The World's Truck Manufacturers (2006) PDF

The Worlds Truck Manufacturers
A strategic review of
finance and operations
9th Edition (2006)
An AWResearcher publication published by Synesis Media

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THE AUTHOR
Jonathan Storey has worked in the motor industry for more than 15 years. Beginning as a financial analyst for Ford
Motor Company, he later moved into the consultancy sector, providing research, analysis and forecasting services to
vehicle manufacturers, suppliers and regulatory authorities. He is editor of Automotive World's Automotive Quarterly
Review and the sister publication The Worlds Car Manufacturers 9th Edition.
Contact:
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Acknowledgements
A large proportion of Jonathan's work is carried out in partnership with Polk-Marketing Systems GmbH, which
supplied much of the information for this report. Marketing Systems has provided planning and forecasting services to
the automotive industry for more than 25 years. Beginning with database and information systems, the company has
expanded to provide a full range of forecasting and consultancy services.
Marketing Systems has its European headquarters in Essen, Germany, and offices in all the world's major vehicle mar-
kets. Recognising the increasingly global nature of the business, Marketing Systems has formed a partnership with The
Polk Company of North America. The partnership's combined databases support the global information needs of the
motor industry and are used regularly by all the industry's principal companies. The comprehensive and ever-expanding
databases are maintained and developed by more than 1,600 professionals worldwide.
Contact details: Polk-Marketing Systems GmbH - Tel: +49 20 54 9333 00. Fax: +49 20 54 9333 12.
The author would like to express his thanks to all vehicle manufacturers that provided information for this report.
ISBN 1 84083 140 5
This work may not be photocopied or otherwise reproduced within the terms of any licence granted by the Copyright
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This Management Report may not be reproduced in any form or for any purpose without the prior knowledge and con-
sent of the publisher.
The views expressed in this report are not necessarily those of the publisher. While information, advice or comment is
believed to be correct at the time of going to press, the publisher cannot accept any responsibility for its completeness
or accuracy.
Printed and bound in Great Britain by IKON Office Solutions, London Document Services, 37-42 Compton Street,
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LIST OF CONTENTS
List of contents ..........................................................................................................................................................iii
List of figures .............................................................................................................................................................iv
Preface ........................................................................................................................................................................vii
Chapter 1: The global truck industry............................................................................................................1
Chapter 2: Truck demand in western Europe ..........................................................................................10
Chapter 3: DaimlerChrysler CV division...................................................................................................23
Chapter 4: Hino Motors .................................................................................................................................37
Chapter 5: Isuzu Motors.................................................................................................................................46
Chapter 6: Iveco ...............................................................................................................................................53
Chapter 7: MAN Nutzfahrzeuge ..................................................................................................................63
Chapter 8: Mitsubishi Fuso Truck & Bus ...................................................................................................73
Chapter 9: Navistar International Corporation........................................................................................74
Chapter 10: Nissan Diesel.................................................................................................................................83
Chapter 11: Paccar .............................................................................................................................................90
Chapter 12: Renault Vhicules Industriels ..................................................................................................99
Chapter 13: Scania............................................................................................................................................101
Chapter 14: Volvo Trucks & Buses ..............................................................................................................109
Chapter 15: Other truckmakers....................................................................................................................124
Appendix 1: Methodology & exchange rates .............................................................................................138
Appendix 2: Western Europe market data .................................................................................................146
Appendix 3: US market data...........................................................................................................................164
Appendix 4: Financial statistics in euros (spreadsheet on disk)
Appendix 5: Financial statistics in native currency (spreadsheet on disk)
Appendix 6: Assembly plant data (spreadsheet on disk)
Appendix 7: Miscellaneous data (spreadsheet on disk)
Appendix 8: Exchange rates (spreadsheet on disk)
The World's Truck Manufacturers - an operating & financial review, 2006 edition
LIST OF FIGURES
Figure 1 : New truck sales worldwide by region, 1997-2005 1
Figure 2 : Aggregate unit sales & operating profit of Europe's major truckmakers (1)
3
Figure 3 : Revenue of the major truckmakers, 2004 4
Figure 4 : Unit revenue of the major truckmakers, 2004 5
Figure 5 : Average operating margins of the major truckmakers, 2001 to (estimated) 2005 (1) 6
Figure 6 : Average operating margins of the major truckmakers, 1996 to (estimated) 2005 (1)
6
Figure 7 : Truck production by manufacturer, 2004 8
Figure 8 : Quarterly truck & bus reg's - western Europe 11
Figure 9 : New truck & bus reg's in western Europe 12
Figure 10 : Truck & bus demand in western Europe (1982-2009) 13
Figure 11 : Shares of West European truck market (%) 14
Figure 12 : The fundamentals of truck demand 16
Figure 13 : Freight & GDP growth in western Europe (1970-2030) 17
Figure 14 : EU freight by mode 18
Figure 15 : EU road tractor parc (1970-2004) 20
Figure 16 : EU Emission Standards for HD Diesel Engines 21
Figure 17 : Latest results - DC 24
Figure 18 : DC CVs revenue & operating profit trend 25
Figure 19 : DC revenue by division 27
Figure 20 : DC commercial vehicle sales by market 31
Figure 21 : DC market shares, western Europe (%) 32
Figure 22 : DC European CV range (>3.5t) 33
Figure 23 : Latest results - Hino 38
Figure 24 : Hino revenue & operating profit trend 39
Figure 25 : Hino net income trend 39
Figure 26 : Hino sales 42
Figure 27 : Latest results - Isuzu 47
Figure 28 : Isuzu revenue & operating profit trend 48
Figure 29 : Isuzu net profit trend 48
Figure 30 : Isuzu unit sales by region 51
Figure 31 : Latest results - Fiat Group 54
Figure 32 : Iveco revenue & operating profit trend 55
Figure 33 : Iveco net income trend 55
Figure 34 : Fiat Group revenue by division (%) 56
Figure 35 : Iveco unit sales by market 57
Figure 36 : Iveco's share of W. European truck markets 58
Figure 37 : Iveco's product range 60
Figure 38 : Latest results - MAN Nutzfahrzeuge 64
Figure 39 : MAN Nutzfahrzeuge revenue & operating profit trend 65
Figure 40 : MAN Nutzfahrzeuge net profit trend 65
Figure 41 : MAN Group revenue by division 66
Figure 42 : MAN Nutzfahrzeuge unit sales: 67
Figure 43 : MAN market shares, western Europe (%) 68
Figure 44 : MAN's product range 69
Figure 45 : Latest results - Navistar 75
Figure 46 : Navistar revenue & operating profit trend 76
Figure 47 : Navistar net profit trend 76
Figure 48 : Navistar revenue & profit contribution by division 78
Figure 49 : Navistar unit sales 80
Figure 50 : Latest results - Nissan Diesel 84
Figure 51 : Nissan Diesel (unconsolidated) revenue & operating profit trend 85
Figure 52 : Nissan Diesel (unconsolidated) net profit trend 85
Figure 53 : Nissan Diesel revenue by division (%) 86
Figure 54 : Nissan Diesel, unit sales 88
Figure 55 : Latest results - Paccar 91
Figure 56 Paccar (Manufacturing) revenue & operating profit trend 92
Figure 57 : Paccar net profit trend 92
Figure 58 : Paccar revenue & profit by division 93
Figure 59 : Paccar's share of W. European truck market (%) 95
Figure 60 : Daf's product range 96
Figure 61 : Latest results - Scania 102
Figure 62 : Scania revenue & operating profit trend 103
Figure 63 : Scania net profit trend 103
Figure 64 : Scania revenue by division (%) 104
Figure 65 : Scania unit sales by market (trucks & buses) 105
Figure 66 : Scania European market shares (%) 106
Figure 67 : Scania product range 106
Figure 68 : Latest results - Volvo 110
Figure 69 : Volvo truck & bus revenue & operating profit trend 111
Figure 70 : Volvo Group revenue by division 112
Figure 71 : Volvo group truck sales by market 113
Figure 72 : Renault brand share of W. European truck market (%) 114
Figure 73 : Volvo brand share of W. European truck market (%) 115
Figure 74 : Volvo group share of W. European truck market (%) 116
Figure 75 : Volvo's European product range 118
Figure 76 : RVI's European product range 118
Figure 77 : Spreadsheet structure 138
Figure 78 : Spreadsheet structure 139
Figure 79 : Exchange rates - units of currency per euro 144
Figure 80 : Value of export earnings in foreign currency 145
Figure 81 : New truck & bus registrations, Austria 146
Figure 82 : New truck market shares, Austria (%) 147
Figure 83 : New truck & bus registrations, Belgium & Luxembourg 148
Figure 84 : New truck market shares, Belgium & Luxembourg (%) 149
Figure 85 : New truck & bus registrations, France 150
Figure 86 : New truck market shares, France (%) 151
Figure 87 : New truck & bus registrations, Germany 152
Figure 88 : New truck market shares, Germany (%) 153
Figure 89 : New truck & bus registrations, Italy 154
Figure 90 : New truck market shares, Italy (%) 155
Figure 91 : New truck & bus registrations, Netherlands 156
Figure 92 : New truck market shares, Netherlands (%) 157
Figure 93 : New truck & bus registrations, Portugal 158
Figure 94 : New truck market shares, Portugal (%) 159
Figure 95 : New truck & bus registrations, Spain 160
Figure 96 : New truck market shares, Spain (%) 161
Figure 97 : New truck & bus registrations, UK 162
Figure 98 : New truck market shares, UK (%) 163
Figure 99 : US truck sales by weight class 164
Figure 100 : US weight classes 164
Figure 101 : US truck sales by weight class & manufacturer 165
Figure 102 : US manufacturer shares by weight class 166
- vii -
PREFACE
About this report

The primary objective of the report is to provide comprehensive and consistent information on the
financial and operating performances of the worlds major truck producers. This information is
complemented by analysis and commentary, which highlight the pertinent aspects of the wealth of
data included, and provide a guide to some of the pitfalls encountered when interpreting the data.
The backbone of the report is the appended database of financial statistics and performance ratios
covering the worlds major truck manufacturers and their subsidiaries from 1983 onwards. This
comprehensive database is designed to present information in a clear and consistent format, to enable
users to analyse and compare the operating performances of a wide range of automotive companies
over a statistically significant period.
I hope you will find the report meets my aims and your expectations.
Jonathan Storey
-1-
CHAPTER 1: THE GLOBAL TRUCK INDUSTRY

In Nafta the cyclical upturn which began in
GLOBAL DEMAND 2003 gathered momentum in 2004 and sales of
Class 4-8 trucks rose by 29% to 516,000 units.
2004
The increase was led by the Class-8 sector
In 2004 global sales of trucks in the 6t-plus which grew by 43% to 203,000 units.
GVW category soared by 21% to 1.98m units.
The increase reflected growing demand in all The demand cycle in western Europe often
major regions of the world, led by Asia and appears to lag that of Nafta by about one year.
Nafta. This was certainly the case in the recent
downturn which western Europe entered one
In unit terms, the largest regional increase year after Nafta and emerged from one year
occurred in Asia, where truck sales rose by later. Thus 2004 marked the first year of a
130,000 units to 790,000 units, as sales in China cyclical upturn with a 9.2% rise to 313,000
recovered strongly to 504,000 units having units.
fallen slightly the previous year.
Figure 1: New truck sales worldwide by region, 1997-2005
Re gion 1997 1998 1999 2000 2001 2002 2003 2004 2005 (e ) 2006 (f)
(000s) (000s) (000s) (000s) (000s) (000s) (000s) (000s) (000s) (000s)
Western Europe 248.2 299.0 335.0 345.3 332.0 300.4 286.8 313.2 326.7 332.9
Increase / (Decrease) % (2.4) 20.5 12.0 3.1 (3.9) (9.5) (4.5) 9.2 4.3 1.9
Eastern Europe 78.9 66.4 59.7 71.5 74.6 80.5 88.1 104.6 113.7 119.2
Increase / (Decrease) % (1.6) (15.8) (10.1) 19.8 4.3 7.9 9.4 18.7 8.7 4.8
Naf ta 427.5 484.4 587.3 532.9 415.2 386.1 399.4 515.9 609.3 630.0
Increase / (Decrease) % 7.8 13.3 21.2 (9.3) (22.1) (7.0) 3.5 29.2 18.1 3.4
A sia 513.3 376.4 382.1 438.2 509.5 621.0 661.0 790.0 822.0 836.0
Increase / (Decrease) % (15.7) (26.7) 1.5 14.7 16.3 21.9 6.4 19.5 4.1 1.7
Latin A merica 76.0 74.5 66.1 82.4 76.8 88.2 93.3 117.3 115.2 108.2
Increase / (Decrease) % 18.8 (2.0) (11.3) 24.7 (6.8) 14.9 5.8 25.7 (1.8) (6.1)
Oceania 17.6 19.2 21.9 22.4 21.5 26.7 29.6 36.2 38.7 35.4
Increase / (Decrease) % 6.8 9.6 13.8 2.3 (4.1) 24.3 10.9 22.2 6.8 (8.5)
Middle East 63.7 54.4 47.4 54.6 56.0 49.0 57.1 77.2 82.3 81.1
Increase / (Decrease) % 51.7 (14.6) (12.9) 15.2 2.6 (12.5) 16.5 35.2 6.6 (1.5)
A f rica 10.6 9.6 12.2 13.7 14.7 15.7 18.3 22.8 25.6 21.9
Increase / (Decrease) % (12.4) (9.4) 27.5 12.2 7.1 6.9 16.7 24.5 12.4 (14.7)
World 1,435.8 1,383.9 1,511.7 1,561.0 1,500.2 1,567.6 1,633.7 1,977.2 2,133.6 2,164.7
Increase / (Decrease) % (2.6) (3.6) 9.2 3.3 (3.9) 4.5 4.2 21.0 7.9 1.5
Sources: Polk-Marketing Systems, OEMs and other, including estimates
-2-
2005 UNIT SALES & OPERATING PROFIT

Global demand in 2005 is estimated to have The data presented in Figure 2 show the
risen at a more moderate rate of 7.9% though aggregate operating profit of five European
this is still a substantial increase by historical truckmakers: Iveco, MAN, RVI (subsumed
standards. within Volvo from 2001), Scania and Volvo.
Profit is plotted against the aggregate unit sales
More than half the 156,000 unit increase was (worldwide) for those companies since 1987.
attributable to Nafta, as demand rose for the
third of what we expect to be a four year Data for DaimlerChrysler's CV division is not
cyclical upturn. The US Class 8 market rose by shown due to the lack of a suitable data series
24% to 253,000 units. (see DC discussion). The unit sales and profit
data for Iveco and RVI includes the
As expected, demand in western Europe grew contribution from sales of vehicles under 6t,
for the second year, although the region's just 4,000-5,000 units in RVI's case but 80-
weaker-than-expected economic performance 90,000 units at Iveco.
meant that the growth was weaker than the
previous year. The chart shows the industry's profit reaching
its first cyclical peak of 1.5bn in 1988 before
Demand in Asia is estimated to have risen by the Europe-wide recession of the early nineties
4.1% to 790,000 units in 2005 as mild declines caused sales and profits to fall, reaching a nadir
in several markets, including China and Japan, in 1993 when an aggregate loss of (50)m was
were offset by growth in India and elsewhere. recorded.
Forecast The European industry's profit rose to a fresh

In 2006 we expect the pattern of world truck peak of 1.7bn in 1995, helped by strong
demand to be fairly well balanced with half of demand in North and South America. Unit sales
the eight regions shown in Figure 1 seeing an declined by 7% in 1996, but aggregate profit
increase and half a decrease. fell more sharply, plunging 57% due to the
intense price competition faced by all the
Growth in the West European market is truckmakers.
expected to remain in single digits in 2006, due
to the fragility of economic growth in Europe's Over the four years to 2000 the industry's profit
major economies and the relatively gentle grew at an average rate of 27% to a new peak of
downturn from 2001-2003. We are expecting 1.86bn as sales climbed to a record 484,000
the introduction of new emission standards vehicles, 34% above the 1995 figure.
during the year to have a relatively minor effect
The 2001 downturn caused profits to plunge by
on demand.
84%. Despite a further drop in sales in 2002 the
We expect the North American market to profit figure increased. This was an unusual
continue its cyclical upturn during the first part result, as on every other occasion when sales
of 2006 hitting a new peak before demand is dropped, operating profit also fell.
pulled down by the new emission regulations
Aggregate sales have increased each year since
in 2007.
2002, reaching an estimated new peak of
In Asia we are forecasting mild growth during 512,000 units in 2005. The 2005 figure
2006. In China we are expecting a continuation represents an increase of nearly 50% over the
of the trend towards purchasing larger trucks 1989 peak sales of 347,000 units.
while demand for light-medium trucks
stabilises or declines. A similar pattern is
expected in India.
-3-
The pattern of rising sales over the past three During those twelve years a 1% rise in unit
years has been clearly associated with a rise in sales was associated with an average rise of
aggregate operating profit, which reached an 94m in operating profit, though this result is
estimated peak of nearly 3bn in 2005. heavily influenced by the sharp profit rise in
2003. Excluding this year, a 1% rise in unit sales
Volvo, boosted by the strength of the US Class- was associated with an average rise of 44m.
8 market) played a major part in this increase.
In 2005 Volvo accounted for just over 50% of In the seven years of falling sales operating
the estimated aggregate profit compared with profit also declined in all but one year - 2002.
an average of 29% over the previous three During the other six years a 1% fall in sales was
years. associated with an average fall in operating
profit of 88m.
It can be seen that over the period 1987-2005,
the twelve years of rising sales led to an
increase in operating profit on all but one
occasion - 1989.
Figure 2: Aggregate unit sales & operating profit of Europe's major truckmakers (1)
3,000
500 Unit s a le s Op. P ro fit
2,500
400
2,000
Op. profit ( m)
Unit sales (000s)
300 1,500
1,000
200
500
100
0
0 -500
87 89 91 93 95 97 99 2001 2003 2005
Y ear 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 0 5 ( e)
U ni t S al es (00 0s) 28 5.1 2 53.0 3 0 0.7 36 0.7 33 4.9 3 57.1 4 15.8 44 3 .2 4 84 .1 44 2.8 4 33 .3 4 3 6.3 48 4 .3 511.8
C hang e (%) (7)% (11)% 19 % 20 % (7)% 7% 16% 7% 9% (9 )% (2)% 1% 11% 6%
O p ' g P r o f i t (
m) 183 .3 (49 .8) 1,08 9 .2 1,714 .8 73 1.4 9 43 .1 1,3 97.1 1,6 32 .7 1,86 5.1 29 1.0 744 .3 1,19 0.1 2 ,38 9 .8 2,9 90 .0
C hang e (%) (6 6)% (12 7)% N/ A 57% (57)% 29 % 4 8% 17% 14 % (84 )% 156 % 6 0% 10 1% 2 5%
-4-
REVENUE The Japanese truck producers have never been

a significant force outside Japan and some Asian
The revenue data for the latest financial years
markets. This mainly reflects the significant
of the major truck-making groups is shown
product differences that have traditionally
below.
existed between Japan, North America and
We have attempted to show the results for the western Europe but also reflects poor strategic
truck (6t-plus) and heavy bus divisions only, planning by company managers. The slump in
but inevitably the figures are not all based on truck demand within Japan and other Asian
consistent criteria due to different levels of markets at the end of the nineties has clearly
disclosure. shown the risk of such a narrow sales focus, as
the industry suffered aggregate net losses in
However, the dominance of the European each of the three years to March 2001 and the
producers is clear, occupying four of the top Japanese truckmakers have all had to negotiate
five places in revenue terms, with DC and alliances with other producers from positions of
Volvo (including RVI) substantially ahead of weakness.
third-place Paccar.
Figure 3: Revenue of the major truckmakers, 2004
Ashok Leyland
Tata
Nissan Diesel
Iveco Truck (e)
Isuzu med/heavy (e)
Navistar
Hino Trucks
Scania
MAN
Paccar
Volvo
DC Trucks (e)
0 5,000 10,000 15,000 20,000 25,000

mils
-5-
The light-medium trucks primarily sold by

UNIT REVENUE these two producers and their lower technology
Looking at average unit revenue is a proxy for levels explains the low average unit revenues
the different product profiles of the shown.
truckmakers.
It is worth stressing that this is not a qualitative
Unsurprisingly it shows the manufacturers measure, under which a company with high
primarily engaged in heavy truck production, unit revenue can be considered better than one
such as Scania and MAN, as receiving the at the other end of the scale.
largest unit revenues.
It is more a reflection of the different sectors in
When RVI began being included in the Volvo which the truckmakers operate and, to some
data in 2001 it lowered the Swedish firms extent, highlights which are a company's key
average unit revenue to 84,000 from 109,000 competitors.
the previous year.
It should also be pointed out that exchange rate
In this year's edition for the first time we are changes alter the picture.
including data upon India's leading
truckmakers, Ashok Leyland and Tata.
Figure 4: Unit revenue of the major truckmakers, 2004
Tata
Ashok Leyland
Iveco Truck (e)
Navistar
Hino Trucks
DC Trucks (e)
Isuzu med/heavy (e)
Nissan Diesel
Paccar
Volvo
MAN
Scania
0 20,000 40,000 60,000 80,000 100,000 120,000

