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Volkswagen deals ready truck business Traton for stock market listing

Reuters  /  October 25, 2018

Volkswagen struck a slew of deals on Thursday to streamline its new Traton unit into a pure truck and bus business and prepare it for a planned stock market listing next year.

VW’s legacy trucks unit MAN SE will sell a 76 percent stake in Renk AG and its wholly owned subsidiary MAN Energy Solutions SE to a subsidiary of VW, MAN SE said in a statement.

The purchase price for the deals would correspond to the expected equity book value of the holdings at the end of this calendar year, estimated to be between 1.85 and 2.05 billion euros ($2.1-$2.3 billion).

In addition, MAN SE’s 100 percent indirect ownership of MAN Energy Solutions USA, Inc., will be sold and transferred to a subsidiary of VW for a purchase price of around $99 million. The sale is expected to be completed by the end of 2018.

“As a result of this transaction, Traton AG will become the lead company of a pure truck and bus group,” MAN said in the statement.

VW is close to hiring Citigroup, Deutsche Bank, Goldman Sachs and JP Morgan to help with a mid-2019 listing that bosses estimate could raise up to 6 billion euros ($6.8 billion).

A domination and profit transfer agreement between VW and MAN will expire at the end of the year, meaning that the Wolfsburg-based auto maker would profit from any revaluation if the deals close before then.

($1 = 0.8794 euros)

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Volkswagen gives ok to taking its truck unit public

Jason Cannon, Commercial Carrier Journal (CCJ)  /  May 13, 2019

Volkswagen AG said on Monday it plans a summertime initial public offering (IPO) of its Traton truck unit. The German automaker just two months ago scuttled IPO plans for Traton – formerly Volkswagen Truck & Bus and the umbrella company for MAN, Scania, Volkswagen Caminhões e Ônibus and RIO – citing poor market conditions.

Held back by build slots that have been filled since 2018, U.S. Class 8 truck orders have been below 20,000 units every month this year. Class 8 orders for the past 12 months now total 380,000 units, according to FTR.

Traton’s supervisory board and board of management on Monday each okayed preparation for an IPO, putting the cash-raising plans back on track “subject to further market developments,” the company said Monday in a statement – a maneuver that could raise upwards of $6.75 billion dollars.

Traton currently owns a nearly 17 percent stake in International Trucks’ parent company Navistar, and Wall Street has long speculated that a Traton IPO is a possible precursor to a richer investment in, if not the outright acquisition of, the Lisle, Ill. truck maker.

Traders responded in-kind Monday. Despite losing as much as $2.23 per share earlier in the day, Navistar stock prices closed up nearly 3 percent after the Traton news broke.

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Are Traton and Navistar Signaling Something Big in the Works?

Jack Roberts, Heavy Duty Trucking (HDT)  /  May 30, 2019

We’ve been hearing since the IAA Commercial Vehicle Show in Hannover, Germany, last year that Traton, Volkswagen’s newly created global truck and bus business unit, is aiming for an initial public stock offering sometime this summer.

There have been a couple of hiccups with that plan. In March, VW announced it was putting the IPO on hold, presumably while the company sorted a few things out. The complexities of managing, promoting and enhancing multiple truck and bus brands on every continent cannot be overstated. But things must have gone well, because just a couple of weeks ago, Traton announced the IPO was back on track and proceeding accordingly.

Meanwhile, on this side of the Atlantic, Navistar announced this week that after more than a decade of legal battles, it is moving ahead in settling a number of class action lawsuits brought by customers who bought its EGR-only MaxxForce diesel engines.

The MaxxForce design featured exhaust gas recirculation as its primary emissions reduction mechanism. That worked well enough for the initial round of diesel particulate and NOx reduction regulations implemented by the U.S. Environmental Protection Agency and the California Air Resource Board. However, to meet the even more stringent 2010 emissions regulations, all other North American diesel engine manufacturers went with selective catalytic reduction (SCR) technology.

