Volkswagen’s truck operation, Traton has had an inauspicious debut on the stiock market, falling in price on its first day of trading as investors adopted a cautious stance on its global expansion plan, which includes boosting its U.S. footprint and attempting to go head-to-head with market leaders Daimler and Volvo Group.
Traton SE declined up to 2.4 per cent to $AUD42.74 (26 euros) after its initial public offering priced at $AUD43.70 (27 euros).
Volkswagen raised $AUD 2.4 billion (1.55 billion euros) from listing a stake of about 11.5 per cent in a transaction that values the German auto giant’s truck unit at $AUD21.89 billion (13.5 billion euros).
A completion of the sale, possibly Europe’s biggest this year, is a significant sea change as the Wolfsburg-based company moves to streamline its sprawling empire after a decade of rapid expansionwhich has seen it acquire Porsche, Bentley, Ducati and the MAN and Scania truck brands.
In the age of electric and self-driving vehicles, the cumbersome structures that have grown around a network of more than 100 factories are believed to be slowing decision-making and causing the company to worry about the risk of falling behind.
VW’s byzantine governance structure which has a powerful labor council and complex ownership structure is seen as standing in the way of deeper changes in recent years.
A plan to sell Ducati was derailed in 2017 because of internal resistance, making Traton’s IPO a milestone for chief executive officer Herbert Diess and truck division boss Andreas Renschler, who bought around $AUD 875,000 (540,000 euros) worth of Traton shares.
VW will almost cetainly use Traton’s IPO proceeds to expand the division’s footprint in North America — the truck industry’s largest profit pool — where the company currently holds a 16.8 per cent stake in Navistar International.
Renschler has said he wants to expand on a leading position in Europe and Latin America with future potential moves on acquisitions and alliances to grow into a global truck maker.
Analysts have speculated on a buyout of Navistar after Traton’s listing, with analysts saying Navistar could command an equity value of as much as $AUD7.5 billion, (4.3 billion euros) while the market may start to weaken in the fourth quarter.
Speaking at the Frankfurt stock exchange, Andreas Renschler said the listing was a “big step” forward for Traton’s strategy.
“The market is what it is,” Scania CEO Henrik Henriksson said in an interview. “The important thing for us is that we have a strategy and a plan that we believe wholeheartedly in.”
Traton’s stock will be tracked by investors as a peer to Sweden’s Volvo, the only standalone commercial-vehicle manufacturer in Europe that competes with a similar product range. Led by former Scania chief Martin Lundstedt, Volvo set the bar high with a successful restructuring that boosted returns within three years.
At VW, the MAN truck unit has made only tepid progress on lifting profit margins in recent years.
The European market for trucks is expected to soften during the second half of the year, with Volvo’s decision to reduce a summer production shift underlining the market sentiment.
Heavy-truck registrations in Europe in May were stronger than expected, helped by one-off effects like pre-buying ahead of a digital tachograph requirement that came into affect in June.
Having been in the job for just over a year, Volkswagen CEO Herbert Diess, is renewing the push to lift the company’s poor valuation by becoming less centralised.
Increasing the valuation will be key “currency” in the industry’s phase of consolidation and partnerships in the shift to electric and self-driving vehicles, he said at a recent meeting of top management.