Eur / unit
-6-
Figure 5: Average operating margins of the major truckmakers, 2001 to (estimated) 2005 (1)
RVI
Navistar
DC CVs
MFTB
Iveco
Hino
MAN
Volvo Truck
Isuzu
Nissan D
Ashok Ley
Paccar
Scania
Tata
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Operating margin
(1) RVI reflects five years to 2000
Figure 6: Average operating margins of the major truckmakers, 1996 to (estimated) 2005 (1)
RVI
Hino
Nissan D
Isuzu
DC CVs
Volvo Truck
Iveco
Navistar
MAN
Ashok Ley
Tata
Paccar
Scania
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Operating margin
(1) RVI reflects ten years to 2000, Ashok Leyland is nine years to 2005, Tata is seven years to 2005
-7-
A margin of 5% is probably the lowest target

AVERAGE OPERATING MARGINS any truck producer is likely to set itself as a
As Figure 2 showed, the European truckmakers long term cyclical average.
benefited from four years of rising sales and
Over a ten year period the same four companies
rising profits from 1996 to 2000. Following a
(though see footnotes on Ashok Leyland and
sharp drop in profit during 2001 there was a
Tata) achieve margins in excess of 5%. MAN is
recovery in 2002, 2003, 2004 and (expected)
in fourth place at 4.1%
2005.
It should be noted that the profit figures used in
The US producers similarly benefited from a
the charts are as reported by the companies
sales boom in the late 1990s, though their time
concerned and in some cases include the profit
of plenty lasted only three years as US truck
contribution from non-truck areas of the
demand began turning down early in 2000.
businesses such as light commercial vehicles
Consequently both Navistar and Paccar and even passenger cars or SUVs in the case of
reported lower earnings for 2000 and again in Isuzu. Please see the individual manufacturer
2001 when Navistar slipped to an operating and discussions for more details.
net loss. Navistar's loss worsened in 2002 but
Previous editions of this report have been
Paccar increased its profit. The performance of
strongly critical of the Japanese truckmakers. In
both companies improved strongly in the
aggregate they reported an average operating
following three years.
margin of just 1.4% over the fourteen years to
In a business as markedly cyclical as the truck 1995 - the Japanese truck market's last cyclical
industry, it is a company's ability to remain peak.
profitable throughout the demand cycle which
The industry suffered from a combination of
is the real sign of having got the fundamentals
too much support from indulgent (or negligent)
of the business right.
parent companies and too much protection
The performance of the major truckmakers from outside competition.
over the last decade suggest there are few
However, the Japanese truckmakers have seen
which fall into this category. The European and
their profitability improve markedly in the past
North American downturns during 2000-2003
three to four years, helped by a combination of
caused operating losses at DaimlerChrysler's CV
recovering demand in the domestic market and
division, Navistar and Volvo.
restructuring. For example, over the two years
The downturn forced several truckmakers to to March 2005 Isuzu reported operating
implement substantial restructuring margins of nearly 6%.
programmes to, at a minimum, reduce their
Despite this improvement we believe Japan's
cost bases and in some cases to introduce
truckmakers remain too small to compete
significant strategic changes to try and reduce
effectively in the global truck market without
exposure to future downturns.
some form of alliance.
As the preceding charts show, looking over the
It was therefore no surprise to see DC acquiring
past five years all the major truckmakers were,
a majority stake in MFTB and Hino form an
on average, profitable at the operating level.
alliance with Scania - albeit limited in scope.
The top performers, Ashok Leyland, Paccar, We may yet see Nissan Diesel or Isuzu form
Scania and Tata all achieved average margins in fresh alliances in order to remain competitive
excess of 7%, significantly ahead of fifth-placed on a global basis.
Nissan Diesel at 4.2%.
-8-
Figure 7: Truck production by manufacturer, 2004
Sisu 0.5
Roman 0.5
Norinco 1.5
Skoda-Liaz-Tatra 1.7
Askam 2.5
Otoyol 4.1
AIOS 4.3
Temsa 4.4
Otosan 6.1
BMC 8.2
Zil 8.4
Uralaz 8.7
Kamaz 29.2
GM 33.0
VW 34.1
Nissan Diesel 39.5
CNHDTC 44.0
Scania 51.0
Ashok Leyland 54.7
Iveco 59.0
Hyundai 62.6
MAN 63.0
Isuzu 64.0
Ford 73.8
Hino 75.0
Navistar 112.0
Paccar 124.0
Telco 129.0
VGT 171.0
Dongfeng 177.0
China FAW 188.0
DC-Trucks 373.0
0 50 100 150 200 250 300 350

Production (000s)
-9-
INDUSTRY STRUCTURE Merger and acquisition activity is likely to put

at least one other group into this category.
The inadequate rates of return being earned by
many truckmakers have been a major factor in
Isuzu, which has recently become more focused
the last wave of industry consolidation. In the
on trucks, by ceding control of some light-duty
past few years takeovers or partial takeovers
engine operations to GM, is high on the list of
have been announced regarding Daewoo Truck,
possible acquisition candidates. Nissan Diesel
ERF, Hino, Hyundai, Mitsubishi Fuso, RVI,
has also recently undergone some major
Scania, Star and Western Star.
financial surgery, which has reduced its debt
and so made it a more attractive target.
Figure 7 shows thirty-two different truck
producers existing as independent entities in
Previous editions of this report commented that
2004, six of which produced fewer than 2,000
MAN was high on the list of truckmakers likely
units during the year and a further five
to make acquisitions or form alliances and this
produced fewer than 10,000 units.
was proved correct when, towards the end of
2004, MAN and Navistar announced an
Most of these firms are in some way dependent
alliance.
on larger producers, for technology and/or
capital and a proportion can be expected either
Among the European truckmakers, Iveco is
to go out of business or be taken over by larger
now looking the most in need of a major
concerns in the next few years.
alliance or acquisition if it is to remain
competitive against its major rivals, nearly all of
At the other end of the scale it looks likely that
whom have recently expanded.
the global truck industry will in future be
dominated by between eight and ten producer
Last year's edition of this report commented
groups, each with an annual output in excess of
that it would not be surprising to hear Iveco
100,000 units. On the basis of 2004's results DC,
making a major announcement during 2005
Volvo, Dongfeng, FAW, Tata, Paccar and
and at the end of the year it announced two
Navistar are already above this threshold.
new alliances with Chinese manufacturers.
However, the company still looks in need of an
DCs dominance of the global industry was
alliance in its more traditional markets.
boosted further by its purchase, during 2004, of
an additional stake in MFTB taking its holding
in the firm to 65%. However, one of DC's other
Asian alliances, that with Hyundai, unravelled
during 2004 (see DC discussion).
- 10 -
CHAPTER 2: TRUCK DEMAND IN WESTERN EUROPE

Within the major markets the pattern of
NEW REGISTRATIONS - HISTORY demand was mixed. A few years ago we
wondered whether the advent of the single
2004
market would bring greater homogeneity to the
New truck registrations in western Europe rose pattern of demand in Europe. The answer for
by 8.2% in 2004 to 352,600 units. The increase the moment is firmly negative, partly due to
brought to an end the three year cyclical different macro-economic conditions but also
downturn which began in 2001 following due to unique micro-factors in the different
record truck demand in the four years to 2000. markets.
The 2004 new registration figure was within

2005
2.6% of the first forecast for 2004 which we
published in 2000. It was within 0.4% (1,400 In 2005 new truck registrations in the region
units) of our October 2002 forecast. rose by about 6% (some data still at provisional
status) and bus demand rose by about 1.7%.
The 3-year downturn took the West European
truck market down by just 15% from its 2000 This was in line with the forecast in last year's
level, a mild decline by historical standards and edition of this report and reflects continuing
far less severe than the drop in North American strong demand for road freight despite slower
truck sales which fell by 12%, 24% and 11% in than expected economic growth in the region.
2000, 2001 and 2002. In the US heavy (Class-8)
market the decline was sharper still, with a Sectoral demand
drop of over 50% from 1999 to 2001. The sub-16t sector grew 4.8% to 117,000 units
in 2004 following 4 years of decline. It rose a
The relatively mild decline in western Europe further 4.9% to 122,000 units in 2005 but
mainly reflects the asynchronous nature of the remains significantly below its 1991 peak of
demand cycles within individual markets, with 143,000 units.
demand during 2003 rising in five of the market
regions covered and falling in six. The 16t-plus sector rose by 9.5% to 235,000
units in 2004 and 7% to 251,000 units in 2005,
The flipside of this mild downturn is that the slightly exceeding its 2000 peak of 250,000
cyclical upturn. is also likely to be fairly gentle. units.
There was little variation in the quarterly The road tractor segment has increased most,
pattern of new registrations during 2004, with rapidly, growing by 12.7% in 2004 and a
demand in each quarter rising above year-ago further 7.4% in 2005 to 138,709 units.
levels by 7-11%. The sharpest increase of 11%
occurred in Q4-2004.
However, towards the end of the year a

number of manufacturers were making less
positive comments about their order books and
these comments form part of the basis for our
forecast that demand will increase more slowly
in 2005.
- 11 -
units
Quarterly truck & bus reg's - western Europe
110,000
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
2002 2003 2004 2005 2006
10,000
0
Q1 Q2 Q3 Q4
Figure 8: Quarterly truck & bus reg's - western Europe

The euro area lacks resilience against adverse
ECONOMIC INDICATORS shocks amid slow trend growth. Most analysts
The 2005 GDP growth forecasts for most and bodies such as the OECD urge the Euroland
economies in western Europe were governments to make structural changes such
downgraded as the year progressed. as completing the European internal market,
boosting labour market performance and
The recovery in Euroland lost momentum since encouraging innovation.
mid-2004, but it should resume in 2006.
Growth is estimated to have fallen from 2.2%
NEW REGISTRATIONS - FORECAST
in 2004 to 1.3% in 2005. It is expected to
recover to around 2% in 2006, with final Higher energy/fuel costs are affecting material
domestic demand firming. prices and truck running costs. This is causing
difficulty for haulage firms and several markets
Unemployment will remain high at over 8.5%.
report an increase in company insolvencies.
Another rise in oil prices or a further
appreciation of the euro could weaken the Nevertheless, the high level of new
recovery further. registrations in the late 1990s, coupled with
used exports to eastern Europe, will keep
replacement demand high.
- 12 -
Some markets are offering incentives for early The fairly flat forecast at aggregate level masks
purchase of Euro-4 engines. We expect the wider variations in national markets. There is
implementation of Euro-4 in October 2006 to no forecast year (2006-09) in which the top-5
have a relatively minor effect on overall HCV markets all move in the same direction.
demand.
Figure 9: New truck & bus reg's in western Europe
New Truck Registrations
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005 2006
A 2-A xle Rigid 3.51 - 6t 42,842 41,184 41,389 37,705 39,097 38,458 40,997 40,507
B 2-A xle Rigid 6.01 - 10t 62,081 61,926 57,617 52,441 46,300 50,220 51,687 53,049
C 2-A xle Rigid 10.01 - 15.9t 31,970 32,973 32,487 29,729 26,022 28,117 29,815 29,949
Truck s be low 16t 136,893 136,083 131,493 119,875 111,419 116,795 122,499 123,505
Change (%) 7.7 -0.6 -3.4 -8.8 -7.1 4.8 4.9 0.8
D 2-A xle rigid 16t + 57,389 52,978 51,288 45,184 42,016 43,430 46,809 49,191
E 3 & 4 A xle Rigid 61,307 66,598 65,561 59,961 57,876 62,258 65,706 65,782
F Artic's 122,268 130,341 125,035 113,124 114,624 129,187 138,709 138,949
Truck s above 16t 240,964 249,917 241,884 218,269 214,516 234,875 251,224 253,922
Change (%) 14.2 3.7 -3.2 -9.8 -1.7 9.5 7.0 1.1
Total truck s 377,857 386,000 373,377 338,144 325,935 351,670 373,723 377,427
Change (%) 11.7 2.2 -3.3 -9.4 -3.6 7.9 6.3 1.0
G Buses 26,731 26,135 26,363 24,989 25,258 26,092 26,454 26,074
Total CV s 404,588 412,135 399,740 363,133 351,193 377,762 400,177 403,501

Change (%) 11.6 1.9 -3.0 -9.2 -3.3 7.6 5.9 0.8
Econom ic Indicators
Road f reight (bn tonne-km) - 1,354.5 1,378.8 1,412.7 1,426.4 1,464.5 1,486.7 1,515.4
Percentage change - 41.1 1.8 2.5 1.0 2.7 1.5 1.9
GDP grow th (%) 2.5 3.5 1.7 1.1 0.9 2.2 1.3 2.0
Real interest rates (%) 2.1 2.0 1.9 1.1 0.3 0.5 0.3 0.9
Consumer price grow th (% 1.3 2.3 2.4 2.2 2.1 1.8 2.0 1.9
Unemployment (%) 9.0 8.3 7.8 8.1 8.4 8.5 8.5 8.3
The key message is that the W. European

market is now in a cyclical upturn. Growth in MARKET SUMMARIES
the next few years is expected to remain in
Germany
single digits, due to the:
2005 was the third year of recovery after a 3-
fragility of economic growth in Europe's major year decline. The rise of 4.6% was below the
economies; West European average and at 102,000 units
relatively gentle downturn from 2001-2003; the HCV market remains well below the 1991
asynchronous pattern of demand in different reunification-boom peak of 132,000 units.
markets.
Further growth in truck demand expected in
2006-08 in a cyclical upswing taking the 16t-
plus sector past its 1991 peak of 59,100 units.
- 13 -
UK Growth remained positive in 2005 with a rise

UK truck demand rose by 4.5% to 58,800 units estimated at 2.7%.
in 2005, taking it to a 16-year peak but the UK
remains one of the few markets not to have A strike by truck drivers in October 2005 won
exceeded its late-1980s peak volumes in either concessions from government over fuel taxes.
the sub-16t or 16t-plus sectors.
Truck demand is expected to stabilise in 2006
Demand is expected to undergo a cyclical then enter a cyclical decline in 2007-08.
downturn in 2006-07, partly prompted by high
fuel prices and higher interest rates. Italy
In Italy new truck registrations rose by an
France estimated 1.1% in 2005 to 39,300 units
In France some 56,000 new trucks were following a 20% fall in 2003 and 10% rise in
registered during 2005, a 17% rise and the 2004. The market remains below its 2002 peak
second year of increase following three years of of 44,400 units which was reached with the
decline. help of the Tremonti Bis law which encouraged
businesses to invest in capital equipment.
Truck demand is expected to continue rising in
2006 and 2007. We expect a small improvement in 2006
though the sub-16t sector will weaken.
Spain
The Spanish HCV market performed strongly
in 2004, rising by 12% to 43,300 units, a new
peak.
Figure 10: Truck & bus demand in western Europe (1982-2009)
New truck & bus reg's, W. Europe (1982-2010)

450
400
350
300
250
Units (000's)
200
150
100
Pre-90 excl. E. Germany
50
All CVs 3.51-16t 16t +
0
82 84 86 88 90 92 94 96 98 2000 2002 2004 2006 2008 2010
- 14 -
Figure 11: Shares of West European truck market (%)
M anufacture r Group 2001 2002 2003 2004 2005 2006
DaimlerChrysler 35.4 34.6 39.8 42.3 40.1 41.8

Iveco 31.3 29.8 28.2 28.3 29.6 28.8
MAN 0.0 0.0 0.0 0.0 0.0 0.0
Paccar 0.0 0.0 0.0 0.0 0.0 0.0
RV I 6.1 6.2 4.9 4.0 4.5 5.0
Scania 0.0 0.0 0.0 0.0 0.0 0.0
V olvo 0.0 0.0 0.0 0.0 0.0 0.0
Other 27.1 29.3 27.1 25.2 25.8 24.4
Total 3.51-6t 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 26.7 32.9 29.9 29.6 28.4 29.6
MAN 16.0 11.4 13.5 13.1 12.8 14.0
Paccar 8.9 9.6 9.5 10.6 11.6 9.7
RV I 8.0 9.0 9.4 8.4 10.6 10.1
Scania 0.0 0.0 0.0 0.0 0.0 0.0
V olvo 1.0 0.7 0.4 0.4 0.3 0.3
Other 9.1 9.1 9.3 6.0 5.5 5.8
Total 6.1-10t 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 23.0 26.4 22.5 24.7 23.8 25.1
MAN 15.1 11.8 15.0 17.6 16.2 17.0
Paccar 6.0 7.2 8.0 8.0 8.2 7.4
RV I 13.7 15.3 14.3 9.1 13.3 13.5
Scania 0.3 0.2 0.3 0.3 0.0 0.0
V olvo 10.0 7.6 7.2 6.4 6.7 6.8
Other 3.2 3.6 3.2 3.8 3.1 2.8
Total 10.1-15.9t 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 27.2 30.3 27.6 28.1 27.7 28.3
MAN 10.8 7.9 9.1 9.5 9.3 10.1
Paccar 5.4 6.0 5.8 6.4 6.9 6.0
RV I 8.8 9.7 9.0 7.0 9.2 9.2
Scania 0.1 0.1 0.1 0.1 0.0 0.0
V olvo 2.9 2.2 1.9 1.6 1.8 1.8
Other 13.3 14.2 14.1 12.2 11.7 11.1
Total 3.5-15.9t 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 11.1 12.5 11.1 11.5 11.3 11.7
MAN 16.2 14.3 14.8 15.1 15.4 16.1
Paccar 11.9 12.4 13.1 12.9 13.4 12.7
RV I 12.3 13.0 11.5 12.1 10.9 10.7
Scania 13.5 13.2 14.0 12.5 13.7 14.1
V olvo 14.4 14.1 15.1 14.5 14.3 13.6
Other 1.5 1.4 1.6 1.6 1.7 1.5
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0
- 15 -
MANs share rose by 0.3pts to 15.1% in 2004,