Navistar, for a variety of reasons, elected to essentially double down on EGR technology for 2010 MaxxForce engines, with decidedly poor results. The extra heat generated by the beefed-up EGR system, coupled with air management problems, led to reliability problems and customer revolts that threatened the health of the sole surviving business unit left from the massive International Harvester Company.

However, a new management team fought back and slowly, but steadily, began to turn the beleaguered truck maker’s fortunes around. But it wasn’t until Navistar and Volkswagen entered into a partnership agreement – along with a healthy influx of cash from Wolfsburg, Germany – that many industry observers finally felt Navistar was going to weather the storm.

The lingering MaxxForce suit has been a millstone around Navistar’s neck for years, so it's no wonder the company wants to resolve this issue, freeing it up to finally move on to new era of products and technology.

But there may be more to the picture than that.

Volkswagen – and now Traton – have made it clear for years that it intends to go toe-to-toe with the two other global heavyweight truck and bus manufacturers – Daimler and Volvo. Moreover, the company has said repeatedly that having a robust, competitive Class 8 product in North America – which is still the largest heavy-duty commercial vehicle market in the world – is absolutely integral to that plan. And obviously, Traton’s contender in North America is Navistar.

Many industry observers see it as likely that eventually, Traton will follow the trail blazed by Volvo and Daimler to get into the North American Class 8 game: Acquire an established OEM, and then begin integrating its proprietary engine and powertrain technologies into the vehicles as new designs come off the drawing board.

Volvo and Daimler were doing so in a time when many Americans were uncomfortable with the idea of “foreign” technology in their trucks. And so they slowly undertook those gradual technology introductions over with decades-long introduction and familiarization strategies.

Today, global technology in heavy trucks is considered a given. Which means Traton, when it finally decides to go all-in on Navistar, will be able to initiate a vastly accelerated adoption curve for its technology, which will certainly shake the North American truck market up and be fascinating to see unfold in real time. (And in fact, the two companies are already working together on designing the next generation of powertrains, including electric.)

So – are the recent moves by Traton and Navistar simply two companies taking care of business? Or are they harbingers of something bigger yet to come?

Time will tell. But it’s going to be interesting to see what the next moves from both OEMs will be.

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VW aims to raise $2B from truck unit IPO

Bloomberg-Reuters  /  June 14, 2019

FRANKFURT -- Volkswagen Group aims to raise up to 1.9 billion euros ($2.1 billion) by floating a stake of at least 10 percent in its Traton trucks unit later this month, its second attempt to bring the business to market.

VW intends to offer stock in Traton, which sells MAN and Scania vehicles, for 27 euros to 33 euros each, it said in a statement Thursday. The sale values the division at 13.5 billion euros to 16.5 billion euros ($18.6 billion).

VW plans to invest proceeds in transforming its auto production as it readies the launch of dozens of electric vehicles over the coming years and deepens an alliance with Ford Motor.

It is also seeking to capitalize on the premium that truck stocks command over automakers to create an acquisition currency, having earlier shown interest in potentially boosting its 16.8 percent stake in U.S.-based truck maker Navistar. Management denies that a Navistar deal is in immediate prospect, but such a move would fit with a broader pivot by VW  toward the United States to balance its reliance on China, where it sells half its cars.

Besides Swedish heavy-truck specialist Scania and Germany’s MAN, Traton includes a smaller operation in Brazil that sells VW-branded commercial vehicles for emerging markets.

Management test

VW surprised investors last month when it revived its effort to float Traton just weeks after shelving the plan in March.

The sale will mark a litmus test not only for IPO demand in a European stock market that turned in its worst month in 3 1/2 years during May, but also for the ability of VW's management to push through deeper structural change.

"We are now all set for the decisive phase," VW Chief Financial Officer Frank Witter said in the statement. "The IPO is driven by the aim to create value for our stakeholders."

The base offer will be 50 million shares, with a possible over-allotment of as many as 7.5 million shares, subject to the use of a so-called green-shoe option for rights to additional stock, VW said.

Trading is set to start on June 28 and the company is targeting a free float of 10 percent to 11.5 percent of Traton’s shares, scaling back earlier ambitions to list up to a quarter of the unit.

