Andreas Renschler is a man with some thinking to do. The Commercial Vehicle world is changing, and, as the man charged with taking DaimlerChrysler’s global CV operation forward, he’s got the job of managing that change. Moreover, as the chief of the world’s biggest CV operation, he has an opportunity to do much to define the agenda for the years ahead. In this exclusive to just-auto, Oliver Dixon caught up with him.
Three issues make up the holy trinity of truck manufacturing c.2005. Scale, modular, and, above all, global. Put all three together, and you have a single, global vehicle. Or, rather, lots of them, with margins aplenty. No you don’t, says Renschler. “There will be no world truck.”
“We are the only truly global CV OEM,” he asserts. “Our development over the past fifty years has shown us one absolute; there are clear differences between regions, and clear differences in their respective demands. As such, it is clear that the idea of a global truck is not workable today, and, for the majority of the market segments, it is unlikely ever to be so.”
Renschler points to legislation as being the key defining issue here; notably, the example he chooses is not the disparity between emissions protocols, but of vehicle size: “In the US, regulation is based around trailer length. In Europe, it’s based around whole vehicle length. Hence US tractor units can be longer without compromising vehicle productivity. Europe and Asia are a bit closer, with the Chinese market adopting European legislation on a step by step basis, but the gulf between the markets is still a large one, and one that precludes wholesale product homogenisation.”
But this is not to say that Renschler does not see increasing trans-regional integration into the future; far from it, but, to his mind, such integration has to come from the ground upwards, not the brand downwards: “We are looking towards increased vertical integration, but on a component-by-component basis,” he explains. “We have launched a Heavy Duty engine platform, and platform is an entirely apt description. These engines will not be identical across all regions – instead the core product can be adapted to suit varying local operational and legislative requirements.”
“But – in my opinion – there will be no word truck. We can talk about engines, transmissions – although here too there is a differing approach on both sides of the Atlantic. Don’t forget too that common electronic and chassis architectures are a possibility.”
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By GlobalDataOK, but here’s a thing. Three regions – the EU, NAFTA and Japan – define truck design through individual legislation. And yet, last year, trucks sales in regions in which legislation does not define design outsold those in which it does by around 30 per cent. How then does a global CV OEM balance the conflicting legislation-driven demands of the emerged markets with the margin and growth potential of the emerging regions?
“Potential is one thing, margin is another,” replies Renschler. “Look at Asia – most of which is still a low margin business. You have to remember that this situation is not new – it’s been much the same for the past twenty years.
“The Middle East is a good example. We’re currently very successful in the region, but it’s a part of the world that isn’t interested in Euro IV. Because we operate from a position of starting with a base engine and then refining it for different markets by varying the after-treatment approach, we can be both competitive and subsequently very successful. It’s not a case of different products for different markets, but different after-treatments for different markets.
“It’s also important to remember that many highly significant countries are following the lead of either the EPA or the EU with regards to their own emissions protocols. China and Brazil are both looking to adopt Euro III in the future. Japan still seems to be domestically-orientated, but they are now very much the exception.”
This apparent homogenisation of emissions legislation reflects an agreement struck last year between the OEMs to pursue a common global protocol. Renschler approves of this move, but warns of the complexities inherent in such a pursuit.
“It is the right move, but there are a number of questions as to how it may be implemented. Not only are there different standards in place, there are differing test cycles as well.
“This process needs to be approached on a step-by-step basis, and all three major regions will have to be prepared to compromise. It has to be a common approach with a common goal.”
If this shift towards a global consensus does play out, the existing value calculations are sure to change. Renschler’s view of the value chain over the next decade reflects this.
“I think that we have to start looking in terms of a whole value chain,” he says. “NAFTA-based OEMs will have to continue their adoption of a verticalised approach, because there is huge value in major components. That’s not to say that we will see complete verticalisation with the OEs controlling every component – that would not be possible.