MARKET SHARES helped by rises across a range of markets with a
particularly strong gain in the Nordic region.
Sub-16t
We are expecting MAN's share to increase to a
In the light to medium sector market leader peak of around 16.5% in 2007.
DC's share of the European market improved
by 2.6pts in 2004 to 35.1%, helped by increases The Volvo brand's share of the heavy sector fell
in France, Germany, Italy, Netherlands and the in 2004 having risen for the first time in six
Nordic markets. We expect this to represent a years during 2003. A further small decline is
peak for DC during the next few years as it expected over the next few years as new
encounters more competition from MAN's new products from competitors make inroads and
models. Please note the data for DC now Volvo's key markets (Nordic region and the
includes sales of Mitsubishi Fuso trucks in all UK) grow more slowly than the W. European
years, so has changed from previous editions. average.
Iveco's market share rose by 0.5pts as expected The share of Volvo and RVI combined
in 2004. This is expected to have dropped remained at 26.6% during 2004 as Volvo's
slightly in 2005, but should remain above losses were offset by RVI's gains.
27.5% through to 2010.
Paccar's market share dipped by 0.2pts to 12.9%
MAN's share of the European sub-16t sector in 2004 following three successive years of
rose in 2003 and 2004 following two years of growth. We estimate the share rose further in
decline. The increase reflects gains in key 2005 as the UK market remained strong but
markets such as Austria, France, Germany and market weighting factors are expected to cause
the UK. The new TG-L and TG-MC ranges a decline in the following years.
should improve MAN's share further from 2006
but we expect a small decline occurred in 2005 Scania saw a sharp fall in its market share in
as the new models were launched. 2004, down 1.5pts to 12.5%. We attribute this
to the disruption of a new model launch and
RVI's market share in the light/medium sector expect Scania's share to recover during the next
fell for the second successive year in 2004 few years.
having risen strongly in 2001 and 2002. The
new Mascott is expected to have improved Over the past few years there has been a
RVI's share during 2005. distinct convergence in the leading brands'
shares of the heavy sector. The former
16t-plus underdogs such as MAN, Paccar and RVI have
DC's share of western Europe's heavy sector made significant gains while the formerly
increased in 2004, following six successive years dominant marques of Mercedes-Benz, Scania
of decline. We are expecting DC's share to and Volvo have tended to lose ground. In 1995
remain close to its 2004 level during the next the seven main brands had an average deviation
few years, helped by the renewals of the from the mean of 2.8pts. By 2002 this had
Actros, Axor and Atego ranges and by the reduced to 1.5pts, widening to 2.0pts in 2004.
forecast growth in the German market being
above the European average.
- 16 -
Figure 12: The fundamentals of truck demand
Freight Demand
Market Share
Rail Road Other
Existing Capacity
Efficiency Gains / Losses
Required Capacity
LONG TERM DEVELOPMENTS

An outline of fundamental drivers of truck demand is shown in Figure 12. This helps to analyse the
historical development of the truck market as well as to examine and quantify the major trends which
will determine future truck demand.
- 17 -
Figure 13: Freight & GDP growth in western Europe (1970-2030)
500
450
400
Real GDP
350 All Freight
Road Freight
Freight & GDP 1970=100
300
250
200
150
100
50
0
1970 1980 1990 2000 2010 2020 2030
Freight demand The aggregate freight transport figure tends to

follow the pattern of GDP growth quite closely
Truck demand is fundamentally driven by the
(see Figure 13) though trade patterns,
levels of demand for goods transport (by all
lifestyle/technology changes and
modes). The choice of mode for goods transport
political/legislative factors can all influence the
in Europe is primarily between road and rail,
relationship.
although the preferred choice for some goods
or some regions will be transport by sea, inland
For example for several decades there has been
waterways, pipeline or air.
a trend towards transporting goods for longer
distances, the establishment of the single
market has boosted this trend which is likely to
lead to higher freight volumes without a
concomitant increase in GDP.
- 18 -
Figure 14: EU freight by mode
3,000
Road Rail Other 11%
2,500
11%
12%
11%
2,000 12%
Billion tonne/km
12% 12%
1,500 14%
13%
16% 18%
1,000
18 24%
30%
500
52% 60% 69% 74% 76% 77% 78%
0
1970 1980 1990 2000 2010 2020 2030
Market share A recent EU report (European Energy &

Transport Trends to 2030) projects that over
Having established the aggregate demand for
the next thirty years the market share of road
freight transport, this is then subdivided to
transport will grow further, reaching 78% by
reflect the market shares of the road haulage
2030.
industry, rail and other transport modes. It is
the road haulage industrys growing market
Road freight transport faces three main
share which has enabled it to grow at rates in
constraints on its growth:
excess of GDP for a number of years.
As shown in Figure 14 the market share The scope for taking market share from rail
achieved by the road transport industry within or waterways has become more limited as
the EU has grown from 52% in 1970 to 71% in there are certain core products which are
2000. This increase occurred over a period likely always to be transported by those
when total freight volumes rose by 93%; thus modes e.g. bulk shipments by primary
industries.
the increasing market share of road transport
led to a 2.6-fold volume increase over this
period.
- 19 -
The competition from railways is being Railways also cannot currently match the
increased by investment in rail networks, speed and flexibility of road transport
principally in response to environmental which has come to be relied upon for just-
concerns. Recently the European Union in-time (JIT) deliveries etc. Despite the
has taken steps to harmonise the wide efforts of the European Commission
range of systems, standards and procedures referred to previously, the rail industries of
that apply in the different member states, the various member states are almost all
in a bid to enhance the attraction of the state-owned, with all the stifling of
international rail freight to freight hauliers. innovation and resistance to change that so
often implies.
Environmental concerns in various
countries are beginning to be translated For example VW has quoted the average
into policies and legislation aimed at speed of its vehicle shipments to European
curbing the increase in road traffic. For dealers and distributors as follows: the
example many countries have bans on average speed of shipments by road was
trucks in certain areas and/or at certain 40kph compared with 16kph for rail
times of day. shipments. For a whole range of time-
critical freight from perishable goods to JIT
Notwithstanding these constraints, transport by
supplies, these relative speeds would mean
road is seen as the only viable option for many
rail transport was not a viable alternative.
businesses. Naturally there are many factors
which each business will need to consider but Existing capacity
there are two fundamental points in favour of Once the level of road haulage demand is
road transport: established, consideration is given to any
changes in the pattern of demand (e.g. increases
The majority of transport by road takes in international traffic and just-in-time
place over relatively short distances. deliveries or the bans on trucks in city centres).
Within the EU, some 64% (by weight) of
goods transported by road are carried less The existing vehicle parc is then analysed for its
than 50km; 85% is carried less than 150km. capacity to meet the demand (including
In 1993 the average length of haul by road segmentation changes and expected efficiency
within the EU was 90km compared with an gains or losses) and the level of new
average of 236km by rail. Railways are not registrations is calculated on the basis of the
realistic substitutes for the short journeys, replacement vehicles and incremental vehicles
typically performed by trucks, except necessary to achieve the required capacity.
within specific niches such as taking coal to
power stations. In the short term, deviations from these long
term sales trends are caused by factors such as
legislative changes, haulage industry
profitability and pricing actions by
manufacturers. As an example Figure 15 shows
the development of the EU tractor parc.
- 20 -
Figure 15: EU road tractor parc (1970-2004)
EU road tractor parc (1970-2004)

1,600
1,400
1,200
1,000
Units (000's)
800
600
400
200
0
70
75
80
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
2000
2001
2002
2003
2004
- 21 -
Figure 16: EU Emission Standards for HD Diesel Engines
Effe ctive
Standard Date CO HC NOx Particulate s Sm ok e
(g/kWh) (g/kWh) (g/kWh) (g/kWh) (m-1)
Euro 1 1992 <85 kW 4.50 1.10 8.00 0.61 -
1992 >85 kW 4.50 1.10 8.00 0.36 -
Euro 2 1996 4.00 1.10 7.00 0.25 -
1998 4.00 1.10 7.00 0.15 -
Euro 3 1999 EEV 's 1.50 0.25 2.00 0.02 0.15
2000 2.10 0.66 5.00 0.1 0.8
Euro 4 2005 1.50 0.46 3.50 0.02 0.5
Euro 5 2008 1.50 0.46 2.00 0.02 0.5
Euro 6 (proj.) 2010-12 1.50 0.46 0.50 0.002 ?
Emissions regulations in Europe Apart from such short term market effects, the
emissions standards are significant in that the
Permissible levels of truck exhaust emissions
costs associated with developing engines to
within the EU have become progressively
comply with tighter and tighter standards in
restricted during the nineties and are scheduled
Europe and worldwide are encouraging several
to become tighter still over the next decade.
producers to enter joint ventures. Examples
The emissions standards are known as Euro 1,
include RVI and MAN, Mercedes-Benz and
Euro 2 etc. and the timetable for compliance is
Detroit Diesel, Iveco and Nissan and Iveco and
shown in Figure 16.
Cummins. Details of these and other joint
The tighter standards are not expected to have a ventures are contained in the manufacturer
significant effect upon long term demand, summaries.
although in the short term we have seen
market distortions associated with the Road haulage industry deregulation
introduction of the Euro 1, Euro 2 and Euro 3 As part of the move to the single European
regulations as buyers in some markets have market ideal of free movement of people, goods
brought forward their purchases to avoid the and services the rules governing the road
higher cost of the vehicles using the cleaner haulage industries of member states are being
technology. This process has also been harmonised and barriers to cross-border
encouraged by manufacturers giving greater competition removed.
discounts to clear their stocks of old technology
vehicles.
- 22 -
The deregulation of Europe's road haulage Germany emerged as the country with the
industry has phased out the previous system highest number of such operations, providing
under which hauliers were not allowed to ply 68.3% of all cabotage services compared to
for hire outside their domestic market other 12.6% in France and 6.9% in Italy for the
than under a restrictive licensing system. period between 1990 and 1998. The statistical
Following the transitional phase, during which breakdown of carriers by nationality reveals
the number of cabotage authorisations that carriers from the Benelux are the most
increased by 30% per year, EU hauliers were successful in cabotage as they are reported to
free to collect or deliver goods anywhere in the perform almost 60% of all cabotage tonne-km
community from July 1, 1998. in the EU, Dutch hauliers leading with a share
of 31.2%. Greek, Spanish and Portuguese
The effect of liberalisation is not only expected vehicles hold a share of just 2%, French carriers
to increase competition and so lower prices, but account for 12.7%, followed in order of
also to increase efficiency by reducing the importance by the Danish (6.7%), the German
number of trucks returning empty after (5.3%), the Swedish (5%), the Italian (3%) and
delivering to other member states. Prior to the the British (3%) hauliers.
deregulation process it was estimated that
around 30% of trucks on cross-border work Deregulation is also likely to provide added
made the return journey with no cargo. As impetus to the restructuring of the European
more efficient operation becomes possible we haulage industry, so that it becomes just that -
expect increasing numbers of hauliers to European - rather than twelve or sixteen
maximise their efficiency by operating heavy largely discrete national industries. Already it is
trucks, particularly artic's. estimated that half of all freight movements (all
modes) in Europe are controlled by just ten
During 2000 the Commission published its companies, but much of their road freight is
second report on cabotage operations within subcontracted to small fleets, sometimes just
the EU over the 1990-1998 period. The report single owner-drivers. A greater concentration
notes that the abolition of quantitative of truck ownership would have adverse
restrictions to access the national road freight implications for the profit margins of truck
markets by non-resident EU carriers did not producers.
lead to any explosion in cabotage activities. In
general, domestic freight services provided by
resident carriers are three hundred times
higher than the tonne-km produced in
cabotage. The share of cabotage in international
freight transport of hauliers increased from
0.2% in 1990 to 1% in 1997 just before
complete liberalisation. Transport freight
services between Member States measured in
tonne-km are seventy times greater than the
current volume of cabotage.
- 23 -
CHAPTER 3: DAIMLERCHRYSLER CV DIVISION

During 2004 DC's other Asian alliance, that
OVERVIEW with Hyundai Motor, unravelled. The plans for
In terms of units produced, DaimlerChrysler DC to acquire a 50% stake in HMC's truck
(DC) is the world's fifth largest carmaker, its division and for joint production of CV engines
largest truckmaker and its largest commercial have been abandoned.
vehicle producer. In 2005 the company sold
The performance of DC's commercial vehicles
824,900 (2004: 712,000) commercial vehicles, of
division is known to have been weak for many
which some 509,000 were trucks.
years although the results have only been
DC is thus unique in being a globally significant disclosed since 1996. During the nine years to
and independent OEM in both the car and 2004 the division made an operating loss in
truck sectors of the industry - not that this has three years and an average operating margin of
done the companys bottom line many favours 3.5% during the six years it was profitable.
so far.
Given the substantial drop in the US heavy
Many other OEMs have competed in both truck market from 1999and the less dramatic
industry sectors over the years but have found downturn in western Europe, it is no surprise
the synergies to be few and failed to achieve that the divisions results were weak. But
critical mass in one or other sector. downturns are a regular and fairly predictable
Consequently, over the past twenty years the feature of the truck industry. All the industry
trend has been for the weaker business to be players know it and they need to gear their
divested. operations around that inescapable fact.
DC has played a major buy-side role in this The CV division is usually one of the DC
process. Various purchases over the years have Groups weaker performers, with an average
endowed it with a portfolio of nine truck and return on net assets (RONA) of 9.0% in the
bus brands, most notably Freightliner, acquired eight years to 2004.
in the 1980s, Sterling, (formerly Ford's North
This average figure is below DC's current
American heavy truck business) acquired in
hurdle rate of 13%. The hurdle rate was
1998 and most recently Mitsubishi Fuso Truck
exceeded in only four of the past eight years. By
& Bus (MFTB) in which DC now has an 85%
contrast the Mercedes-Benz passenger car
stake.
division has generated an average return
The MFTB acquisition was a groundbreaking around 20% over the past eight years.
development in the consolidation of the world's
Previous editions of this report have suggested
truck industry with DC becoming the first
the company should consider the demerger of
western truckmaker to acquire majority control
the CV division. This would conform to the
of a major Asian truckmaker. The acquisition
already mentioned trend for OEMs to focus on
boosted DC's 2004 sales by 118,100 units.
either car or truck production. However, DC's
However, during 2004 MFTB incurred presence in both sectors rarely seems to attract
substantial losses due to the costs and comment by shareholders or industry
ramifications of a massive recall campaign commentators.
which was initiated when it emerged that
MFTB had, for some years, failed to disclose
known vehicle defects to the authorities (see
later discussion).
- 24 -
For several years this report has commented Although there seems little prospect of DC
that there seems little industrial logic in adopting this spin-off strategy in full, the
keeping the car and truck businesses in the company has recently altered its organisational
same portfolio. and reporting structure to make the truck
There are few synergies and there are at least operation more of a discrete entity. The
three reasons for considering spinning off the changes are intended to improve the truck
CV business as an independent unit, preferably unit's focus and responsiveness and as such they
including the Mitsubishi truck business. Such a are to be welcomed.
move would:
improve DCs return on assets;
unlock share value;
narrow the focus of DC's senior management,
which is looking overstretched.
Figure 17: Latest results - DC
DaimlerChrysler
Unit 9M o-05 Q3-05 H1-05 Yr to De c 04 9M o-04 Q3-04 H1-04 Yr to De c 03
Group data Data % ch. Data % ch. Data % ch. Data % ch. Data % ch. Data % ch. Data % ch. Data % ch.
Revenue mils 108,322 3.8 38,155 9 .4 70,167 1.1 142,059 4 .1 104,314 3 .1 34,891 2.3 69,423 3 .4 136,437 (7.4 )
Operating prof it mils 4,137 (16 .7) 1,838 38 .0 2,299 (3 6 .8 ) 5,754 1.2 4,969 51.0 1,332 6.9 3,637 77.9 5,686 (17.0 )
Pre-tax prof it mils 2,636 (15.9 ) 1,263 46 .9 1,373 (3 9 .6 ) 3,571 4 73 .2 3,135 (2 ,2 0 4.0) 860 (164 .6 ) 2,275 92 .3 623 (8 9.5)
Net profit mils 1,780 (7.1) 755 (2 0 .6 ) 1,025 6.1 2,443 4 4 5.3 1,917 (3 00 .5) 951 (157.5) 966 38 .6 448 (9 0.5)
Employees 000's 388.0 0 .5 388.0 0 .5 388.8 1.3 384.7 6 .3 386.2 2.9 386.2 2.9 383.7 3.1 362.1 (1.0 )
Unit s ale s 000's 3,619.6 5.1 1,184.6 9 .6 2,435.0 3.1 4,718.9 8 .3 3,443.1 5.3 1,080.9 2.2 2,362.3 6 .8 4,355.8 (4 .1)
M-Benz car 000's 865.9 (1.4) 310.9 6 .0 555.0 (5.2 ) 1,226.8 0 .8 878.5 (3.9) 293.2 (4 .0 ) 585.3 (3 .9 ) 1,216.6 (1.3 )
Chrysler car 000's 2,142.3 3.9 663.4 11.5 1,478.9 0 .9 2,779.9 5.4 2,061.1 3 .1 594.9 (5.4 ) 1,466.2 7.1 2,638.2 (6.5)
M-Benz CV 000's 611.4 2 1.4 210.4 9.1 401.0 2 9.1 712.2 4 2 .2 503.5 41.4 192.8 56 .4 310.7 3 3 .5 501.0 3 .3
Pe r unit
Revenue 29,927 (1.2) 32,208 (0 .2 ) 28,816 (1.9 ) 30,104 (3.9) 30,296 (2.2) 32,281 0 .1 29,388 (3 .2 ) 31,323 (3.5)
Operating prof it 1,143 (20 .8) 1,552 2 5.9 944 (3 8.7) 1,219 (6.6) 1,443 4 3.4 1,232 4.6 1,540 66 .6 1,305 (13.5)
Pre-tax prof it 728 (20 .0) 1,066 34 .0 564 (4 1.5) 757 4 29 .1 911 (2,09 7.5) 796 (163 .2 ) 963 80 .0 143 (8 9 .0 )
Net profit 492 (11.7) 637 (2 7.6 ) 421 2 .9 518 40 3 .3 557 (2 9 0.4) 880 (156 .3 ) 409 2 9 .7 103 (90 .1)
Pe r e m ploye e
Revenue 279,170 3.4 98,334 8 .8 180,490 (0 .2 ) 369,250 (2.0) 270,107 0 .1 90,346 (0 .6 ) 180,919 0 .3 376,832 (6.5)
Operating prof it 10,662 (17.1) 4,737 3 7.3 5,914 (3 7.6 ) 14,956 (4.8) 12,867 4 6.7 3,449 3.9 9,478 72 .5 15,704 (16 .2 )
Pre-tax prof it 6,794 (16 .3) 3,255 46 .2 3,532 (4 0 .4 ) 9,282 43 9 .4 8,118 (2,14 4.2) 2,227 (16 2 .7) 5,929 8 6 .5 1,721 (8 9 .4 )
Net profit 4,587 (7.6) 1,946 (2 1.0 ) 2,637 4.7 6,350 4 13 .2 4,964 (2 9 4.8) 2,462 (155.9 ) 2,517 34 .4 1,237 (9 0 .4 )
Sales units 9.3 4.6 3.1 9.1 6.3 1.7 12.3 2 .0 8.9 2.3 2.8 (0 .7) 6.2 3 .6 12.0 (3 .1)
Re turn on re ve nue
Operating prof it % 3.8 (0 .9) 4.8 1.0 3.3 (2 .0 ) 4.1 (0 .1) 4.8 1.5 3.8 0.2 5.2 2 .2 4.2 (0.5)
Pre-tax prof it % 2.4 (0 .6) 3.3 0 .8 2.0 (1.3 ) 2.5 2 .1 3.0 3.2 2.5 6.4 3.3 1.5 0.5 (3 .6 )
Net profit % 1.6 (0 .2) 2.0 (0.7) 1.5 0.1 1.7 1.4 1.8 2.8 2.7 7.6 1.4 0 .4 0.3 (2 .9 )
Re ve nue by divis ion

M-Benz car mils 35,374 (3 .8) 12,519 3 .3 22,855 (7.3 ) 49,630 (3.5) 36,772 (4.2) 12,121 (4 .9 ) 24,651 (3 .9 ) 51,446 2.5
Chrysler mils 36,654 (0 .4) 12,889 11.9 23,765 (5.9 ) 49,498 0 .4 36,786 (0.6) 11,520 (7.8 ) 25,266 3.1 49,321 (18 .0 )
M-Benz CV s mils 29,753 2 0 .1 10,592 15.2 19,161 2 3 .0 34,764 2 5.2 24,772 2 7.1 9,197 3 6 .1 15,575 22 .3 27,771 (2 .2 )
Services mils 11,292 9.9 3,913 13 .6 7,379 8 .0 13,939 (0.7) 10,279 (2.9) 3,444 (0 .7) 6,835 (3 .9 ) 14,037 (10 .6 )
Other & intra-group mils (4,751) 10.6 (1,758) 26 .4 (2,993) 3.1 (5,772) (4,295) 1.2 (1,391) 3.0 (2,904) 0 .3 (6,138) (13 .3 )
Op. profit by divis ion