The offer period for the share sale is set to begin on June 17 and end on June 27.

VW CEO Herbert Diess, who took over the job a little more than a year ago, earlier Thursday addressed 500 top executives near VW’s corporate headquarters in Wolfsburg, Germany, and stressed the urgency of his push to make the transportation giant less centralized and more agile to navigate an unprecedented industry transformation.

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Navistar (You short sighted board of director jerks) you have opened up a can of woop ass and VW is going to woop your behind. RIP American-owned Navistar.

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VW’s $18.6 Billion Truck IPO to Test CEO’s Overhaul Plan

Christoph Rauwald, Bloomberg  /  June 14, 2019

Volkswagen AG valued its heavy-trucks business at as much as $18.6 billion in a planned initial public offering that will test CEO Herbert Diess’ ambition of overhauling the carmaking behemoth.

The manufacturer intends to offer stock in Traton SE, which sells MAN and Scania AB vehicles, for between 27 euros ($30) to 33 ($37) euros per share, it said in a statement June 13, valuing the division at 13.5 billion euros ($15.16 million) to 16.5 billion euros ($18.6 millon).

It’s set to be one of the year’s largest European public offerings. While trade jitters and a slowing global economy have weighed on recent IPO deals, industrial companies such as Switzerland’s Stadler Rail AG and Germany’s Knorr-Bremse AG, which listed in October, have fared well.

Listing Traton is management’s highest-profile most notable move in a push to make the world’s largest automobile manufacturer more agile, which includes potential plans to shed assets, seek co-ops and freeing up units to make decisions. Diess is considering selling operations that build ship engines and large transmissions while teaming with Ford Motor Co. on vans and likely electric and autonomous cars.

While seeking to allocate investments more efficiently, the moves also are aimed at increasing the stock price and giving VW more financial flexibility. The company has committed to spending 44 billion euros ($49 billion) through 2023 on electric and connected cars, with the payoff likely years away leaving the company’s valuation to trail the broader market.

VW’s plans for Traton and with Ford will help create “currency” for the upcoming phase of industry consolidation, Diess told a gathering of top executives June 13. In the truck division alone, VW plans to challenge industry leaders Daimler AG and Volvo Group in markets such as North America and China. This may include potentially boosting its 16.8% stake in U.S. peer Navistar International Corp.

“This IPO represents a much needed ‘first step’ structural change at VW as the management team seeks to unlock value during a period of significant and transformational industry changes,” Evercore ISI analyst Arndt Ellinghorst said in a note.

Volkswagen shares trade at 6.2 times earnings, compared with an average multiple of 16.1 for Germany’s Dax Index companies.

Global stocks have struggled in recent weeks as trade frictions jeopardize global economic growth.

VW has been working toward a listing of Traton for more than three years, reviving plans last month that were shelved earlier in the year.

“We are now all set for the decisive phase,” VW Chief Financial Officer Frank Witter said in the statement. “The IPO is driven by the aim to create value for our stakeholders.”

VW is targeting proceeds from the IPO of as much as 1.9 billion euros ($2.13 billion). The proposed price range follows Volkswagen’s announcement this month of a public listing for its wholly owned Traton subsidiary in Frankfurt and Stockholm.

The base offer will be 50 million shares, with a possible over-allotment of as many as 7.5 million shares, subject to the use of a so-called green-shoe option for rights to additional stock, VW said. Trading is set to start June 28, and the company is targeting a free float of 10-11.5% of Traton’s shares.

During the IPO’s marketing, investors will focus on Traton’s intentions for its stake in Navistar and its strategy in China, where it has no production joint venture such as Volvo and Daimler, Jefferies analysts led by Graham Phillips said in a note.

Diess, who took over the job a little more than a year ago, on June 13 addressed 500 top executives near VW’s corporate headquarters in Wolfsburg, Germany, and stressed the urgency of his push to make the transportation giant less centralized and more agile to navigate an unprecedented industry transformation.