“But that leads to a second question – one of critical mass. How big do you have to be to justify the in-house manufacture of major components? In our case, for example, we can generate sufficient engine volumes in both the heavy and medium duty segments. Other OEMs may well find themselves having to co-operate in order to achieve these volumes.”
Renschler is also determined to look for value beyond the product itself: “Aftersales is another area of potentially high value growth,” he explains. “We’re certainly interested in a bit more control here, and I think that this is a trend that will develop.”
If volume is still key to global success, then does not the development of an external Powertrain business such as that trialled during the late 1990’s begin to make sense once again? “Could be, could be not,” answers Renschler with the rider that this is not information he’s going to share at this meeting. He does, however, point to one of the key successes that came about as a result of DaimlerChrysler’s foray into external business – namely the effective verticalisation of Freightliner.
“Powertrain was a very good idea at the time,” he explains. “One of the key aims of the exercise was to increase internal volumes at Freightliner – and, as we now have 60 per cent of the heavy duty, and 45 per cent of the medium duty engine business there, you have to accept that Powertrain achieved a great deal.”
But does this not create a new set of problems? Demand spikes pre both Euro IV and EPA 07 will require very careful capacity management, and by taking Freightliner business in-house, does this not mean that DaimlerChrysler is now exposed to even more market vagaries than it might otherwise have been?
“Our biggest task involves overcoming the fact that we operate in a highly cyclical business,” he replies. “This isn’t just as a result of legislation, but simple economics. If the economy is down, so is the demand for transport, and so the demand for trucks.
“Flexibility is everything. Recent
history shows that the US market can cycle +/- 40 per cent, and the EU +/- 20 per cent. Take the US market at present; Class 8 demand is still strong, but 6 and 7 is dropping. We adjusted our production immediately. In simple terms, if there is no market, don’t try and buy it. It will come back to you.”
And his confidence in this approach? “I believe that Freightliner will go through the next downturn without going into the red. It’s very easy to make money when business is good.”
Andreas Renschler is in charge of the world’s biggest truck manufacturer during a period of huge potential changes. How far does he look ahead? “In detail, three years, and, from a broader perspective, a decade.” In a business that can, seemingly, change wholesale from one day to the next, this is a long-term view. In practice, it is a long-term view into completely uncharted waters.
And so, what is on this as yet unseen horizon; where will we be in ten years time? “The biggest and most profitable truck manufacturer on earth.” Biggest or most profitable first? “With a clarity of vision belying the ten year view comes a very simple answer: “Profit always comes first.”
Oliver Dixon
ANDREAS RENSCHLER
Board of Management DaimlerChrysler
Commercial Vehicles
Andreas Renschler has been a member of the Board of Management of DaimlerChrysler AG since October 1, 2004 and is responsible for the Commercial Vehicles Division.
Renschler was born on March 29, 1958 in Stuttgart, Germany. After obtaining the Fachhochschulreife (Technical College entrance examination), he studied Economic Engineering and graduated from Technical College Esslingen (1979 to 1983). From 1984 to 1987, he studied at Eberhard-Karls-University where he obtained an MBA.
In 1988 he joined the then Daimler-Benz AG at Organization and Data Processing department.
Previous positions in the company:
- Executive Vice President MCG Business Unit smart, Head of Business Unit smart gmbh, 10/1999
- Senior Vice President, Executive Management Development, DaimlerChrysler AG, 01/1999
- Vice President, President and CEO, MBUSI Tuscaloosa/USA, 1997
- President and CEO, MBUSI Tuscaloosa/USA, 1996
- Project leader Multiple Purpose Vehicle (MPV), MBAG Headquarters, 04/1993
- Executive Assistant to the Chairman of the BoM, MBAG Headquarters, 01/1993
- Executive Assistant to the Deputy Chairman of the BoM, MBAG Headquarters, 1992
- Corporate Planning, MBAG Headquarters, 1991
- Office of Corporate Secretary, MBAG Headquarters, 1989
- Organization and Data Processing, DBAG Sindelfingen plant, 1988