M-Benz car mils (506) (130 .7) 436 43 .4 (942) (170 .2 ) 1,666 (4 6.7) 1,646 (29 .7) 304 (6 1.7) 1,342 (13 .4 ) 3,126 3.5
Chrysler mils 1,106 6.2 310 42 .9 796 (3 .4 ) 1,427 1,041 (2 6 0.4) 217 47.6 824 (20 3.5) (506) (183 .1)
M-Benz CV s mils 1,736 9 4.0 498 2 13 .2 1,238 6 8 .2 1,332 56 .9 895 9 6.3 159 (19 .7) 736 18 5.3 849 (3 47.5)
Services mils 1,121 1.4 408 (1.0 ) 713 2 .9 1,250 0 .8 1,105 6.6 412 4 5.1 693 (8 .0 ) 1,240 (59.5)
Other & intra-group mils 680 14 1.1 186 (2 2.5) 494 1,076 .2 79 (91.9) 282 171.2 240 (2 36 .4 ) 42 (8 5.0 ) 977 92 .3
Note s : (1) Q1 is Jan-Mar, Q2 is A pr-Jun, Q3 is Jul-Sep, Q4 is Oct-Dec (2) % ch is change versus corresponding year-ago data
(3) Full-year data is taken f rom annual report. It may not reconcile to quarterly data due to restatements.
(4) Per Unit & Per Employee data include non-automotive op's
- 25 -
Figure 18: DC CVs revenue & operating profit trend
1,100
Index (Revenue 1983 = 100, Op. Profit 1996 = minus 100)
Revenue () Op. Profit ()

900
700
500
300
100
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
-100
-300
The increase in recurring profit was primarily

RECENT PERFORMANCE due to the turnaround in Chrysler's earnings
and strong growth in the CV division's
2004 results
earnings, partly offset by the substantial
DC had some good news to report for 2004 - a downturn in the Mercedes car division.
return to profit in the Chrysler division and a
strong performance in the CV division - but Net income amounted to 2.4bn, compared
these positive developments were with 448m in 2003. Apart from the rise in
overshadowed by the downturn in the operating profit, the increase was mainly
Mercedes car division which has long been the attributable to the non-recurrence of a 1.96bn
mainstay of the business but is now suffering impairment charge in connection with EADS
the consequences of a drop in the quality of its and a 1.7bn reduction in financial expense.
products.
In the Mercedes car division full year revenue
Group revenue rose by 4.1% to 142.1bn, fell by 3.5% to 49.6bn on unit sales of
mainly due to a 25% rise in the CV division's 1,226,800 vehicles (2003: 1,216,900). The
contribution. At constant exchange rates the decline reflected adverse exchange rates and a
revenue increase would have been 7%. weaker model mix. For model life-cycle
reasons, sales of the Mercedes-Benz brand fell
Operating profit was 5.75bn, up 1.2% from the by 2% but Smarts sales rose by 22% due to the
previous years reported figure of 5.69bn. The launch of the Smart Forfour.
recurring profit of 6.7bn was 30% higher than
the previous year's recurring profit of 5.15bn.
- 26 -
Divisional operating profit was 46.7% lower at During February DC and MMC announced that
1.66bn and the margin slipped from 6.1% to MMC is to compensate DC for the MFTB recall
3.3%. In the fourth quarter alone the division costs. DC is expected to receive 200-250m in
barely broke even, reporting a profit of just cash plus an extra 20% stake in MFTB.
20m.
Jan-Sep 2005
According to DC the deterioration was partly
DC reported a 38% rise in group operating
due to the weaker model mix and exchange-
profit for Q3-2005 as the performances of all its
rate effects, but also due to high launch costs
major divisions improved.
for new products and the costs of the quality
improvement programme at Mercedes-Benz. In However, the weak performance of the
addition it claims the contribution by the Smart Mercedes-Benz car division in the first half of
brand was significantly negative as a result of the year meant that the group results for the
higher marketing expenses and launch costs for first nine months were below the year-ago
the Forfour. figures.
Chrysler's revenue grew by just 0.4% in euro In the commercial vehicle division revenue
terms to 49.5bn though in US dollar terms the over the first nine months was 20% higher at
increase was 10% on sales which rose by 5.4% 29.7bn, boosted by a 21% rise in vehicle sales
to 2,779,900 units. The division's operating to 611,387 units.
profit was 1.43bn compared with a loss of
(506)m in 2003. The turnaround reflects the The division's operating profit grew by 94% to
benefits of Chrysler's restructuring and lower 1.7bn, an operating margin of 5.8%. The profit
average price incentives as new models enter improvement reflected not only higher sales
the market. It also reflects reduced spending on but also a richer sales mix as sales of Class-8
restructuring measures - 145m versus 469m trucks in Nafta rose strongly.
in 2003.
The commercial vehicles division expects its
The CV division saw its full year revenue higher sales to continue into the fourth quarter
increase by 25% to 34.76bn, boosted by a42% and for its full-year earnings to be substantially
rise in vehicle sales to 712,200 units. This figure higher than in 2004.
includes the first-time contribution by MFTB,
which was consolidated from April 2004,
amounting to118,100 units. Excluding MFTB BUSINESS STRUCTURE
the increase in sales was 19% and the revenue There are some common threads to the
increase was 16%. histories of Chryslers and Daimler-Benz
business structures. Both companies tried
The division's operating profit soared by 57% to
diversifying in the late 1970s to mid-1980s and,
1.33bn. This figure includes a non-recurring
prior to the merger, both (to a greater or lesser
charge of 475m relating to the recall campaign
extent) had disposed of their non-automobile
and quality improvement measures at MFTB.
interests to concentrate their resources on the
Excluding this charge the profit would have
core business of making and selling motor
been 1.81bn, a margin of 4.8% compared with
vehicles.
3.1% in 2003. Although this represents a
significant improvement it is still a long way
short of competitors such as Volvo, whose
truck division reported an operating margin of
6.6% in 2003 and Scania, which reported an
11.2% margin.
- 27 -
Figure 19: DC revenue by division
Divis ion 1997 1998 1999 2000 2001 2002 2003 2004 2005(e )
(m) (m) (m) (m) (m) (m) (m) (m) (m)
M-B cars 25,874 30,859 35,592 40,822 44,002 46,796 48,025 46,082 46,000
Share of total (%) 22.0 23.4 23.7 25.1 29.3 31.8 35.2 32.4 30.5
Chrysler car & truck 51,939 56,278 63,666 67,405 62,676 59,716 49,321 49,485 49,500
Share of total (%) 44.2 42.7 42.4 41.5 41.7 40.5 36.1 34.8 32.9
M-B CVs 19,481 22,374 25,480 28,521 27,084 26,905 26,909 32,940 40,300
Share of total (%) 16.6 17.0 17.0 17.6 18.0 18.3 19.7 23.2 26.8
Services 8,888 10,543 10,662 15,322 14,975 13,765 11,997 11,646 12,800
Share of total (%) 7.6 8.0 7.1 9.4 10.0 9.3 8.8 8.2 8.5
Aerospace 7,751 8,722 9,144 5,368 0 0 0 0 0
Share of total (%) 6.6 6.6 6.1 3.3 0.0 0.0 0.0 0.0 0.0
Other 3,639 3,006 5,441 4,946 1,649 186 185 1,906 2,000
Share of total (%) 3.1 2.3 3.6 3.0 1.1 0.1 0.1 1.3 1.3
Total 117,572 131,782 149,985 162,384 150,386 147,368 136,437 142,059 150,600
Chrysler was further down this path than The refocusing of the business continued into
Daimler-Benz, having disposed of many 2000. DaimlerChrysler Aerospace (Dasa) was
businesses during its cash-strapped years. By the largest German aerospace company and a
the time of the merger, 96% of Chryslers major European and international player with
revenue came from the car and truck business, interests in military and civil aircraft,
the remaining 4% coming from financial helicopters, aero-engines, space systems
services. infrastructure, space systems satellites and
defence electronics. During 1999
Daimler-Benz didnt begin to refocus its DaimlerChrysler signed an agreement to merge
activities until Jrgen Schrempp became Dasa with the French company Arospatiale
chairman in 1995. A substantial part of the Matra and the Spanish company Casa, to form
electronics division, AEG, was quickly sold and the European Aeronautic Defence and Space
Daimler-Benz withdrew its financial support Company (EADS). The new company came into
for Fokker, the loss-making Dutch aircraft being in July 2000 and DaimlerChrysler holds a
manufacturer. In 1997, Daimler-Benz ended its 30% stake in EADS. The transaction resulted in
partnership with the French software company a non-recurring gain of $3.3bn in Q3-2000 and
Cap Gemini. In 1998, Daimler-Benz sold the the contribution from EADS is now included in
semiconductor business of Temic, its DC's accounts on an equity basis. In 2004 EADS
electronics subsidiary and in 1999, DC sold contributed 249m to Dc's pre-tax earnings.
most of its stake in debitel AG, a
telecommunications company. At the end of 2000 DC's other non-automotive
divisions included: Adtranz rail systems; the
Temic automotive electronics business and
MTU Diesel Engines. The sale of Adtranz to
Bombardier was announced in 2000 and
completed in May 2001. During 2001 DC sold a
60% stake in its Automotive Electronics
business to Continental AG for 398m. The
remaining 40% was sold in April 2002, bringing
a gain of 215.3m for DC.
- 28 -
The MTU Diesel Engines business was moved As well as disposing of non-core businesses, DC
to the CV division's Off-Highway unit. In has acted to strengthen its principal activities.
September 2005, DC acquired the shares in The merger with Chrysler followed Daimler-
MTU Friedrichshafen GmbH held by the family Benz acquisition of Fords heavy truck division
shareholders, taking its stake to 100%. It then in 1997, renamed as Sterling Trucks. During
initiated an open bidding process for the sale of 2000 DC acquired Western Star, the premium-
the Off-Highway unit and in December 2005 truck manufacturer and full control of Detroit
announced its sale to EQT. DC will receive Diesel, the producer of medium-duty and
about 1bn in cash from the deal. heavy-duty diesel engines for automotive
applications. Previously DC held 21% of
During 2001 DC's services division announced Detroit Diesel's equity.
a plan (completed in 2005) to sell its stake in
Debis Air Finance, one of the world's five DaimlerChryslers Commercial Vehicles
largest airline leasing businesses. The division is Division, the special vehicles manufacturer
to focus its activities on providing automotive American LaFrance was sold to Patriarch
financial services. Partners LLC in December 2005.
In January 2002 DC agreed the sale of two non- On the car side of the business DC made two
core financing units to GE Capital. It sold its major alliances during 2000 with the
commercial real estate financing business and acquisition of a 34% (subsequently raised to
asset-based lending portfolio for $1.2bn, leaving 37%) stake in Mitsubishi Motors Corporation
open the possibility of further disposals of its (MMC) and a 10% stake in Hyundai Motor.
five remaining non-auto financing businesses. Both equity stakes have since been sold (see
below).
At the end of 2003 DC sold its MTU Aero
Engines unit, resulting in a pre-tax gain of MMC / MFTB
1bn.
In March 2000 DC announced plans to acquire
a 34% stake in Mitsubishi Motors (MMC). At
In October 2003 it was announced that
the time MMC was suffering from a heavy debt
ThyssenKrupp Automotive was to take over
burden and the severe downturn in Asian truck
DC's production of steering gear and complete
demand but it was subsequently weakened
steering systems. In a first step, ThyssenKrupp
further when it was discovered during July and
subsequently acquired 60% of Mercedes-Benz
August 2000 that for years, the firm had
Lenkungen GmbH, Dsseldorf. The remaining
fraudulently hidden details of faulty products
40% will be purchased in October 2005 at the
from the authorities. This revelation led to the
earliest. Mercedes-Benz Lenkungen GmbH
recall of some 2.5m vehicles. This further
produces steering systems at three locations in
downturn in MMC's fortunes allowed DC to
Germany and at locations in Poland, Brazil and
negotiate some more favourable terms
the USA. In 2002 the division generated
including a price reduction to 2.2bn, more
revenue of just under 300m and employed
influence on MMC's board and an option to
some 1,600 people worldwide.
increase its stake in MMC after three years
instead of the ten years originally agreed.
- 29 -
At the time of DCs investment Volvo also had Hyundai

a 3.3% stake in MMC and planned to take a In mid-August 2004 DC sold its 10.5% share in
19.9% stake in MFTB (the truck and bus Hyundai Motor (HMC), raising more than
division) when it was spun off as a separate $900m in the sale. The new HMC shareholder
entity. However, DC blocked this plan and in has not yet been revealed. In June 2000, DC
April 2001 paid Volvo 343m for its 3.3% stake paid about $430m for a 10% stake in the
in MMC, taking DC's holding in MMC to company.
37.3%.
Although the two companies have said they
In early 2004 MMC's continuing difficulties led will continue some joint ventures in the
to it requiring a recapitalisation to fund a passenger car sector, the planned joint
restructuring. DC decided not to participate in production of CV engines in Korea has been
the recapitalisation. Its stake subsequently abandoned as has a plan for DC to take a 50%
dropped to 20.7% and it lost management stake in HMC's commercial vehicle business.
control.
The announcement followed several months of
The spinning off of MFTB took place with increasing tension between the two firms. In
effect from January 2003 and DC acquired a our view the various disagreements between
43% stake on March 14, 2003. Wilfried Porth, a the two were symptoms of HMC's rapid
former DC executive, was appointed President recovery after the Asian economic crisis. When
and Chief Executive Officer of MFTB. In March DC bought its stake in 2000 HMC was in a
2004 DC took a further 22% of MFTB taking its much weaker state and very much the junior in
stake to 65% and MFTB became a consolidated the relationship. HMC now sees itself as a rival
subsidiary. to DC in many areas and wants to assert its
independence as it progresses towards its target
The aggregate amount paid by DC for its 65% of being one of the top-5 carmakers in the
controlling interest in MFTB was 1,251m. world by 2010.
MFTB made net profits of 1.5bn (11m) and
17.5bn (130m) in the years to March 2003 DC at least has the consolation of doubling its
and 2004 respectively. money.
During 2003 and 2004 it emerged that like

Organisation
MMC, MFTB was also guilty of concealing
vehicle defects from the authorities. The In January 2006 the organisation of the CV
affected vehicles (about 900,000) had to be division was changed. In future it will focus on
recalled for safety checks and remedial work. commercial trucks as its core business and
operate under the name Truck Group. The Bus
In March 2005 DC and MMC reached a final and Van business will be reported elsewhere.
agreement over the issue. The agreement
mainly entails: a cash payment from MMC to Truck Group will comprise: Trucks
DC; the transfer of MMCs 20% stake in Europe/Latin America (Mercedes-Benz), Trucks
MFTBC to DC (taking DC's stake to 85%); the Nafta (Freightliner, Sterling, Thomas Built
agreement that MMC will continue to maintain Buses), Mitsubishi Fuso Bus and Truck
100% ownership of NedCar; additional co- Corporation, and Truck Product Creation.
operation between MMC and MFTBC in
According to DC the new structure will create
various other areas.
further synergies between its regional truck
units and brands, and allow the Truck Group to
accelerate its profit potential initiative called
Global Excellence.
- 30 -
The financial and operating results of Bus and We expect this to represent a peak for DC
Van operations will be reported in a new during the next few years as it encounters more
segment called Van, Bus, Others. Due to the competition from MAN's new models. Please
commonality of powertrain and components, note the DC data now includes sales of
the Bus business will report to the head of the Mitsubishi Fuso trucks, so has changed from
Truck Group; the Van business to the head of previous editions.
the Mercedes Car Group.
Western Europe market share - 16t-plus trucks
Divisional performance DC's share of western Europe's heavy sector
From its beginning DC has stated that its increased in 2004, following six successive years
principal performance measure is to be return of decline. We are expecting DC's share to
on net assets (RONA). The industrial business remain close to its 2004 level during the next
units are expected to achieve an RONA of at few years, helped by the renewals of the
least 13%, based on operating profit. In 2004 Actros, Axor and Atego ranges and by the
the Commercial Vehicle division reported an forecast growth in the German market being
RONA of 13.8% (2003: 11.5%). above the European average.
US market
MARKETS
In the USA the Freightliner, Sterling and
DC reported a record sales level for commercial Western Star brands accounted for 36.8% of the
vehicles in 2005, with a rise of 16% to 824,900 Class 8 market during 2005 (2004: 36.3%).
trucks, buses and vans (2004: 712,200 units). Retail sales of these three brands rose to 94,900
Sales were higher in all major regions. There from 73,700 in 2004.
were rises of:
MODELS
1% in western Europe to 277,000 units;
23% in Nafta to 217,800 units; The Mercedes-Benz CV range in Europe
9.7% in Latin America to 63,200 units; comprises:
31% in the rest of the world to 266,900 units. Sprinter - (T1) Light to medium vans 2.5t-6t,
The Trucks Europe/Latin America business unit built at Dsseldorf.
sold 8% more trucks at 148,000 vehicles In the Vario - (T2) Medium to heavy vans and light
core market of Western Europe, sales were up trucks 4.5 to 7.5t, built at Ludwigsfelde.
by 12% over the 2004 level. Atego -light, medium and heavy trucks from
7.5t, including multi-axle, built at Wrth, 2nd
The Trucks Nafta business unit sold 182,400 generation from 2004 up to 15t only.
trucks from all Freightliner brands - a 20%
Axor - fleet artic, built at Wrth: Atego cab,
increase. MFTB sold about 178,900 trucks and
new engine, Actros chassis, 2nd generation
buses.
from 2004 features 2 axle and multi-axle rigids.
Western Europe market share - sub-16t trucks Actros - heavy trucks built at Wrth.
In the light to medium sector DC's share of the Unimog - light/medium all terrain and special
European market improved by 2.6pts in 2004 to purpose vehicles now built at Wrth.
35.1%, helped by increases in France, Germany, Econic - SPVs aimed mainly at the municipal
Italy, Netherlands and the Nordic markets. market, now built at Wrth previously at
Arbon in Switzerland
- 31 -
Figure 20: DC commercial vehicle sales by market
M ark e t 1997 1998 1999 2000 2001 2002 2003 2004* 2005*
(000s) (000s) (000s) (000s) (000s) (000s) (000s) (000s) (000s)
Germany 97 107 114 113 106 103 102 111 115
Share of M-B total (%) 23.3 21.8 20.5 20.6 21.5 21.2 20.4 15.6 13.9
Other Europe 132 170 173 187 187 184 174 207 220
Share of M-B total (%) 31.7 34.7 31.2 34.1 37.9 37.9 34.7 29.1 26.7
North A merica 80 126 193 154 106 118 134 177 218
Share of M-B total (%) 19.2 25.7 34.8 28.1 21.5 24.3 26.7 24.9 26.4
South A merica 55 58 45 51 43 37 40 58 63
Share of M-B total (%) 13.2 11.8 8.1 9.3 8.7 7.6 8.0 8.1 7.7
Other 53 29 30 44 51 43 51 159 209
Share of M-B total (%) 12.7 5.9 5.4 8.0 10.3 8.9 10.2 22.4 25.3
Total 417 490 555 549 493 485 501 712 825
* 2005 results include estimates. 2004 results include part-year contrib ution b y MFTB
The Sprinter van range (originally 2.5-4.6t) was A renewed Mitsubishi Canter was launched in
launched in 1995 and heavily facelifted in early Japan early in 2003 and a new light truck
2000. It was introduced in the USA in 2001 developed in Brazil for worldwide release was
under the Freightliner brand and also launched introduced as the Accelo at 7.5t and 9t GVW.
in Canada and Mexico. The North American
Sprinters are assembled at Freightliner's The Atego received its market launch in early
Gaffney plant in South Carolina. To strengthen 1998, with artics and multi-axle rigids
its presence in the US van market DC appearing towards the end of the year. The
introduced the model as a Dodge brand in 2003. second generation Atego made its debut at
The next generation model will be built at a Hanover in 2004 comprising 2-axle rigids from
new facility near Savannah in Georgia. 6.5 to 16t and lightweight tractors. The new
models are offered with a lighter, uprated
A new Sprinter, based on a chassis jointly chassis and Euro 4 compliant versions of the
developed with VW for its LT2 range 900 Series engine. They feature Actros style cab
replacement, will go on sale in March 2006. A interiors with a minor styling update to the
contract for the development was agreed in exterior.
2002. The new Sprinter and the VWLT3 are to
be manufactured at Dsseldorf and The Axor, a new artic, was launched in autumn
Ludwigsfelde. 300m is being invested in the 2001. It was aimed at the fleet market for
expansion of the Ludwigsfelde facility. Reports medium range haulage and heavy distribution,
indicate the two marques will feature their own using an Atego derived cab on an Actros
engines and different front and rear end body chassis, to give operators increased payload (up
designs. to 500kg) compared with the Actros. It also
features an OM457 12-litre, 6-cylinder, in line
The replacement strategy for the Vario light engine instead of the 500 Series V6 and V8
truck range is unclear. We assume that the Actros units. The second generation, launched
current Vario will remain in production for 2 to alongside the new Atego, includes 2-axle and
3 years with demand for the model transferring multi-axle rigids from 18t GVW and a revised
to the top end of the new heavier Sprinter, the engine line-up.
Mitsubishi Canter or the light end of the Atego
range.
- 32 -
Figure 21: DC market shares, western Europe (%)
2001 2002 2003 2004 2005(e ) 2006(f)