Besides Swedish heavy-truck specialist Scania and Germany’s MAN, the unit includes a smaller operation in Brazil that sells VW-branded commercial vehicles for emerging markets.

The offer period for the share sale is set to begin June 17 and end June 27.

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No doubt Traton will want a strong relationship with Navistar, the question is 'how much and when?'.  They absolutely need International in the U.S. to challenge Daimler and Volvo. 

It's a little too early to see just where the Ford-VW thing is going.  

I don't even want to think about FCA and Renault.......... 








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VW's $2 Billion Truck IPO Reflects Push to Trim the Empire

Christoph Rauwald, Bloomberg  /  June 17, 2019

Volkswagen AG’s plan to list its truck division later this month will test whether it can pull off a feat that was once unthinkable for the German automotive giant: get smaller.

For decades, the world’s biggest carmaker only knew how to expand -- adding Bentley luxury cruisers, Ducati racing bikes and Scania heavy trucks while taking its network of factories well past the 100 mark and its headcount over 640,000.

Even in the face of the debilitating diesel-cheating scandal in 2015, the manufacturer didn’t trim its portfolio, bolstering investment in electric cars instead and even creating a new division for mobility services.

Now with the pace of change in the auto industry quickening, Volkswagen is trying its hand at trimming the empire.

If the listing of a minority stake in Traton SE -- a truck and bus maker with three vehicle brands and valued at as much as 16.5 billion euros ($18.5 billion)-- goes well, it would give Chief Executive Officer Herbert Diess more sway to balance the often diverging interests of VW shareholders including the Porsche and Piech owner family, Lower Saxony and powerful labor unions.

Healthy Valuation

“Traton’s IPO pricing suggests a healthy valuation which puts a spotlight on VW’s significant sum-of-its-parts disconnect,” RBC Capital Markets analyst Tom Narayan said in a note. Concerns over the company’s ability to switch to electric vehicles is “unfairly” weighing on its share price, the analyst said.

Volkswagen rose 0.2% to 141.42 euros at 11:46 a.m. in Frankfurt trading, taking gains this year to 1.8%.

For now, Diess is seeking deeper technology partnerships and the possible sale of assets like transmission maker Renk AG and MAN Energy Solutions, which develops engines. A successful Traton listing, targeted for June 28, could even spark rival Daimler AG to follow suit with a carve-out of its own truck business.

Lagging Peers

Traton's return on sales is rising, but still trails major heavy-truck competitors.

The truck group comprises three main assets, Scania, MAN and Volkswagen-branded budget trucks sold in South America and Africa, as well as a unit offering digital services to fleet operators. With 29 production and assembly sites globally, the business last year sold 223,000 vehicles. While that’s 14% more than a year earlier, it’s less than half of Daimler’s truck division, the world’s biggest.

Volkswagen is offering 50 million Traton shares at 27 euros to 33 euros apiece, plus a possible over-allotment of 7.5 million shares, meaning at the top end of the price range, the sale would raise as much as 1.9 billion euros. Here are the key points in one of the biggest initial public offerings in Europe this year:

Sales Pitch

Traton is looking to woo investors by combining the best-in-class technology and strong margins of the Scania unit with the prospect of a turnaround at MAN and growth potential in key markets, according to company presentations and research from advising banks seen by Bloomberg.

The plan includes the following four pillars:

  • Scania is the group’s crown jewel, and Traton will aim to show it can maintain the heavy-truck specialist’s profitability. The Swedish brand is expanding its use of alternative-fuel technology like hydrogen ahead of stricter emissions rules and introducing digital services to generate more revenue from fleet operators.
  • MAN has long been a problem, but some investors like a turnaround story, and so Traton will push its effort to revive the German division’s weak returns. This will be underpinned by replacing a 12-year-old truck with a new model next year. MAN also has room to expand in the lucrative aftermarket business.
  • Traton is a major player in Brazil -- a hugely profitable truck market before the economy tanked -- and a recovery there will play well for the manufacturer’s VW-branded budget trucks, which could expand in the Middle East, Africa and Mexico.
  • Traton is still more a collection of parts than a whole, and the company will talk about synergy prospects with a target to cut costs by 700 million euros by combining purchasing and engineering. Scania is leading development of the so-called CBE, a 13-liter engine that’s due to power more than half of Traton’s heavy trucks in 2025.


