Volkswagen’s commercial vehicle operation, the Traton Group has outlined what it says is “a clear strategic way forward” and has set ambitious margin targets for 2024.
The company has set the target of a nine per cent return on sales, based on the implementation of several strategic ‘building blocks’.
The company said higher volumes, further growth in vehicle services business, the successful completion of the realignment of MAN Truck and Bus as well as further efficiency gains are expected to support higher profitability.
Traton says that unit sales for the Group are expected to grow in the medium term, primarily driven by what it says will be a “highly competitive product and service offering”, including its recent entry into the North American market with Navistar, and the establishment of production in China.
It said that its integrated Traton Financial Services are will help to benefit the Group in supporting its growth ambitions both within its new business models as well as with its customer requirements.
Traton also said that the introduction of a common modular system for trucks and buses for all its brands which it is gradually introducing across its global product line up will also be a major boost to its ambitions.
It said that in future, vehicles from Scania, MAN, Volkswagen Caminhões e Ônibus in Brazil ( which it is renaming Volkswagen Truck & Bus), and Navistar are all set to be increasingly based on the Traton Modular System.
The new modular system it claims will enable ‘efficient cross-brand development, procurement, production and simple integration of various vehicle components into the respective models of the brands through a standardised Group interface’.
It says the aim is for all Traton brands to use more common components and parts, mainly within the powertrain, cab, software platforms, and chassis, saying that at the same time each brand will ‘maintain and strengthen its identity and individual offering for the respective customer group’.
“Improved collaboration in the Group based on an intelligent application of modularisation will also enable efficiency gains and cushion the investments needed and higher costs of future technologies such as electric drivetrains and autonomous driving, CEO of the Traton Group, Christian Levin said.
“With our Traton Modular System, we can solve the eternal dilemma in our industry, which is combining scale with a made-to-measure approach,” Levin said.
“Standardised interfaces throughout the Group will enable a much faster exchange of technology,” he added.“We will be able to use identical solutions for the same needs, and thus achieve maximum customer focus and maximum price points and this approach also allows us to solve the problem of brand differentiation through balanced performance steps,” Levin concluded.
Traton says that under its current motto of Transforming Transportation, its “Way Forward” strategy focuses on three elements, being a responsible company, value Creation, and what it calls Traton ‘accelerated’.
In its statement Traton says it intends to amplify the first element by becoming “even more responsible as a company in every respect”.
The company claims that it will particularly focus on decarbonisation and circularity saying these will play a key role in its endeavours.
Under its second element of value creation it says it will focus on a sustained increase in value for stakeholders, tapping into additional sources of revenue to reach this goal.
With the third element Traton says it wants to play an active role in shaping the transportation and logistics ecosystem of the future, by creating new business models and partnerships that ‘add value in a world marked by electrification, autonomous driving, and connectivity’.
Levin announced that the company is adding a fourth element to its ‘Way Forward’ strategy with strategy execution and governance, being added to the plan.
“We will focus more on execution in the future, and we will do this with a clear brand positioning, an optimised industrial setup, and a better holding setup,” Levin said.
“Of course our Traton Modular System will be key on our way to stronger profitability,” said Christian Levin.
The statement claims Scania will aim for a strategic return on sales of 12 per cent, based on its unique business model, the modular system and a strong company culture.
Traton said that not only does Scania have ambitious profitability targets, it says it is also fully committed to sustainability.
The company said that the return on sales target is supported by the continued roll-out of the its Super-based powertrain and a larger contribution from the highly profitable service business, which it says also plays an important stabilising role, especially in an economic downturn.
It said that further important drivers will be the opportunities that digitalisation, data, and artificial intelligence will offer, while the addition of its new production site in China, which will see construction commencing shortly, is expected to create additional volume growth.
At, the Group’s troubled MAN subsidiary the ongoing implementation of a realignment program it says has laid the foundation for improving sustainable earnings for the brand and the aim for i9t is to achieve a strategic return on sales of eight per cent.
The plan for MAN is to fully revise its product portfolio along with placing a greater emphasis on the Vehicle Services business which it says will offer a ‘focus of growth and resilience’ in as similar way to its sibling Scania.
It said that it will further leverage the Traton Modular System and the transition to zero-emission transport solutions and smart products to drive the the margin development to support the profitability improvement it is planning for MAN Truck and Bus.
In Brazil the company says its operation is already delivering strong return on sales is aiming for a return of 8 per cent as a strategic target.
The solid profitability of its Latin American operation Traton says, will be backed by strong products and volume growth with sustained leadership in the South American market and a further expansion of its export business.
Traton said that Volkswagen Caminhões e Ônibus or VWCO has already announced that it will be changing its legal corporate name to Volkswagen Truck & Bus, which it says will better reflect its ambition to further internationalise the brand.
The Latin American operation claims to be already successful in e-mobility with its e-Delivery and Traton said that the expansion of its heavy-duty portfolio is expected to lead to higher margins in the future.
The statement from Traton also marks the first time it has published a return on sales target for its new brand, Navistar, which became a wholly owned subsidiary just under a year ago on 1st July last year.
The company said that Navistar is targeting a return on sales of nine per cent with the ambition to further increase profitability in the World’s biggest and most competitive heavy truck market.
It said that it will aim to do this by utilising the Modular System as well as through improving its dealer network performance and by expanding its vehicle services business as well as by better integration and utilisation of its own financial services arm.
According to the Traton Group’s chief financial officer, Annette Danielski the Group is pursuing ambitious profitability targets through its four strong brands and their clearly defined growth strategies.
“We will secure Traton’s future competitiveness with targeted investments in common components, new business models, and new technologies while retaining a high cost discipline,” said Danielski.
“We aim to reduce net debt and strengthen our capital structure. We are making progress with the integration of Navistar and are taking the next step in our successful internationalisation strategy with the establishment of production in China,” she said.
“The realignment of MAN Truck and Bus is progressing according to plan and will result in an improved fixed cost structure, material cost savings, and higher productivity and we are confident that Traton offers a strong value proposition for investors,” she concluded.
The Company also said it is focusing its R&D budget on the most important future technologies and more than 60 per cent of the total development budget is being allocated to new technologies and growth.
The Group’s new, efficient 13-litre common base engine, which it is calling the CBE, will have the distinction of being Traton’s last traditional ICE and will underpin the Group’s he profitable core business which it says will provide the financial resources for its transition to e-mobility.
It says that to leverage the benefits of the Group and its modularisation strategy, Traton will also develop what it dubbed as its ‘ACE platform’, which stands for autonomous, connected, and electrified vehicles.
It also emphasised that Traton Financial Services will leverage the brands’ existing structures and will underpin customer’s journey towards sustainable transport.
The Group said that the transition to e-mobility will also have a positive impact on the its Vehicle Services business with its established and technically well-equipped service network tapping into additional customer groups for complex repair and maintenance work.
This is particularly evident around new components such as battery systems which it says will drive a further shift of its business model from products to services, expanding to include charging services, battery recycling and service offerings based on vehicle networking with the Group already having more than one million connected vehicles on the road around the world today