3.5t-6.0t
Austria 48.4 54.8 58.1 43.8 35.8 38.4
Belgium & Luxembourg 39.2 24.8 46.0 42.8 33.7 38.3
France 21.0 19.4 19.6 34.0 31.6 33.0
Germany 38.2 41.0 36.3 38.9 36.4 37.2
Italy 14.8 17.6 51.2 52.8 54.5 54.8
Netherlands 34.7 32.8 26.6 28.7 25.8 29.2
Portugal 15.4 42.3 44.2 73.1 59.1 58.7
Spain 50.0 42.4 55.5 54.3 52.9 53.4
UK 43.1 39.4 40.7 37.3 30.4 40.3
Nordic markets 22.6 23.2 27.9 32.6 34.1 34.8
Other 56.1 50.7 46.0 51.7 48.5 49.5
Total W. Europe 35.4 34.6 39.8 42.3 40.1 41.8
6.1t-10.0t
Austria 28.1 24.6 25.7 23.1 24.8 26.9
France 23.0 22.5 17.5 14.5 13.4 14.5
Germany 48.1 45.0 47.5 50.8 49.9 48.6
Italy 9.7 9.1 7.6 9.8 8.6 8.0
Netherlands 28.8 22.3 29.4 30.3 45.3 40.7
Portugal 9.2 6.6 8.5 51.2 46.8 46.5
Spain 16.7 11.3 9.3 14.3 13.5 12.8
UK 17.2 17.7 17.4 17.7 17.3 17.0
Nordic markets 31.7 29.7 22.8 32.6 32.0 27.2
Other 27.3 28.5 29.7 41.2 33.8 32.8
Total W. Europe 30.3 27.2 28.0 31.9 30.9 30.5
10.1t-15.9t
Austria 33.0 27.8 26.3 29.5 23.3 24.9
France 22.0 20.8 19.7 16.3 15.8 17.2
Germany 46.6 45.0 45.7 44.0 45.6 43.3
Italy 16.6 15.8 15.2 15.4 14.0 15.1
Netherlands 33.9 29.5 25.5 32.1 31.4 31.1
Portugal 11.6 17.2 15.9 11.0 10.2 11.8
Spain 13.7 16.1 22.2 18.2 18.2 18.5
UK 23.3 25.1 27.5 23.7 25.5 26.0
Nordic markets 31.6 33.1 32.1 32.7 32.9 30.7
Other 43.1 43.6 46.0 40.2 34.2 37.6
Total W. Europe 28.6 27.7 29.5 30.1 28.6 27.4
3.5-15.9t
Austria 35.4 34.3 33.2 30.5 26.7 28.9
France 22.1 21.0 19.1 21.1 17.5 18.6
Germany 44.7 43.7 43.4 45.7 44.9 43.9
Italy 13.7 13.8 27.6 28.4 30.4 27.3
Netherlands 32.0 27.4 27.0 30.5 34.3 34.0
Portugal 11.3 15.3 17.2 45.4 39.9 40.5
Spain 31.2 27.4 34.5 33.3 32.0 32.3
UK 22.7 23.0 23.9 22.8 21.3 23.3
Nordic markets 25.4 25.7 27.8 32.6 33.6 33.0
Other 43.2 40.3 39.3 44.9 39.6 40.1
Total W. Europe 31.5 29.7 32.5 35.1 33.4 33.4
16t plus
Austria 14.7 13.5 14.2 14.3 15.9 14.8
France 15.4 14.2 13.5 15.3 14.2 14.6
Germany 39.6 38.4 38.6 38.4 37.8 36.9
Italy 15.7 14.7 13.3 13.6 11.6 12.2
Netherlands 11.4 13.4 11.8 11.3 11.7 12.1
Portugal 14.5 17.3 11.6 12.6 15.2 15.6
Spain 14.8 14.5 14.1 14.6 13.9 14.6
UK 10.0 14.1 14.0 16.4 15.4 15.3
Nordic markets 7.5 8.0 8.3 9.5 10.3 9.9
Other 19.8 19.8 18.7 18.9 17.2 19.1
Total W. Europe 19.2 19.0 18.8 19.8 19.3 19.6
- 33 -
Figure 22: DC European CV range (>3.5t)
DaimlerChrysler
M ode l De but 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Re m ark s
I II I II I II I II I II I II I II I II I II I II I II
Sprinter 1995 F F N Develop ed wit h V W
Euro 4 eng ines

V ario 1996 E T
Uncert ain
New Vario I
LN2 1984 T Rep l. B y A t eg o
A tego / LKN 1997 E N F Seco nd generat io n 2 00 4
MK / SK 1984 T Old heavy rang e
A xor I N F Seco nd generat io n 2 00 4
A ctros / 1996 N F/E Seco nd generat io n 2 00 3
SKN
MMC Canter 2005 N Euro pean d eb ut 20 0 5
I: Intro ductio n T: Term inatio n N : New M o del F: Facelift E: New Engine X: range extensio n
The second generation Actros range, featured at The Econic range of 18t and 26t chassis / cabs,
the Hannover truck show in September 2002, produced at the Mercedes NAW special
commenced production in March 2003. It has vehicles facility at Arbon in Switzerland prior
received an all-new cab interior and exterior to 2003, was also targeted primarily at the
cab facelift - codenamed MP2. It also features a municipal market but is demonstrating its
revised chassis and more powerful engines. worth in many other special purpose
These changes are designed to emphasise applications.
Actros as a premium, long haul tractor and
differentiate it from the Axor fleet artic. Bus operations
Bus production in western Europe is based at
A completely new range of Unimog vehicles
Mannheim, Ulm and Ligny. DC's European bus
was announced in 1999, targeting the
operations are managed under the Evobus title
municipal sector and similar applications, with
and comprise:
the emphasis on better on-road rather than off-
road performance. The new U3000 - 5000 Mercedes-Benz buses;
models, to replace the current heavy-duty Kssbohrer (Setra) acquired in 1995.
range, were launched in 2003. From early 2003
the U500 was marketed in the USA through
Freightliners dealer networks.
- 34 -
In 2002 DC combined its urban and transit bus The Western Star range is concentrated in
business in N. America, previously run by Classes 7 and 8. The 4900EX, 4900SA, 4900FA
Freightliner, with the world-wide bus business and 6900 XD are available to suit a variety of
of the Mercedes and Setra brands. All activities applications from high-specification tractors for
were centred in the DC Buses business unit. In owner-operators to severe service applications
2003 the management team at Evobus GmbH such as mining, logging etc.
was expanded and took on a strategic
The North American truck operations have
management role in DCs worldwide bus
traditionally developed and produced vehicles
business, the DC Buses and Coaches sub-
largely independently of each other. This used
division.
to be a feature of all the US subsidiaries of
European truck producers.
The Orion bus operation, a builder of mass
transit buses was acquired with the purchase of
The reasons cited for the lack of component
Western Star. Thomas Built Buses Inc- the US
commonality were:
bus producer acquired in 1998- is part of the
Freightliner business. that trucks, heavy trucks in particular, are
very different on each side of the Atlantic;
In North America Freightliner sells trucks in
the fact that North American truckmakers
the Class 6 to Class 8 sectors. Its current line-up
are traditionally much less vertically
is as follows:
integrated than those in Europe, mostly
outsourcing the major components such as
Business Class M2 - Class 6-7 trucks.
engines, gearboxes and axles to the specialists
FLD - Class 7 and 8 trucks for construction, like Caterpillar, Cummins, Eaton and
emergency and intensive use applications. Rockwell.
Classic and Classic XL - Class 8 regional haul
However, as all the truckmakers look to
tractor.
improve their profitability, there is a slow but
Argosy - Class 8 truck sharing much steady drift towards greater integration
componentry with the Actros. between North American and European
Columbia New highway tractor for long-haul operations. The Europeans are leading this
use. trend, introducing their in-house components
Century Class ST - Bonneted, heavy-duty Class to their North American model ranges.
8 tractor.
In DC's case the first significant example of
Coronado - Class 8 truck for long-haul use by
closer integration was the March 1999
independent owner/operators.
introduction of the German-built Mercedes 900
Condor Special purpose use vehicle for waste Series engine as an option in Freightliner's
disposal and municipal use. middleweight truck range. The 900 Series
Sterling's range extends from Class 5 to Class 8: diesels have now become global engines
produced in Germany and Brazil.
Aceterra - Class 5-8, urban delivery use.
In early 2000 the Sterling Acterra (Class 5-8)
L-Line - Class 6-8 bonneted trucks.
was launched in North America, equipped with
Cargo Line Class 7-8 tractor for vocational use 4-cylinder and 6-cylinder Mercedes-Benz
and local/regional distribution. engines as standard, though Cummins and
Condor - Construction, refuse/utility and Caterpillar units were optional.
municipal use.
A-Line - Class 8.
- 35 -
The new Freightliner range Business Class M2 There is to be uniform electrical/electronic

(Classes 6-7), launched in 2002, offers 4 and 6 architecture between future Actros and
cylinder engines from the Mercedes-Benz, Freightliner models as well as wider use of
Mannheim-produced 900 Series as standard Mercedes engine and axle technology
equipment. Engines and transmissions from US
suppliers are optional. In North America, acquisitions had left DC
with 23 plants in all prior to a restructuring in
A further sign of closer integration was of October 2001:
course the previously mentioned introduction
of the Sprinter to North America in 2001. 4 Freightliner truck plants;
1 Sterling truck plant;
9 American LaFrance plants;
MANUFACTURING STRATEGY 3 Thomas Built Buses plants;
1 Western Star plant;
Europe & North America
2 Orion bus plants;
DC's commercial vehicle plants are mostly 1 Custom Chassis plant;
concentrated in Europe and North America. In 2 parts manufacturing plants.
Europe the company has 15 production
locations for its vans, trucks, buses and In the last downturn DC closed three plants:
components. The principal truck assembly Woodstock, Ontario (bus) Kelowna, British
plant is at Worth. In 2002 the plant took over Columbia (Truck) and Portland, Oregon
production of the Unimog range, formerly (components). Production of Western Star
produced at Gaggenau, and in 2003 the Econic. trucks was transferred from the Kelowna
The Gaggenau plant concentrates on producing facility to a refurbished plant in Portland
transmissions for commercial vehicles. Oregon during the second half of 2002.
As all truck manufacturers look to improve In December 2005 DC announced the sale of its
their profitability, there is now evidence of American LaFrance division. The corporate
more urgency in moves towards greater office building and assembly facility in Ladson
integration between North American and near Charleston (South Carolina), is not part of
European operations. Turning scale into profit the sale. DC will dedicate the 460,000 sq. ft.
has become a major strategic initiative. facility to assembly of the next generation
Dodge Sprinter van in response to growing
DC is aiming for 50-60% component demand in the North American markets.
commonality between its North American Initially, 220 employees will be engaged in the
trucks and those of Europe and Asia. production process when the plant assembles
its first van in Q4 2006. In 2005 28,100
DC has announced that it is developing a range Sprinters were sold in Nafta.
of global, large capacity, in-line 6-cylinder
engines for introduction in 2007. The new Other regions
engines will be launched in the US powering a As well as the truck assembly plants in W
new range of Freightliner trucks before Europe and North America, DC produces
appearing in a new Actros. They will replace commercial vehicles at wholly-owned or
the four different engine series currently in majority-owned facilities in Argentina, Brazil
use:-the 500-Series V6 and V8 units in the and Turkey. There are assembly operations in
current Actros as well as the other large in-line South Africa, Iran and Saudi Arabia.
sixes such as the 12-litre OM457, the 12.8-litre
MBE4000 and the 12.7-litre Detroit Diesel 60-
Series. DC aims to produce 176,000upa of the
new engine with Europe taking 40% and the
Americas 52%.
- 36 -
In Latin America DC rationalised its production The accounts of DaimlerChrysler present

system, by concentrating truck and bus operating profit figures for the commercial
assembly in Brazil and van production in vehicles division as well as capital spending,
Argentina. Since February 2002, the Brazilian R&D and employee numbers.
operation has reported to the MercedesBenz
Truck Business Unit and the Argentinean van There are three sets of statistics showing
assembly to the M-B Van Unit. information for DaimlerChrysler,
DaimlerChrysler CVs (including Mercedes-
In September 2003 DC signed a framework Benz CVs as was) and Daimler-Benz.
agreement with BAIC covering a 50-50 JV with
Beiqi-Foton, whose main shareholder is BAIC. In October 1993 Daimler-Benz became the first
In addition to medium and heavy trucks the German company to be listed on the New York
venture will manufacture engines and Stock Exchange. The company therefore
components for the Chinese market. An annual changed its accounting standards to conform
capacity of 100,000 trucks is envisaged. Co- more closely with the US generally accepted
operation on light trucks is to be considered accounting principles (US-GAAP). These
later. This project could eventually greatly adjustments resulted in non-recurring income
strengthen DCs position in Asia. of some DM2.6bn, as provisions made under
German accounting standards were released to
Starting in 2006, in co-operation with Chinese conform with US-GAAP. The accounts for
partner Fujian Motor Industry Group and the DaimlerChrysler are prepared in accordance
Taiwanese China Motor Corporation, DC with US-GAAP.
intends to start producing the Sprinter and the
new Viano/Vito van family in China with an Other items to note include:
annual capacity of 40,000 units. A 50-50 joint
venture is planned via a Hong Kong holding. Capital Investment - from 1987 capital
investment excludes expenditure upon vehicles
for leasing purposes.
NOTES UPON FINANCIAL STATISTICS
Liabilities - prior to 1987 current debt (defined
Prior to the merger, as part of the restructuring
as debts due within one year) and long term
of the Daimler-Benz Group carried out by Mr.
debt were not separated in the accounts, in the
Schrempp, the Mercedes-Benz subsidiary was
interests of completeness a 60/40 split has been
reintegrated into Daimler-Benz with the aim of
used for earlier years, based on the 88-92
reducing management layers and speeding
actuals.
decision making.
Employees - the employee numbers for DC
Mr. Schrempp also introduced greater clarity
Cars plus DC CVs do not reconcile to the DC
and transparency into the Groups financial
Group figure due to the non-allocation of sales
reporting so that the performance of individual
staff and head office/central staff.
business units could be more accurately
assessed. This was a welcome change as the
profitability of the commercial vehicles division
began to be officially disclosed instead of being
subsumed within the combined accounts of the
Mercedes-Benz car and truck divisions as
previously.
- 37 -
CHAPTER 4: HINO MOTORS

During its period of declining performance
OVERVIEW Hino had the benefit (if 'benefit' is the right
Hino Motors develops, manufactures and word) of a long-term principal shareholder,
markets diesel trucks and buses in Japan and Toyota, to ward off the threat of takeover by
other (primarily Asian) markets. In Japan it has domestic or foreign competitors. The
been the market leader in the medium to heavy association between the two firms dates back to
truck sector for more than thirty years. The the 1960s and during Hino's difficulties Toyota
domestic market typically accounts for 60-66% injected funds, increasing its equity stake from
of Hino's truck and bus sales. In revenue terms, 20% in 1998 to over 50% during 2001.
the proportion contributed by domestic
We raise the question as to whether the link
operations is even higher (around 86% in
with Toyota has been truly beneficial because
2004/05), due to the income generated by work
while it has undoubtedly offered Hino a
performed on behalf of Toyota, Hino's majority
welcome security blanket, particularly during
shareholder.
the downturn it appears that thus protected,
During the eighties and early nineties, Hino Hino's attempts to restructure and regain
ranked as one of the world's top producers of profitability have lacked the necessary urgency
trucks above 6t GVW. Producing 70-80,000 and vigour.
trucks per year the company vied with Navistar
It seems that Toyota shared this view. Once it
for second place, a long way behind industry
acquired majority control Toyota installed one
leader, Daimler-Benz (as was). The slump in
of its own vice-presidents, Tadaaki Jagawa, as
demand in Japan during most of the nineties
Hino's new president. Despite the long
and the sharp downturns in other Asian
association between the two companies Mr
markets in 1997/98, caused Hino's output to fall
Jagawa was the first Toyota employee to be
by more than 50% from its 1989-91 peaks but
appointed to the position illustrating its
the recovery in Japanese demand since 2003 has
previous hands-off approach. Mr Jagawa was
seen its output climb to 75,000 units, putting it
given a brief to make rapid changes to bring the
in eighth place worldwide (see Figure 7).
new subsidiary closer to the profit levels
Hino's profit margins were unimpressive before achieved by the rest of the group. He talked of
the slump in demand so such a precipitous a shift to offensive management in describing
decline in sales inevitably caused the company his approach to rehabilitating the firm the
to slide into the red. The year to March 1999 implicit criticism being that management had
saw its first net loss since listing on the Tokyo previously been too passive.
Stock Exchange in 1949. Further net losses
Mr Jagawa (now chairman of the board)
were incurred in the following two years and
formulated a five-point plan to reduce costs,
the company finally returned a positive net
lower debt and expand the business. This has
result in the year to March 2002. It remained
helped the company to return to profit in its
profitable in the following two years, though
last four financial years.
over the ten years to March 2005, Hino made a
cumulative net profit of just 12.9bn, a margin
on cumulative revenue of 0.17%.
- 38 -
The restructuring of the business has also The company is now entering the growth phase
involved establishing a number of alliances, of its restructuring. It has the ambitious target
either to reduce costs in existing business of expanding its worldwide sales of medium
operations or to lower the cost of entry into and heavy trucks to 150,000upa by 2010 and
new market sectors. To this end, over the past being the world's fifth largest truckmaker.
few years Hino has formed alliances with Isuzu,
PSA Peugeot Citron and Scania. None of these The change in attitude at Hino is encouraging
alliances yet involves an equity link. and the restructuring being implemented gives
the company a good prospect of attaining a
The forming of alliances is a strategy which reasonable level of profitability over the next 2-
previous editions of this report have 3 years. However, in the longer term it may
recommended, recognising that even as a find that it needs to deepen one of its recently
division of Toyota, Hino faces much the same formed alliances in order to compete effectively
degree of competitive pressure that has forced in the global truck industry.
numerous other truckmakers worldwide to
merge or pool resources.
Figure 23: Latest results - Hino
Hino
Unit 9M o-05/06 Q3-05/06 H1-05/06 Yr to M ar 05 9M o-04/05 Q3-04/05 H1-04/05 Yr to M ar 04
Revenue bn 853.9 4 .5 287.5 5.0 566.4 4 .2 1,130.1 7.5 817.1 8 .0 273.7 7.6 543.4 8 .2 1,051.6 2 3 .7
Operating prof it bn 24.4 0 .4 10.1 54 .9 14.3 (19 .5) 38.3 (14 .0 ) 24.3 (2 9 .3 ) 6.5 (3 9 .7) 17.8 (2 4 .6 ) 44.6 13 2 .3
Pre-tax prof it bn 26.8 5.5 10.6 73 .4 16.2 (16 .0 ) 30.3 (3 1.9 ) 25.4 (2 4 .9 ) 6.1 (4 2 .7) 19.3 (16 .8 ) 44.6 2 58 .4
Net prof it bn 20.3 9 7.1 7.1 174 .2 13.2 71.0 17.7 (4 8 .1) 10.3 (53 .5) 2.6 (6 8 .5) 7.7 (4 4 .6 ) 34.0 58 5.9
Employees 000's 21.29 1.4 21.29 1.4 21.29 2 .4 21.29 3 .5 21.00 2 .1 21.00 1.4 20.80 0 .5 20.56 (1.0 )
Unit s ale s 000's 73.0 4 .0 24.0 4 .2 49.0 3 .9 95.5 10 .7 70.2 12 .4 23.0 (4 .0 ) 47.2 13 .5 86.2 4 2 .6
Japan 000's 39.6 9 .5 13.6 13 .1 26.0 7.6 50.7 (1.1) 36.2 (0 .6 ) 12.0 (11.6 ) 24.2 (1.8 ) 51.2 4 7.5
Overseas 000's 33.4 (1.8 ) 10.4 (5.6 ) 23.0 0 .0 44.8 2 8 .1 34.0 3 0 .5 11.0 5.9 23.0 3 5.8 35.0 3 6 .0
Pe r unit
Revenue mils 11.704 0 .5 12.000 0 .8 11.559 0 .3 11.835 (2 .9 ) 11.647 (3 .9 ) 11.900 12 .1 11.523 (4 .7) 12.19 (13 .3 )
Operating prof it mils 0.334 (3 .4 ) 0.420 4 8 .7 0.292 (2 2 .5) 0.401 (2 2 .3 ) 0.346 (3 7.1) 0.283 (3 7.2 ) 0.377 (3 3 .6 ) 0.52 6 2 .9
Pre-tax prof it mils 0.367 1.5 0.442 6 6 .5 0.331 (19 .1) 0.318 (3 8 .5) 0.362 (3 3 .2 ) 0.265 (4 0 .3 ) 0.409 (2 6 .7) 0.52 151.3
Net prof it mils 0.278 8 9 .5 0.298 16 3 .2 0.269 6 4 .6 0.185 (53 .1) 0.147 (58 .6 ) 0.113 (6 7.2 ) 0.163 (51.2 ) 0.39 3 8 1.1
Pe r e m ploye e
Revenue mils 40.108 3 .1 13.505 3 .6 26.603 1.8 53.094 3 .8 38.910 5.7 13.034 6 .1 26.125 7.7 51.15 2 4 .9
Operating prof it mils 1.146 (1.0 ) 0.473 52 .8 0.673 (2 1.3 ) 1.801 (16 .9 ) 1.157 (3 0 .8 ) 0.310 (4 0 .6 ) 0.856 (2 4 .9 ) 2.17 13 4 .6
Pre-tax prof it mils 1.259 4 .1 0.497 71.1 0.762 (17.9 ) 1.426 (3 4 .2 ) 1.210 (2 6 .5) 0.290 (4 3 .5) 0.928 (17.2 ) 2.17 2 6 1.9
Net prof it mils 0.953 9 4 .4 0.335 170 .5 0.619 6 7.1 0.830 (4 9 .8 ) 0.490 (54 .5) 0.124 (6 8 .9 ) 0.370 (4 4 .9 ) 1.65 59 2 .8
Sales units 3.4 2 .6 1.1 2 .8 2.3 1.5 4.5 6 .9 3.3 10 .0 1.1 (5.4 ) 2.3 13 .0 4.2 4 4 .0
Operating prof it % 2.9 (0 .1) 3.5 1.1 2.5 (0 .7) 3.4 (0 .8 ) 3.0 (1.6 ) 2.4 (1.9 ) 3.3 (1.4 ) 4.2 2 .0
Pre-tax prof it % 3.1 0 .0 3.7 1.5 2.9 (0 .7) 2.7 (1.6 ) 3.1 (1.4 ) 2.2 (2 .0 ) 3.6 (1.1) 4.2 2 .8
Net prof it % 2.4 1.1 2.5 1.5 2.3 0 .9 1.6 (1.7) 1.3 (1.7) 0.9 (2 .3 ) 1.4 (1.4 ) 3.2 2 .7