Chief Executive Officer Andreas Renschler, 61, is the mastermind behind Traton. After helping to establish Daimler’s commercial vehicles business as the world’s largest, he was lured to Volkswagen in 2014. Despite the partly overlapping operations, he’s improved earnings over the past four years, mainly by enforcing closer cooperation between long-standing rivals Scania and MAN. Investor interest in Traton will largely be a bet on Renschler’s veteran skills to deliver in the cyclical truck market.

The timing of the listing, which was delayed earlier this year, is complicated by global volatility. The window may be as good as it gets. Rival Volvo Group -- the main pure-play competitor -- has gained 26% this year.

“It’s no secret that the market environment is very volatile,” VW Chief Financial Officer Frank Witter told reporters on Monday. “It’s not ideal, but it’s not bad either.”

VW remains open to sell more Traton stock at a later stage, up to a maximum stake of 24.9%, if market conditions are supportive, he said.


Traton has only small bridgeheads in the key North American and Chinese markets, and the prospects for expanding those positions face obstacles.

In North America -- the truck industry’s largest profit pool -- Traton merely owns a 16.8% shareholding in Navistar International Corp., which doesn’t it allow it to do much. Lifting the stake will cost money and add complexity. Meanwhile, Navistar still faces fierce competition from market leaders -- Daimler’s Freightliner, Volvo’s Mack and Paccar Inc.

While Daimler and Volvo have functioning production joint ventures in China, the world’s biggest truck market, Traton’s cooperation with Sinotruk Hong Kong Ltd., where its holds a 25% stake through MAN, has yet to deliver the hoped-for results.

Alliances can fall short of aspirations to create economies of scale, with the recent tensions at the Renault-Nissan Alliance a fresh reminder of the difficulties in uniting separate cultures. Traton also has a cooperation with Hino Motors Ltd., a Toyota Group company, on electric technology, product development and purchasing.

MAN has long attempted a turnaround, but improvements have been tepid compared to an aggressive restructuring at Volvo that doubled margins within roughly three years. MAN’s production footprint in high-cost Germany and a lineup that includes less-profitable medium-duty trucks limits the potential for improvement.

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VW's Traton shares limp on stock market debut

Reuters  /  June 28, 2019

FRANKFURT - Traton made a lacklustre start on its debut on Friday, as shares in Volkswagen's truck unit slipped below their initial public offering price.

The stock opened at 27 euros ($30.75), the IPO price in Europe's second-largest listing of the year, before slipping to trade as much as 2.4 percent lower. Germany's benchmark DAX index was up 0.5% at 1200 GMT.

Weak demand for German listings had forced VW to scale back its Traton IPO and it had already priced the offering at the low end of its target range.

"At first glance, markets don't look that bad. But volumes have been low as risk averse investors hoard cash," a banker working on the deal said.

The average daily turnover of Stoxx600 shares stood at 470 billion euros so far this year and the June median was 439 billion euros, compared with the 2018 daily average of almost 600 billion.

Global IPO volumes are down 30% in the year so far, Refinitiv data shows, while the European figure is at its lowest level since 2012 amid concern about the global economic outlook.

Volkswagen floated 11.5% of Traton's shares after initially seeking to list a stake of up to 25% in a bid to put the company's truck business on an independent footing.

The deal values Traton at 7.9 and 7.0 times its 2019 and 2020 earnings before interest and taxes, respectively, roughly in line with the valuation of its peer Volvo, two people close to the matter said.

The 1.55 billion euros ($1.77 billion) in proceeds from the offering will flow to parent Volkswagen which aims to use the funding to invest in mass producing electric cars.

Traton, which includes the MAN, Scania and Volkswagen trucks businesses wants to create a global trucks operation.

A flotation could give Traton the resources to deepen its relationship with U.S. truck maker Navistar International Corp , in which it owns a 16.85% stake.

