must have crossed the minds of some executives within MAN, Scania and VW.

In the meantime, discussions will centre on components that can be co-developed without damaging the value of individual commercial vehicle brand images. Could axles be one such component?

One fall-out of the decision for MAN and Scania to co-develop a transmission surely is a loss of business for German transmission giant ZF, which supplies MAN. There is not much that ZF does not know about transmission technology. Gears and gearing are its livelihood.

The big question is: How will ZF respond to the fall-out? ZF executives in Friedrichshafen will have been watching events minutely from the sidelines as VW weaves its way dexterously through the potential minefield of bringing MAN and Scania closer together under its umbrella.

ZF may already have plans up its sleeve; or it may have long-suspected that something like this might happen, and accepted the situation as ‘a given’. But normally, business is not like that. ZF is too big to roll over and take the hit lightly. It will certainly know the exact number of transmissions it supplies to MAN.

ZF has economies of scale on its side and these can be reflected in price, delivery and transmission R&D effort. Economy of scale is something that MAN and Scania are also striving to achieve. Can the truck makers can build a ‘common’ ‘box with innovative features but at price lower than that offered by ZF? That remains to be seen.

Certainly, ZF will not wish to lose such high profile – and high profit – customers.

                                           ZF to buy TRW

Meanwhile, ZF has agreed to buy US automotive suppliers TRW Automotive. For $11.7 billion in a move that will make it the second-largest automotive supplier after Bosch. In 2013, TRW enjoyed sales of $17.4 billion and specialises in steering, brakes, electronics and occupant safety.

As Bloomberg notes the deal makes ZF big enough to push back against the price pressure from the larger vehicle manufacturers. ZF has both scale and depth, as it now encompasses clutches, gears and transmission to now automotive electronics.

Interestingly, Volkswagen AG is TRW’s largest single customer. It is also noteworthy that gaining its new-found scale required ZF to sell off its 50 per cent stake in a steering systems joint venture it held with Robert Bosch GmbH.

TRW has its own steering system business, including electric power steering which dates back to its 1999 acquisition of the Lucas-Varity business in the UK.

Is it any wonder that the world’s two largest automotive suppliers are both German? And is there a message here somewhere?

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