Domestic bn - - - 921.4 2 .2 - - - 901.2
Overseas bn - - - 208.7 3 8 .8 - - - 150.3
Note s : (1) Q1 is A pr-Jun, Q2 is Jul-Sep, Q3 is Oct-Dec, Q4 is Jan-Mar (2) % ch is change versus corresponding year-ago data
- 39 -
Figure 24: Hino revenue & operating profit trend
1,400
Yen
1,000
600
Index (Yr to March 1985 = 100)
200
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
-200
-600
-1,000
-1,400
-1,800
Figure 25: Hino net income trend
500
Index (Year to March 1985 = 100)
300
100
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
-100
-300
Revenue (Yen) Op. Profit (Yen)
-500
- 40 -
Interim results & forecast

RECENT PERFORMANCE
In the first nine months of the year to March
2004 / 2005 results 2006 Hino reported a 4.5% increase in revenue
In the year to March 2005 Hino reported its to 853.9bn, due partly to the growing demand
first profit decline for six years. since the autumn for its large trucks with
loading capacities of 8t or more.
Group revenue rose 7.5% to 1,130bn reflecting Operating profit was just 0.4% higher during
increased sales of trucks and buses in the period but net profit rose by 97% to
Asia/Oceania region, the US and Canada. 20.3bn, boosted by the non-recurrence of the
asset impairment charge.
Operating fell 14% to 38.3bn from the
previous year's record of 44.6bn. The margin Forecast
dropped by 0.8pts to 3.4%. The decline For the year to March 2006 Hino projects
reflected increased costs for overseas expansion, revenue of 1,220bn and net profit of 30bn.
R&D and productivity and quality
improvements.
BUSINESS STRUCTURE
On a regional basis revenue and operating Hinos origins date back to 1918. In addition to
profit were as follows: manufacturing medium and heavy trucks, buses
and light trucks for Toyota, the company
Japan - revenue 1,065bn, operating profit
produces industrial engines for compressors,
37.9bn.
generators and marine applications etc. The
engine production activity accounts for less
Asia - revenue 103.6bn, operating profit
than 10% of Hino's revenue so the company is
2.4bn.
not obliged to disclose any separate financial
Other regions - revenue 54.8bn, operating loss information on this business.
(680)m.
The proportion of revenue contributed by
Please note that the revenue figures include production of Toyota vehicles was 30% on
intra-company transactions so add to more than 2004/05 when Hino produced 248,012 Toyota
the group revenue figure previously quoted. vehicles.
Group net profit fell by 48% to 17.7bn. In Links with Toyota

addition to the previously mentioned negative The association with Toyota goes back to 1966.
factors, net profit was reduced by a non- During 1997 Toyota raised its stake in the
recurring charge of 4.38bn for asset smaller firm from 16.4% to 20.1% and in March
impairments. 2000 the stake was raised to 33.8%, giving
Toyota effective management control. In April
2001 Hino announced it would issue Y66.4bn
worth of new shares for private placement with
Toyota, boosting Toyota's stake to 50.1%, at
which level it remains.
Tadaaki Jagawa, an executive vice president

with Toyota, became Hino's new president in
June 2001. During 2003/04 Mr. Jagawa became
chairman of the Board and Shoji Kondo became
president.
- 41 -
Hino used the proceeds from the share Alliances & co-operation
placement to beef up its two-ton truck business
Scania
and offshore operations and for the
development of environment-friendly In March 2002 Hino and Scania announced an
technologies. alliance. In the first phase of their partnership
Hino buys some heavy trucks from Scania for
Generally speaking, the industrial or sale in Japan. However, volumes have been
commercial logic for keeping a carmaker and fairly insignificant with about 12- units sold
truckmaker under the same roof is between May 2003 (the first delivery) and
unconvincing. The trend in recent decades has September 2005.
been in the opposite direction, with companies
such as Ford, GM, Renault, Saab-Scania and In exchange, Hino will supply the Swedish
Volvo all deciding to focus on one sector or the company with 7-litre to 8-litre diesel engines.
other. The two firms will also pool their emission
reduction expertise and technology.
The reason underpinning this trend is simple:
there are few worthwhile scale economies to be According to Hinos president, other potential
gained from a presence in both sectors. In all areas for co-operation are for the two firms to
the principal areas of expense such as design, use each other's production bases in Southeast
development, production, marketing and Asia, China and South America, as well as to
distribution; there is no significant potential for co-operate in vehicle maintenance and other
cost reduction from synergies - cars and trucks businesses. The option of Hino supplying
simply being too different. medium trucks to Scania is also being
investigated.
Having said that, if a company decides it does
want to maintain an interest in both sectors it Isuzu
must be preferable for that interest to be a In January 2002 Hino and Isuzu announced a
controlling one, as Toyota's now is. At least this plan to merge their bus-making operations
gives Toyota a reasonable chance of managing through a joint venture. J-Bus is now serving as
Hino to its own standards. a holding company with the two firms' bus
operations under its control, excluding
In the case of Hino and Toyota there is more marketing.
overlap between the two firms than was the
case in the earlier examples. Toyota uses Hino Hino holds a 26.5% share in the domestic large
to assemble some of its light commercial bus market and Isuzu has a 20% share. In the
vehicles and Hino also builds trucks of up to 7t midsize bus market, Hino has a 29.1% share
GVW which Toyota sells under its own brand and Isuzu has a 28.1% share. In bus operations,
name. However, Toyota having a stake in Hino Hino currently has about 1,000 staff and Isuzu
is not a necessary precondition for either has about 850.
arrangement. Fundamentally Hino has still to
fund the design, development, production and The bus alliance was preceded by the
sale of its medium and heavy truck ranges and announcement in October 2001 that Hino was
powertrains. The link with Toyota does not to begin purchasing components from Isuzu -
enable it to spread those development costs the first such deal between the two firms. Isuzu
over a higher unit volume. has begun supplying an air suspension system
for Hinos medium trucks at the rate of about
Previous editions of this report have concluded 1,000upa. The companies are considering
that Hino needs to form alliances in order to further deals involving transmissions and other
secure those scale economies and this is what components.
the firm has been doing, though to only a
limited extent.
- 42 -
Figure 26: Hino sales
M ark e t / Yr to M arch 1999 2000 2001 2002 2003 2004 2005(f)
Japan 21,349 30,002 33,136 34,011 34,742 51,242 50,430

Share of Hino total (%) 60.8 66.7 65.2 65.6 57.4 58.9 52.7
A sia ex. Japan - - 9,823 11,290 14,699 18,100 21,500

Share of Hino total (%) - - 19.3 21.8 24.3 20.8 22.5
Oceania - - 2,495 2,736 3,424 3,578 3,600

Naf ta - - 2,902 2,149 2,600 2,468 2,800

S. A merica - - 1,696 3,578 2,420 2,500 2,560

Other 13,768 14,965 2,464 1,695 2,600 9,130 14,840

Share of Hino total (%) 39.2 33.3 4.8 3.3 4.3 10.5 15.5
Total 35,117 44,967 50,820 51,881 60,485 87,018 95,730
Note: output f or Toyota 165,937 135,459 140,734 141,045 191,743 222,676 260,000
Nissan Diesel Sales of Hino's light truck (Dutro) were 4.5%

higher at 15,269 units. The Dutro was in its
During 2004 Hino began supplying medium-
fifth full year of sales, having been launched in
sized diesel engines (the Hino J-series engine)
May 1999. Hino's market share was 3.5pts
to ND under an agreement announced in 2001.
higher at 13.5%.
Nissan Diesel will stop its in-house production
of such engines. Hino supplied about 12,000 New registrations of buses rose by 6.6% to
engines in 2004/05 but aims to increase this 3,108 units, a market share of 25.5% (20.1%).
figure in future years.
Overseas sales
MARKETS Hino's exports were traditionally concentrated

in Asia which accounted for over 80% of export
Hino sold 95,486 units of its trucks and buses in sales in most years, the principal markets being
the year to March 2005 a 10.7% increase from Thailand, Malaysia, Indonesia and Pakistan.
the previous year and the sixth successive year Sales in the region plummeted in the wake of
of increase. Domestic sales were 1.1% lower at the economic crisis, falling by 75% in 1998/99
50,668 units. to 3,700 units. Demand in the region has since
improved significantly, helping Hino's overseas
Domestic sales sales to rise from 13,768 units in 1998/99 to
The small decline in domestic sales reflects 44,818 units in 2004/05.
weaker demand for medium and heavy trucks,
retail sales of which fell by 4.2% to 32,291 units An expansion of overseas sales is a key element
following a 49% rise the previous year. of Hino's expansion plans. North America is
targeted as the company's next core market. It
has developed model variants specifically for
the Nafta market in Classes 4-7.
- 43 -
Following the launch of new models in 2003 Toyota

Hino sold 4,290 units in calendar 2005. It hopes During 2003 Toyota announced it is to
to boost sales in the region to 10,000upa by consolidate the development and production of
2006 and 30,000upa by 2010. These goals will small trucks at Hino. In January 2005, Hino
be supported by local production (see below). begin producing 2t pick ups previously made by
Toyota Auto Body, along with 1.5t models and
0.75t vans such as the Liteace and the Townace,
MODELS
totalling 23,000 vehicles.
Hino's truck range comprises:
United States
Dutro - a light truck (4.3-7.4t GVW) developed
The first Hino truck built in North America
jointly by Hino and Toyota (which badges it
rolled off the assembly line in Long Beach,
Dyna or Toyoace). This is Hino's first entry into
California., in October 2004. The trucks are
the light truck sector, launched in May 1999.
built at TABC Inc., Toyota's plant that also
builds pickup beds and engines. The plant also
Ranger medium trucks launched in 1994,
makes chassis, bonnets and other parts for
medium trucks spanning 7.9-17t GVW. A new
Hino's medium trucks sold in the US.
Ranger-Pro was launched in December 2001.
Hino is opening two plants of its own in the

Super Dolphin Profia - the range of heavy duty
US. First will be a component plant to supply
trucks was renewed in May 1998 and a new
Toyota with axles for its Tundra light truck.
generation was launched in November 2003,
Hino is investing an undisclosed amount
with new diesel engines.
building the plant in Marion, Arkansas.
Production is scheduled to start in 2006.
PRODUCTION STRATEGY
The second plant will be a truck production
During the year to December 2005 Hino facility, also at Marion. The new factory is
produced 96,985 units, a 3.4% increase from expected to begin production in 2007 with
the previous year. capacity planned at 10,000upa.
In calendar 2006 the company is aiming to Its North American operations have been losing
produce 14% more vehicles at 110,000 units. money, but Hino aims to clear accumulated
losses at those operations by 2010.
Hino is strengthening its 2-ton truck business
as it looks to become more competitive in small
China
trucks. In January 2006 it established a
temporary new organisation comprising nine In 1993 Hino established a joint venture,
employees from its development, production, Heilongjiang Bus Factory, for the production of
sales and other divisions. The unit will exist for touring buses. Hino has a 12.5% stake in the
six months to one year and study Hino's small venture, with 65% held by Heilongjiang Bus
truck business plan. Hino plans within the year which is a subsidiary of Dongfeng Motor
to upgrade its Dutro truck series to respond to Corporation. Capacity is 500upa.
current exhaust standards. The overall aim is to
Shenfei Hino Auto Manufacturing, a joint
reduce development and design costs. Through
venture with Shenyang Riye Auto, produces
this, Hino hopes to revamp its small truck
and markets buses in China. Hino has a 25%
operations, a business area in which it has been
stake in the JV and supplies design and
less competitive than in larger vehicles.
production technology and marketing know-
how as well as the right to manufacture and
market Hino vehicles.
- 44 -
In the initial phase, Shenfei Hino is producing Indonesia

about 1,000 buses a year. By 2010, annual Local assembly of Hino trucks and buses has
production will be raised to 3,500 units, been carried out for a number of years by
including 2,000 Hino models. National Assembler. Hino also had a 30% stake
in an engine plant. In 1997 Hino established a
In September 2003 Hino announced it had set joint venture with Suitomo and the Salim group
up a 50-50 joint venture in Shanghai with to build a new plant near to Jakarta (capacity:
Shanghai Diesel Engine Co. to begin production 10,000upa). However, this was postponed due
of truck engines from end-2004. Capitalized at to the economic crisis.
$30m, the joint venture has built a 15,000upa
plant in Shanghai. Initially, it is producing In January 2003 this plan was reinstated and
10.5-litre engines for use in large trucks, Hino began assembly trucks at the rate of about
meeting Euro-3 European environmental 3,000upa in August 2003.
regulations.
Pakistan
However, a plan to produce trucks with
Chunlan Co. has hit an obstacle. Hino has Capacity at Hino-Pak Motors exists for 6,000
decided to freeze the large-truck joint venture trucks and 1,200 bus chassis per year. Actual
project in Shanghai because new Chinese production over the last five years has been
regulations on foreign auto ventures have made below 1,000upa.
approval unlikely.
Philippines
The firm had been planning to start production Hino has a 30% stake in Pilipinas Hino which
in co-operation with local electronics assembles Hino trucks and Suzuki models.
manufacturer Chunlan Co. as early as 2005. Output has been under 100upa in recent years.
Hino is the first Japanese automaker to suffer a
setback because of the new policy. Taiwan
Kuozui Motors was established by Hino in 1984
China's new automobile policy, unveiled in
and Toyota bought a stake in 1986. Toyota now
June 2004, stipulates that one foreign
holds 38.3% and Hino 18.1%. Kuozui assembles
automaker can tie up with up to two Chinese
Hino trucks and the Toyota Dyna as well as
companies in each of two sectors: passenger
Toyota passenger cars. Output of Hino models
cars and commercial vehicles.
is 2-3,000 units annually.
Toyota already manufactures buses and SUVs in
China through a joint venture with China FAW Vietnam
Group. Hino has the bus joint venture referred Operations started at Hino Motors Vietnam in
to above. Under the policy, firms whose November 1997. Hino owns 51% of the
management rights fall under the same parent venture, which has assembled less than 100
are considered one company, so Toyota and units in each of the last three years.
Hino will be treated as members of a single
group and will thus have already filled their Hino trucks are also assembled in: Bangladesh,
joint venture quotas. Costa Rica, Ireland, Kenya, Malaysia, South
Africa; Turkey and Zimbabwe. Volumes are
With help from Toyota, Hino is considering generally tiny and Hino has no equity stake in
options, such as looking for a new partner or the assemblers.
changing joint venture frameworks.
In its three-year business plan released in May

2004, Hino projected that its truck output in
China would reach 5-6,000 units in fiscal 2006.
- 45 -
NOTES UPON FINANCIAL STATISTICS Beginning with the annual report for the year
to March 1996 Hino's accounts are published
The production on behalf of Toyota has a
on a consolidated basis. The results for the year
significant effect on Hino's accounts as revenue
ended March 30, 1995 were restated but earlier
from Toyota has represented some 35% of the
years remain on a non-consolidated basis.
total in recent years. This needs to be
considered when, for example, comparing
Hino's unit revenues with those of other truck
producers.
- 46 -
CHAPTER 5: ISUZU MOTORS