Asked whether Volkswagen planned to buy out Navistar, Chairman Hans Dieter Poetsch said: "Today's steps make many things possible. Currently there are no concrete plans."

Traton Chief Executive Andreas Renschler said alliances with Navistar, Hino and Sinotruck gave Traton economies of scale. "We don't need any further participation at all, there's no need to always buy companies," he said.

($1 = 0.8780 euros)

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Timing is everything.  This will ultimately be a successful move, even if it gets off to a slow start.  Nonetheless it looks like this move was made more to bail VW's car business out and fund their BEV plans than fund the purchase of NAV.  

As far as Traton buying Navistar, I am still not convinced Navistar wants to be bought.  Let their shareholders enjoy the profits of NAV's turn-around.  Who knows, maybe things go bad for VW it will be Navistar buying Traton!   


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TRATON Boss Says VW Truck Unit "Not Interested" In Acquiring Navistar

FreightWaves  /  July 18, 2019

Navistar International shares fell nearly 6.5 percent on Wednesday (July 17) after the head of Volkswagen's trucking group TRATON said it was "not interested" in a full acquisition of Navistar. 

TRATON CEO Andreas Renschler told the German newspaper Handelsblatt that owning 16.8 percent of Navistar's stock and controlling two board seats is sufficient.

We are very satisfied with our partnership with Navistar as it is," Renschler said. "To be honest, many takeovers – even in other industries – are unsuccessful."

In 2018, Renschler said acquiring Navistar would be a "good idea."

Been here before

David Leiker, senior research analyst at Robert W. Baird & Co., said TRATON, formerly the Truck & Bus Group of Volkswagen, has made similar comments since paying $256 million in September 2016 for its stake in Navistar.

"In the past, comments suggesting a longer process for acquiring Navistar have created pullbacks in Navistar's stock, and today is no different," Leiker said. "We firmly believe TRATON will eventually acquire Navistar to maximize the synergies and financial returns from its investment."

Geographic synergies

TRATON began trading on the Frankfurt Stock Exchange and Nasdaq Stockholm under the ticker 8TRA on June 28. That raised investor speculation that it would add Navistar to its MAN and Scania brands as it pursues Daimler and Volvo for global truck leadership.  

TRATON's core markets are Europe and South America. It reported revenue of 25.9 billion euros in 2018 with truck sales of 233,000 units. North America accounts for only 1.5 percent of TRATON's vehicle deliveries. It has about 81,000 employees and 29 production and assembly facilities in 17 countries.

Navistar holds about 14 percent of the U.S. market for heavy- and medium-duty trucks. It generated $10.3 billion in revenue during its 2018 fiscal year ending in October 2018.   Navistar's $3.3 billion market cap is roughly one-quarter of TRATON's value. The two collaborate on engine technology, the sale of engines and contract manufacturing.

TRATON formed a strategic partnership with Japan's Hino Motors Ltd. in April 2018 to cooperate on conventional, hybrid and electric powertrains, connectivity and autonomous driving systems as well as purchasing and logistics. Toyota owns 50.1 percent of Hino.  

Investment timing

TRATON's investment came at a critical time for Navistar. Its market share had cratered because of the defective Maxxforce engine that cost billions in recalls and repairs and damaged the company's reputation. Navistar recently set aside $158 million to cover a class action and other customer claims.

Since the alliance was formed, Navistar has also benefited from TRATON's purchasing might.  VW and Navistar said they anticipated five-year savings of $500 million from working together.

"The alliance with TRATON is reducing costs through the procurement joint venture and cost-effective access to next-generation technologies," Navistar CEO Troy Clarke said on the company's earnings call June 4.

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Seriously, why should they?  They get all the advantages with NAV as a strategic partner and it doesn't cost them any more.  Got a good thing going just the way it is now.  Besides, I am starting to think VW wants to slim down so they can swallow Ford.  I figure VW will sell more of Traton off in coming years, and they are about to sell MAN's large engine unit off as you have reported.   

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