It became apparent that a more radical
OVERVIEW restructuring was required, one that addressed
Isuzu is a producer of trucks, diesel engines and Isuzu's corporate and financial structure as well
recreational vehicles (RVs). In the last three fiscal as the usual operational measures to improve
years its worldwide sales have averaged efficiency through reductions in staff, material
299,200upa, about 90% of which have been light costs etc.
trucks, including SUVs and pickups. In Japan
Thus in August 2002 Isuzu announced a number
Isuzu's Elf range is the market leader in the light-
of revisions to its existing 3-year plan. The key
duty truck sector.
points of the new programme were:
selling to Fuji Heavy Industries (Subaru)
In the past Isuzu also produced passenger cars but
it was too small to compete effectively and Isuzu's 50% share in Subaru-Isuzu Automotive
decided during 1992 that it would no longer - their North American SUV joint venture;
forming a powertrain joint venture with GM,
develop and produce passenger cars
independently, concentrating instead on the into which all the existing engine joint
three areas mentioned above. ventures are incorporated and GM will take a
majority stake;
However, the prolonged slump in truck demand GM cancelling its existing Isuzu equity and
in Japan, the Asian economic crisis and increased resubscribing for a 12% stake;
competition in the RV sector all combined to a debt-for-equity swap.
keep the company struggling, and often failing, to

turn a profit. The effect of these measures, coupled with
improving demand in Isuzu's key markets, are
During the ten years to March 2003 Isuzu made a already starting to be seen in the company's
cumulative net loss of 289bn and reported a net results - in the years to March 2004 and 2005 it
loss in each of the last four years of that period. reported net profits and respectable operating
margins of 5.8-5.9%.
During this troubled decade Isuzu was helped by
its affiliation with GM. The relationship dates This is not a remarkable figure by the standards
back to 1971 when the US company acquired a of the world's truck industry as a whole, but for a
34.2% stake in Isuzu. Since then the two firms company whose highest full-year operating
have co-operated in various discrete joint margin over the previous 17 years was 2.2%, the
ventures, such as the IBC operation in the UK figures are very encouraging.
(now wholly owned by GM).
In November 2004 Isuzu announced a fresh 3-
In March 1999 GM increased its stake to 49% and year plan. It aims to expand its commercial
this was followed by a Isuzu becoming more vehicle and diesel engine businesses on a global
closely integrated in the GM production network. basis. The targets for the year to March 2008 are
For example it was given global responsibility for revenue of 1,600bn and operating profit of
the development of GMs diesel engines and 100bn, a margin of 6.2%.
commercial truck development.
Despite these changes and various restructuring

measures, Isuzu's performance remained weak
and during 2002 there was a real fear that the
company would be unable to meet its debt
repayment schedule and become insolvent.
- 47 -
Figure 27: Latest results - Isuzu
Isuzu
Unit H1-05/06 Q2-05/06 Yr to M ar 05 9M o-04/05 H1-04/05 Q2-04/05 Yr to M ar 04 Yr to M ar 03
Revenue bn 737.3 0.3 382.0 (7.5) 1,493.6 4.4 1,082.1 1.6 735.2 1.7 412.8 2 .0 1,430.3 6 .0 1,349.4
Operating prof it bn 37.9 (12 .8 ) 20.9 (3 0.1) 87.2 3.2 64.2 8.9 43.5 21.8 29.9 32 .1 84.5 4 4 5.2 15.5
Pre-tax prof it bn 31.6 (16 .7) 15.1 (2 9 .7) 68.8 2 4.2 56.2 (2.4) 38.0 6 7.2 21.5 55.4 (28.5)
Net prof it bn 26.0 (2 7.4 ) 13.1 (35.1) 60.0 9.8 51.1 35.8 4 3 .9 20.2 54.7 (13 7.9 ) (144.3)
Employees 000's 18.00 0.0 18.00 0 .0 18.00 0.0 18.00 0.0 18.00 0 .0 18.00 0 .0 18.00 (0.7) 18.13
Unit s ale s 000's 214.0 59 .7 115.4 46 .4 339.0 2 1.1 227.4 9.9 134.0 (0 .7) 78.8 6 .9 280.0 0.7 278
Japan 000's 46.0 7.0 27.8 1.9 90.0 (12 .6) 63.0 (18 .1) 43.0 (14.0 ) 27.3 (10.6) 103.0 66 .1 62
Overseas 000's 168.0 8 4.6 87.6 70 .0 249.0 40 .7 164.5 2 6.5 91.0 7.1 51.5 19.2 177.0 (18 .1) 216
Pe r unit
Revenue mils 3.445 (3 7.2 ) 3.311 (36 .8 ) 4.41 (13 .8) 4.758 (7.5) 5.487 2.5 5.238 5.11 5.2 4.85
Operating prof it mils 0.177 (4 5.4 ) 0.181 (52 .3 ) 0.26 (14 .8) 0.282 (0.9) 0.324 2 2.7 0.379 0.30 4 41.3 0.06
Pre-tax prof it mils 0.148 (4 7.9 ) 0.131 (52 .0 ) 0.20 2.6 0.247 (11.2) 0.284 6 8.5 0.273 0.20 (0.10)
Net prof it mils 0.121 (54 .6 ) 0.114 (55.7) 0.18 (9 .3) 0.224 0.267 4 5.0 0.256 0.20 (13 7.6 ) (0.52)
Pe r e m ploye e
Revenue mils 40.963 0.3 21.224 (7.5) 82.98 4.4 60.118 1.6 40.846 1.7 22.936 2 .0 79.46 6 .8 74.43
Operating prof it mils 2.106 (12 .8 ) 1.160 (3 0.1) 4.85 3.2 3.567 8.9 2.416 21.8 1.660 32 .1 4.69 4 49 .1 0.85
Pre-tax prof it mils 1.758 (16 .7) 0.840 (2 9 .7) 3.82 2 4.2 3.125 (2.4) 2.112 6 7.2 1.195 3.08 (1.57)
Net prof it mils 1.444 (2 7.4 ) 0.728 (35.1) 3.34 9.8 2.837 1.991 4 3 .9 1.121 3.04 (7.96)
Sales units 11.9 59 .7 6.4 46 .4 18.8 2 1.1 12.6 9.9 7.4 (0 .7) 4.4 15.6 1.4 15.3
Operating prof it % 5.1 (0 .8 ) 5.5 (1.8 ) 5.8 (0 .1) 5.9 0.4 5.9 1.0 7.2 1.6 5.9 4 .8 1.1
Pre-tax prof it % 4.3 (0 .9 ) 4.0 (1.3 ) 4.6 0 .7 5.2 (0.2) 5.2 2 .0 5.2 3.9 6 .0 (2.1)
Net prof it % 3.5 (1.3 ) 3.4 (1.5) 4.0 0.2 4.7 4.9 1.4 4.9 3.8 14.5 (10.7)
Re ve nue by re gion
Japan bn 533.1 0.4 - 1,087.9 2 .1 - 531.0 - 1,065.0 13 .0 942.5
Naf ta bn 80.5 (30 .9 ) - 200.9 (14 .7) - 116.5 - 235.4 (3 4.7) 360.2
A sia bn 200.4 57.0 - 296.6 4 1.2 - 127.6 - 210.1
Other bn 19.6 27.6 - 33.2 27.9 - 15.4 - 26.0 (8 6.5) 192.0
Intra-company bn (96.2) 74.3 - (125.0) - (55.2) - (106.1) (145.2)
Op. profit by re gion
Japan bn 25.1 (3 1.3 ) - 72.9 (5.5) - 36.5 - 77.2 2 9 9.7 19.3
Naf ta bn 3.7 149 .7 - (0.2) - 1.5 - (0.7) (11.5)
A sia 8.3 79 .1 14.1 124 .5 4.7 6.3
Other bn 0.6 (18 .5) - 1.3 (5.5) - 0.8 - 1.4 (53.6 ) 3.0
Intra-company bn 0.1 714.3 - (0.9) (39 3 .1) - 0.0 - 0.3 (9 3.3 ) 4.5
Note s : (1) Q1 is A pr-Jun, Q2 is Jul-Sep, Q3 is Oct-Dec, Q4 is Jan-Mar (2) % ch is change versus corresponding year-ago data
12.6bn cost-cutting and rationalisation;

RECENT PERFORMANCE 5bn consolidation of Thai manufacturing
operation;
Year to March 2005
4bn - lower depreciation and other expense cuts;
Strong growth in sales and the benefits of cost
(12.7)bn material cost increases;
cutting programmes helped Isuzu to achieve a
(3.8)bn weaker sales mix;
record operating profit for the year to March
(2.4)bn adverse exchange rates.
2005.
Net profit improved by 9.8% to 60bn, helped by

Sales grew by 20.9% to 339,200 units but weaker
lower non-recurring losses.
sales in Nafta and Japan constrained revenue
growth to 4.4% at 1,493.6bn.
Revenue in Japan dropped 0.3% to 625.7bn, and
operating profit fell 10.6% to 66.5bn.
Following a more than fivefold increase in
operating profit the previous year there was a
3.2% rise in 2004/05 to 87.2bn, a company
record. The operating margin dipped by 0.1pts to
5.8%. The net profit increase of 2.7bn reflected:
- 48 -
Figure 28: Isuzu revenue & operating profit trend
1,400
1,200 Revenue Op. Profit
1,000
800
Index (1987 = 100)
600
400
200
0
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
-200
-400
-600
-800
Figure 29: Isuzu net profit trend
1,400
1,200 Revenue Op. Profit
1,000
800
Index (1987 = 100)
600
400
200
0
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
-200
-400
-600
-800
- 49 -
In North America revenue fell 15% to 213.9bn Light-duty vehicles - these include recreational
as Isuzu withdrew from local SUV production vehicles (e.g. Bighorn/Trooper), pickups (e.g.
and reduced unprofitable sales. The operating loss Campo), light trucks such as the Elf Series and
in the region reduced to (400)m from (1,000)m microbuses.
as the company made progress with its
restructuring in the region. Medium/heavy-duty vehicles - trucks and buses.
Engines, components and others - Isuzu sees
In Asia excluding Japan its revenue grew 11.3%
diesel engines as a core business and has
374.2bn helped by the first-time consolidation
expanded capacity significantly in recent years.
of the Thai manufacturing operation and brisk
However, the recent restructuring has seen its
sales in China. Operating profit rose 111% to
stake in some of its diesel operations reduced to
15.2bn.
below 50% (see detail below).
April - September 2005

Restructuring
Isuzu reported a 27% fall in group net profit to
As mentioned in the introductory comments,
26.02bn in the first half ended September 2005.
Isuzu's recent 3-year plans have included some
significant restructuring measures. The plan for
Revenue edged up 0.3% to 737.33bn from but
the three years to March 2005 addressed four
operating profit dropped 13% to 37.87bn from
main areas:
43.48bn.
The company said it managed to absorb the 1. Business restructuring in North America
negative effect of higher steel sheet prices, partly dissolving the SIA joint venture and
through cost cuts. However, an increase in its contracting SUV production to Subaru;
R&D expense led to the drop at the operating
reducing headcount and inventory levels;
level.
adding a new Pickup model.
Net profit was affected by non-recurring costs
including the closure of its Kawasaki factory, as 2. Powertrain business restructuring
well as write-offs of losses on its fixed-asset selling its share of DMAX to GM;
holdings. selling a 60% stake in Isuzu Poland (ISPOL) to
GM;
Full year outlook establishing a powertrain engineering JV with
GM (GM Isuzu Diesel Engineering Ltd).
Despite the weaker performance Isuzu revised up
its earnings forecast for the year to March 2006.
3. Manpower reduction
Group operating profit is forecast at 90bn 4. Recapitalisation & management change
compared with 80bn in its prior forecast. Net
cancelling GMs existing shares in Isuzu;
profit is forecast at 55bn from 50bn and it now
issuing new shares to GM for 10bn;
expects revenue of 1,580bn compared with
installing a senior GM executive on its board;
1,540bn.
debt-for-equity conversion through the issue
of 100bn preference shares.
BUSINESS STRUCTURE
By the end of the year to March 2005 Isuzu had:
Since abandoning passenger car production in cut labour costs by 20bn;
1992 Isuzus business has been organised around cut procurement costs by 20% through joint
three main divisions: purchasing with GM;
consolidated domestic sales companies to 25
from 41;
reduced by 40% the number of affiliates;
- 50 -
shut a truck plant in Kawasaki city; Isuzu has earmarked 180bn for capital
reduced the number of platforms to 3 from 7; investments in the current 3-year plan, up by
developed a common cab for its light and 70bn from the previous plan. The company is
medium trucks. targeting overseas sales of 300,000upa, excluding
pickup trucks, for fiscal 2007, up 100% from fiscal
Latest 3-year plan 2004. Isuzu expects the Japanese market to shrink
Under its current three-year plan starting April in the next three years but hopes to increase its
2005, Isuzu said it will target a group net profit of market share by releasing competitively priced
80bn, operating profit of 100bn and sales of small and midsize trucks, and thus minimizing
16,000bn for the fiscal year ending March 2008. sales declines.
The net profit goal represents a 45% increase GM

from the company's projected profit for this fiscal As mentioned, the links between GM and Isuzu
year. To achieve these, the company is go back to 1971. Currently GM has a 8.39% stake
introducing new truck models to be marketed in the Japanese firm.
globally while cutting the costs to develop and
make these models by reducing the number of Isuzu has recently made announced several
parts and other steps. initiatives in support of its aim to expand its role
within the GM group:
In China, the company aims to improve and
expand sales networks as well as strengthen Isuzu-General Motors Australia Ltd. (IGM)
brand recognition by opening in Shanghai and has become a wholly owned subsidiary,
Beijing large-scale car dealerships that handle all acquiring GM's 40% interest. IGM markets
Isuzu brand cars. It will also try to boost sales of Isuzu's Elf light truck and other vehicles
its core diesel engines to Chinese car makers, and shipped from Japan. It sells about 7,000upa.
consider making diesel engines locally in China. In South Africa, where GM produces and
markets trucks, Isuzu is taking a majority
In pursuit of these aims Isuzu has increased from stake in a new truck unit to be spun off from
6.9% to 20%, its stake in Qingling Motors which a GM subsidiary. Details are to be worked in
builds and sells Isuzu's medium- and light-duty 2006.
trucks (F series, N series, TF and UC) in China.
Eyeing a bigger role in the GM group, Isuzu
Isuzu has also sent one of its executives to be
also intends to eventually raise its interest in
Qingling's president.
a North American joint venture with GM. It
wants to help the group's truck operations
Isuzu also said it will transfer its light commercial
gain a foothold in such markets as China and
vehicle development operations to Thailand.
Russia.
Under its alliance with GM, Isuzu aims to supply Hino
its diesel engines to more firms in the GM group.
In January 2002 Hino and Isuzu announced a
GM's truck development operations will be
plan to merge their bus-making operations
consolidated at Isuzu, while the two companies
through a joint venture. J-Bus is now serving as a
will jointly develop light commercial vehicles for
holding company with the two firms' bus
the global market.
operations under its control, excluding
marketing.
- 51 -
Figure 30: Isuzu unit sales by region
Yr to M arch 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(f)
Japan 158,365 124,464 90,560 77,305 77,954 64,138 61,894 103,000 90,000 106,000
Share of Isuzu total (%) 45.3 34.9 21.9 19.9 22.0 20.8 22.3 36.8 26.5 23.1
Rest of World 190,977 232,017 322,722 310,972 277,139 244,340 215,997 177,000 249,000 352,000
Share of Isuzu total (%) 54.7 65.1 78.1 80.1 78.0 79.2 77.7 63.2 73.5 76.9
Total 349,342 356,481 413,282 388,277 355,093 308,478 277,891 280,000 339,000 458,000
* 1999 & 2000 reflect consolidated, earlier is non-consolidated
Hino holds a 26.5% share in the domestic large In Mexico it aims to sell 1,800 N-Series/Elfs in
bus market and Isuzu has a 20% share. In the 2006 and 2,300 in 2007. In Spain Isuzu Iberia has
midsize bus market, Hino has a 29.1% share and a sales target of 2,500 units of N-series/Elf and
Isuzu has a 28.1% share. In bus operations, Hino 3,000 units of Rodeo in 2007
currently has about 1,000 staff and Isuzu has
about 850. Isuzu Benelux has a sales target 450 units by
2008.
The bus alliance was preceded by the
announcement in October 2001 that Hino was to Isuzu's truck range comprises:
begin purchasing components from Isuzu - the
first such deal between the two firms. Isuzu has N-Series: light duty (3-8t GVW) trucks badged as
begun supplying an air suspension system for Elf in the domestic market. Isuzu counts these
Hinos medium trucks at the rate of about vehicles within its light-duty vehicle division.
1,000upa. The companies are considering further The N-Series models are designated: NHR (3.1-
deals involving transmissions and other 3.5t GVW), NKR (4.1-5.5t), NPR (5.5-7.0t) and
components. NQR (8t). An all-new N-Series range is expected
within twelve months.
MARKETS AND MODELS F-Series: medium weight 2-axle trucks 9-21t

GVW, badged as Forward in the domestic
2005 sales market.
Isuzu reports its total sales for calendar 2005 at
629,500 units. a 12% rise from the previous year. C&E-Series: heavy trucks. The C-series are rigids
However, this figure includes KD sets and the spanning 16.9-38t. The E Series are tractor units.
sale of vehicles to other manufacturers. These trucks are badged as Giga in Japan.
Domestic sales accounted for 95,300 units and The company was aiming to raise sales of
overseas sales 534,200 units. LCV sales amounted compressed natural gas (CNG) vehicles by 50% in
to 385,000 units, light-duty truck sales were 2006 to about 2,000 units, promoting their use as
192,200 units and heavy-duty truck sales were a way to lower emissions of nitrogen oxides and
52,300 units. carbon dioxide. It will focus on sales of CNG
vehicles that use the N-Series as their base. In
During 2005 the company announced the start of 2006, it will attempt to top 10,000 units in
new sales operations in Mexico, Spain and cumulative sales.
Benelux.
- 52 -
PRODUCTION USA
Under its new 3-year plan Isuzu plans to increase The last Isuzu rolled off the Lafayette, Indiana,
its global vehicle production to 760,000 units in assembly line in July 2004. Isuzu had been
fiscal 2007, up by 30% from fiscal 2004. building cars there for 15 years along with
Subaru. Subaru will continue to assemble vehicles
Japan at the plant, including the Legacy, Outback and
Baja models, and there are plans for Saab to begin
To support its CNG sales drive Isuzu has readied building a car there next year. Saab acquired
its plant in Fujisawa, Kanagawa Prefecture, for Isuzus 49% interest in the plant last year.
increased output, raising its annual production
capacity to 3,000 CNG vehicles. China
Thailand In April 2001 production started of F-Series
In Thailand Isuzu is boosting production capacity medium and heavy-duty trucks at Isuzu's Chinese
for its pickup trucks with a planned investment of joint venture Qingling Motors which previously
10bn from 2005 to 2007. Isuzu production made only light trucks. Isuzu now has a 20%
capacity in Thailand will be 300,000upa in 2007 stake in the company (see Business Structure).
consisting of 50,000upa of export vehicles,
Also in 2001 Isuzu became the first Japanese
another 50,000upa of knockdown component
automaker to begin producing midsize and large
exports and 200,000upa for the domestic market.
buses in China. Guangzhou Isuzu Bus, a joint
Ukraine venture in Guangdong Province, aims to produce
Isuzu plans to begin manufacturing trucks in about 1,000 Isuzu buses per year within three
Ukraine around 2006 at a joint venture with years. Isuzu has a 49% stake in the venture.
Holding Bogdan, a local bus maker based in Kiev.
Isuzu has been supplying 1,000 to 1,500 units' Engines
worth of microbus parts annually to Bogdan since Production of diesel engines rose by 2% in
1999. The joint venture will be the first calendar 2005 to 1.121m units. Excluding ISPOL
production base to be established by a Japanese (see Business Structure) output rose by 12% to
automaker in the former Soviet bloc. It will be set 881,900 units. The forecast for 2006 is for a 9%
up in Kiev at a capitalization of roughly 500m. rise to 962,000 units.
Bogdan will likely contribute 50% of the capital,
and Isuzu and Sojitz are expected to provide the
rest. Isuzu intends to hold a minimum 20% stake NOTES ON FINANCIAL STATISTICS
in the joint venture to make it an equity-method
Data is shown in the appendices for consolidated
affiliate. The trucks, to be sold under the Isuzu
and non-consolidated accounts. The non-
brand, will be made by assembling parts imported
consolidated data has been available for longer
from Japan. Starting with an annual output of
and the level of disclosure used to be better. Since
several thousand units, the joint venture is
the 1998/99 fiscal year the disclosure of
expected to export some of the trucks to Russia
consolidated data is much improved, in response
and other neighbouring countries.
to changed regulatory requirements.
Isuzus accounting year-end changed from

October to March in 1995, hence the 199495
period covers the five months from November
1994 to March 1995.
The sales and production data refer to all vehicles

including light trucks.
- 53 -
CHAPTER 6: IVECO
Iveco is by far the smaller of Fiat's two vehicle
OVERVIEW divisions in terms of revenue, assets or
Iveco, the commercial vehicle division of the employment. Over the past ten years its
Fiat Group, is the product of a consolidation cumulative revenue was just 32% of that
process which extends back to 1933. That was generated by Fiat Auto. However, during that
the year Fiat acquired control of OM. Control decade Iveco has usually been the more
of Frances Unic and Lancia followed in the profitable of the two divisions. Fiat Autos
1960s and in 1975 Iveco was formed by the massive losses over the past four years have
integration of: Fiat Veicoli Industriali, Lancia accentuated this trend.
Veicoli Industriali, OM, Unic and Magirus
The current troubles in Fiat Auto have
Deutz of Germany, a Klockner Humboldt
distracted attention from the fact that Iveco
Deutz (KHD) company which joined Iveco in
performed relatively well in the recent industry
return for a 20% equity stake in the combined
downturn and the near completion of its
group.
product renewal programme means its growth
The rationale for Ivecos formation was clear: prospects for the next few years are good. It
the five companies/divisions were too small and also means that the company should generate
nationally concentrated to compete effectively more free cash in the coming years as its capital
at a European level, still less at a global level. expenditure falls from 7.4% of revenue (average
Magirus Deutz was an entirely independent 2000-2002) to around 3-4% over the next few
company with its own product range and years.
manufacturing facilities but even Fiats own
Although it has not undergone any further
truck divisions were operated as discrete
significant expansion by acquisition, during the
entities with no product overlap or significant
late eighties and the nineties Iveco was active
pooling of resources, so the potential for
in developing alliances, generally either in
economies of scale and rationalisation was high.
order to penetrate new markets or to share the
That rationalisation of products and costs of product development.
manufacturing facilities took most of the
The Fiat group itself has undergone substantial
ensuing two decades to achieve, partly as a
change in recent years, as non-core businesses
result of having to accommodate the later
have been divested and the core business
acquisitions of Fords UK truck operations,
sectors have been boosted by acquisitions and
Astra in Italy, Pegaso in Spain and Seddon
alliances.
Atkinson in the UK.
The launch of the Euro range, starting with the

EuroCargo in 1991 and completed with the
introduction of the EuroStar in 1993, marked
the full integration of Ivecos disparate divisions
and the Euro range has recently completed its
first major renewal.
- 54 -
This refocusing of the group's industrial company has had discussions with a variety of
portfolio has been conducted with the objective other truckmakers such as MAN, Navistar and
of making each of the retained businesses world Scania but as yet, no significant agreements
leaders within their sphere of activity. So far, have been announced.
Iveco shows little sign of achieving this status
and there has long been speculation as to how Previous editions of this report have mentioned
Fiat might act to boost its presence in the that the link between Fiat Auto and GM may
world's truck industry. Merger and alliance put one additional name into the frame, that of
activity among Ivecos competitors means there Isuzu, whose medium/heavy truck division is of
are few potential partners left to talk to. The least strategic interest to GM. The Fiat/GM link
has now been broken.
Figure 31: Latest results - Fiat Group
Fiat
Unit Yr to De c 05 Q4-05 9M o-05 H1-05 Yr to De c 04 Q4-04 9M o-04 H1-04
Revenue mils 46,544 2.0 13,140 7.5 33,404 (0 .0 ) 22,807 (1.0) 45,637 (3.5) 12,218 (3 .5) 33,419 (3 .4 ) 23,033 (7.0 )
Trading prof it mils 1,000 1,9 0 0.0 361 639 2 65.1 407 98 .5 50 (125) 175 205
Operating prof it mils 2,215 361 1,854 # # # # # 1,445 1,0 56 .0 (585) (588) (514 .1) 3 125 (13 4 .1)
Pre-tax prof it mils 2,264 194 2,070 - 1,034 (1,629) (933) (696) (395)
Net prof it mils 1,420 84 1,336 510 (1,579) (561) (1,018) (638)
Employees 000's 161 0.2 161 0 .2 155 (3.7) 155 (3 .6) 161 (1.0 ) 161 (1.0) 161 (4 .2 ) 161 (7.7)
Unit s ale s 000's 1,870.2 (3 .0) 514.5 6 .5 1,355.7 (6 .2 ) 939.4 (6 .7) 1,928.3 4 .7 483.1 (4.9) 1,445.2 8 .3 1,006.7 7.0
Fiat A uto 000's 1,697.7 (3 .9) 467.0 7.1 1,230.7 (7.5) 852.0 (8 .1) 1,766.0 4 .2 436.0 (6 .5) 1,330.0 8 .2 927.5 7.0
Iveco 000's 172.5 6.3 47.5 0 .8 125.0 8.5 87.4 10.4 162.3 10 .9 47.1 13 .2 115.2 10 .0 79.2 7.2
Pe r unit
Revenue 24,887 5.2 25,539 1.0 24,640 6 .6 24,278 6 .1 23,667 (7.8 ) 25,291 1.5 23,124 (10 .9 ) 22,880 (13 .1)
Operating prof it 1,184 702 (157.6 ) 1,368 1,538 1,138 .8 (303) (1,217) (535.4 ) 2 124
Pre-tax prof it 1,211 377 1,527 1,101 (845) (1,931) (482) (392)
Net prof it 759 163 985 543 (819) (1,161) (704) (634)
Pe r e m ploye e
Revenue 289,246 1.8 81,658 7.3 215,510 3 .8 147,142 2 .7 284,256 (2 .4 ) 76,101 (2 .5) 207,681 0 .8 143,322 0.7
Operating prof it 13,765 2,243 (16 1.3 ) 11,961 9,323 1,0 98 .6 (3,644) (3,662) (518.4 ) 19 778
Pre-tax prof it 14,070 1,206 13,355 6,671 (10,146) (5,811) (4,325) (2,458)
Net prof it 8,825 522 8,619 3,290 (9,835) (3,494) (6,326) (3,970)
Sales units 11.6 (3 .2) 3.2 6 .3 8.7 (2 .6 ) 6.1 (3 .2) 12.0 5.8 3.0 (3.9) 9.0 13 .1 6.3 15.9
Operating prof it % 4.8 6.0 2.7 7.6 5.6 5.5 6.3 5.8 (1.3) (0 .2 ) (4.8) (5.9) 0.0 1.9 0.5 2 .0
Pre-tax prof it % 4.9 8.4 1.5 9 .1 6.2 8 .3 4.5 6.2 (3.6) (0 .8 ) (7.6) 1.0 (2.1) (1.5) (1.7) 0 .6
Net prof it % 3.1 6 .5 0.6 5.2 4.0 7.0 2.2 5.0 (3.5) 0 .6 (4.6) 4 .2 (3.0) (0 .8 ) (2.8) 0 .1

Fiat A uto mils 21,077 1.4 5,586 0 .0 15,491 1.9 10,609 (1.0) 20,795 3 .9 5,586 (2 .1) 15,209 6 .3 10,718 5.6
Iveco mils 9,374 1.3 2,652 0 .0 6,722 1.8 4,667 3.6 9,257 9 .7 2,652 8 .0 6,605 10 .4 4,504 7.9
CNH mils 9,926 0.2 2,298 0 .0 7,628 0 .3 5,172 0 .1 9,902 5.1 2,298 (4.4) 7,604 8 .4 5,165 7.6
Other & intra-group mils 6,167 8 .5 2,604 54 .8 3,563 (10.9 ) 2,359 (10 .8 ) 5,683 (3 9.6 ) 1,682 (19 .7) 4,001 (4 5.3 ) 2,646 (53.2 )
Trading profit by divis ion

Fiat A uto mils (248) (70 .9) 21 (113 .0 ) (269) (225) (852) (162) (690) (425)
Iveco mils 415 11.9 138 (6 .8 ) 277 2 4 .2 175 17.4 371 148 223 149
CNH mils 698 49 .5 160 (1,554 .5) 538 12 .6 405 10 .7 467 (11) 478 366
Other & intra-group mils 70 9.4 (23) (77.0 ) 93 (4 3.3 ) 52 (54 .8 ) 64 (100) 164 115
Fiat A uto mils (840) (96) (744) (474)
Iveco mils 357 3 4 0.7 134 119.7 223 1,0 15.0 147 56 8 .2
CNH mils 407 77.7 88 (11.1) 319 14 5.4 229 118 .1
Other & intra-group mils (509) (4 20 .1) (714) (1,0 0 3.8 ) 205 156 .3 223 2 01.4
- 55 -
Figure 32: Iveco revenue & operating profit trend
500
400
300
Index (1983 = 100)
200
100
0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
-100
Revenue ()
Op. Profit ()
-200
Figure 33: Iveco net income trend
300
200
100
Index 1983 = minus 100
0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
-100
-200
-300
-400
-500
-600
- 56 -
BUSINESS STRUCTURE
RECENT PERFORMANCE
As mentioned in the opening comments, Iveco's
2005 results core structure was established in the period
Fiat Group reported a pre-tax and net profit for spanning its initial formation in 1975 through to
2005 following four successive years of losses. its acquisition in 1990 of Spain's Enasa Pegaso, an
The recovery was helped by reduced losses at Fiat acquisition which brought Pegaso-owned Seddon
Auto and rising profits in other major divisions. Atkinson along with it. Since then the core
structure has been largely unchanged as Iveco
Iveco reported revenue 9.5bn, up 4.9% as sales concentrated its attention on integrating the
rose by 6.3% to 172,500 units. various companies to form a cohesive entity.
The division reported a 44% increase in trading Although it has not undergone any further
profit to 415m, a margin of 4.4% of revenues significant expansion by acquisition, during the
compared with 4.1% in 2004. The improvement late eighties and the nineties Iveco was active in
reflected increased volume and improved pricing, developing alliances, generally either in order to
which more than offset higher raw materials penetrate new markets or to share the costs of
prices. product development. Examples of the former are
included under 'Production Strategy', examples of
The powertrain activity (included in Ivecos the latter include joint ventures with:
results) produced 435,300 engines in 2005,
virtually unchanged from 2004, and generated Nissan Diesel in 1991 for the development of
revenue of 2.55bn (+6.3%), with over 40% of a new engine range, badged Cursor by Iveco
this represented by deliveries outside the Sector, (see Markets & Models).
chiefly to CNH. Trading profit was 83m, up
from 76m. Cummins in 1996, with whom Iveco and
Fiat's New Holland formed the European
Outlook Engine Alliance to develop another engine
range. The Tector range includes 4-cylinder
Iveco expects a slight overall increase in market
and 6-cylinder units and slots in below the
share in a flat Western European market,
Cursor range with displacements of 3.9-5.9
especially for its heavy-range vehicles and buses.
litres.
Growth is also expected in the rest of the world, ZF, with whom Iveco has jointly operated a
particularly for buses. Additionally, Iveco will transmission production plant in Spain since
focus on manufacturing efficiencies to offset 1993. The two firms co-operated in the
higher labour and utilities costs. development of a semi-automatic gearbox,
launched by Iveco as the Eurotronic in 1997.
Iveco's revenue is expected to be little changed in
2006 but its trading margin is expected to rise to
5.5-6.0% from 4.4% in 2005.
Figure 34: Fiat Group revenue by division (%)
Divis ion 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Fiat A uto 53.6% 57.0% 54.3% 50.1% 44.1% 42.1% 39.8% 42.3% 43.2% 42.0%
CNH Global 10.6% 11.5% 11.2% 10.9% 18.7% 18.6% 18.9% 19.9% 21.9% 21.9%
Iveco 13.2% 12.7% 14.5% 15.4% 15.0% 14.9% 16.4% 17.9% 19.8% 20.4%
Other 22.7% 18.8% 20.0% 23.7% 22.3% 24.4% 24.9% 19.9% 15.1% 15.7%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
- 57 -
RVI with whom Iveco collaborated in the In the firefighting sector Iveco has been at the
development of a new cab for their forefront of industry consolidation. In 1996 Iveco
respective van ranges. The cab is used in the acquired BTG, an East German manufacturer of
Daily. small fire fighting vehicles. Subsequently Iveco
In 1998 the ties between Iveco and RVI became formed a joint venture with RVI through a new
closer, first with the announcement that their bus holding company called Iveco EuroFire in which
and coach operations were to merge to form Iveco is an 85% shareholder. In 1997 Iveco
Irisbus and then the merger of the foundry EuroFire acquired a manufacturer in Austria and
operations of their respective parent companies. established a new company called Lohr Magirus
Feuerwehrtechnik.
However, the European Commission's approval
for Volvo's takeover of RVI was conditional upon Ivecos structure
RVI disposing of its interest in Irisbus and in May Until recently Iveco divided its business into six
2001 it was announced that Iveco would take full segments: Light CVs, Medium CVs, Heavy CVs,
control of Irisbus in two stages over the next Buses/Special Vehicles, Engines and Services.
following years. For four years after the signing of
the agreement, Irisbus retains the right to use the During 2002 Iveco announced the merger of its
Renault trademark, allowing it to replace the medium truck and heavy truck business units. It
brand gradually with the Irisbus name and logo as expected the move to save some 50m per year by
the core trademark of the Group. The Iveco 2004. The move is also expected to make Iveco
brand will be similarly phased out. more efficient in approaching fleet customers
who buy vehicles in both segments.
Figure 35: Iveco unit sales by market
M ark e t 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005(e )
(000s) (000s) (000s) (000s) (000s) (000s) (000s) (000s) (000s) (000s)
Italy 32.6 34.4 37.2 41.5 45.8 39.3 44.3 38.3 38.7 36.0
Share of Iveco total (%) 27.2 27.7 27.2 27.7 27.8 24.5 27.4 26.2 25.3 20.9
France 15.2 15.1 16.3 20.1 23.1 22.9 17.6 17.8 20.4 21.6
Great Britain 13.9 14.6 15.6 13.7 13.1 15.4 16.2 13.8 14.6 15.5
Germany 14.7 14.5 16.6 16.9 18.4 16.3 15.0 14.0 16.3 17.0
Other 43.3 45.6 51.1 57.7 64.4 66.5 68.8 62.5 63.0 82.4
Total 119.7 124.2 136.8 149.9 164.8 160.4 161.9 146.4 153.0 172.5
- 58 -
Figure 36: Iveco's share of W. European truck markets
2001 2002 2003 2004 2005(e ) 2006(f)

3.5t-6.0t
A ustria 18.7 18.3 20.9 14.9 20.3 19.9
France 14.5 11.8 13.4 6.9 9.8 9.1
Germany 38.5 36.2 37.9 39.4 43.2 40.6
Italy 63.4 59.4 36.0 34.6 33.5 31.8
Netherlands 38.3 42.6 36.1 37.2 37.5 40.0
Portugal 18.6 2.7 4.5 7.2 9.5 8.6
Spain 22.0 17.1 15.5 16.4 16.3 16.8
UK 31.4 24.4 23.9 26.7 20.6 24.3
Nordic markets 18.9 25.0 23.5 20.2 24.8 22.6
Other 12.3 16.0 15.7 14.5 17.3 15.1
Total W. Europe 31.3 29.8 28.2 28.3 29.6 28.8
6.1t-10.0t
A ustria 16.8 20.7 18.1 9.8 14.4 15.3
France 28.6 31.9 32.3 33.5 34.4 34.3
Germany 19.1 27.4 22.4 21.1 21.3 21.3
Italy 59.9 61.6 64.7 62.1 62.3 60.8
Netherlands 15.4 20.5 17.7 23.9 13.5 13.0
Portugal 9.7 9.7 7.0 8.9 9.6 9.1
Spain 31.1 31.2 37.7 33.0 32.0 33.7
UK 30.6 34.9 32.0 33.2 29.3 34.2
Nordic markets 22.0 24.7 20.9 30.6 27.6 31.1
Other 12.2 13.5 15.0 18.4 19.8 18.3
Total W. Europe 26.7 32.9 29.9 29.6 28.4 29.6
10.1t-15.9t
A ustria 8.7 15.5 11.1 9.2 14.2 16.0
France 20.8 20.6 18.5 21.7 21.7 22.4
Germany 14.3 21.3 16.2 20.6 19.3 20.6
Italy 53.9 57.7 60.2 61.0 63.1 59.8
Netherlands 5.7 10.9 8.4 9.1 7.1 8.3
Portugal 22.6 22.6 14.9 23.2 20.1 22.3
Spain 28.1 23.5 26.6 22.8 23.6 24.3
UK 23.6 17.3 14.6 15.0 19.1 17.0
Nordic markets 9.2 8.4 6.7 9.3 10.3 9.6
Other 11.1 16.9 16.5 14.7 13.8 14.5
Total W. Europe 23.0 26.4 22.5 24.7 23.8 25.1
3.5-15.9t
A ustria 13.7 17.9 15.6 10.7 15.7 16.7
France 21.9 22.3 21.4 19.9 23.5 24.1
Germany 24.5 29.3 26.3 26.6 27.5 27.4
Italy 58.7 59.6 51.6 50.9 49.7 49.9
Netherlands 17.2 22.0 20.9 22.2 17.9 17.9
Portugal 15.0 10.7 8.1 12.2 12.3 12.3
Spain 26.1 23.0 24.7 23.2 23.0 23.8
UK 29.9 30.6 28.1 29.8 26.1 30.1
Nordic markets 17.6 22.2 20.8 19.6 22.5 21.2
Other 11.9 15.2 15.6 16.3 17.5 16.3
Total W. Europe 27.2 30.3 27.6 28.1 27.7 28.3
16t plus
A ustria 4.8 6.5 5.6 7.1 6.9 6.9
France 8.6 8.9 8.7 10.8 9.1 9.4
Germany 5.4 7.4 6.7 6.7 6.4 7.3
Italy 36.6 37.1 37.6 38.1 37.5 37.5
Netherlands 2.4 2.3 2.5 2.3 2.8 3.2
Portugal 8.4 6.8 4.8 3.5 5.1 7.5
Spain 17.8 19.5 17.4 18.7 19.1 17.9
UK 7.4 8.3 7.5 5.7 7.0 7.8
Nordic markets 3.2 2.6 2.6 2.3 2.6 4.1
Other 10.5 7.4 6.1 7.1 5.9 7.3
Total W. Europe 11.1 12.5 11.1 11.5 11.3 11.7
- 59 -
Model range
MARKETS & MODELS Iveco has now completed its product
Iveco delivered a total of 172,500 vehicles (all development cycle during which nearly all its
weights) in 2005, up 6.3%. In Western Europe Euro model range and most of its engines have
134,900 units were sold, up 2.3%. been renewed. The phase can be said to have
begun in October 1998 when a 7.8-litre version
Sales in Italy were 1.7% lower but in the rest of of the new Cursor engine (Cursor 8) was
western Europe were 5.2% higher. Sales in launched in the EuroStar. The Cursor 10
Latin America and Eastern Europe were quite followed in late 1999, this is a 10.3-litre unit
strong. which is installed in the Euro-Tech and
EuroStar models. A 13-litre unit debuted in the
At 10.9%, Ivecos share of the Western EuroTrakker at the beginning of 2001 and was
European market was virtually unchanged. In offered in the EuroStar and EuroTech later in
Italy, where the market was down 1.7%, Iveco the year.
had a market share of 29.4%, down 0.4pts
At the autumn 2000 IAA commercial vehicle
Western Europe - sub-16t trucks show in Frankfurt, Iveco showed its new
Tector engine range, now being installed in the
Iveco's share of western Europe's sub-16t sector
Eurocargo range. The Tector engine was jointly
rose by 0.5pts to 28.1% during 2004, following
developed by Fiat group companies (Iveco and
a 2.7pts decline the previous year. The
New Holland) and Cummins in the European
company gained share in six of the eleven main
Engine Alliance.
markets, including Germany, the most
important market in this sector.
At the light end, Ivecos F1 engine (for the Fiat
We previously anticipated a further increase in Ducato and the Daily) has also been renewed. It
2005, but the weakening of the Italian market is being installed in the Ducato (a new
will cause a small decline. However, the new generation of which was introduced in early
Eurocargo (renewed in 2003) and the new (new 2002) and in the Daily, which was facelifted in
engines and transmissions) Daily mean that 2004.
Iveco's share should remain at a reasonably
high level over the next few years. The main In January 2002 the company launched the
exception to this comment is Italy; Iveco's share Stralis AS (active-space), the replacement for
of its domestic market is generally expected to the EuroStar. The new model is offered with
decline in the face of increasing competition. the Cursor 10 and Cursor 13 engines and is
reported to have cost 170m to develop.
Western Europe - 16t-plus trucks
In the heavy truck sector Iveco's share of the The EuroTech was replaced by the Stralis AT
west European market rose by 0.4pts to 11.5% (active time) and AD (active day) models in
following a drop of 1.4pts the previous year. summer 2003. The Eurocargo was also replaced
in summer 2003.
The availability of new products such as the
Eurocargo and Stralis should help the company The EuroTrakker was replaced by the new
maintain its share at 11% or more over most of Trakker, which was shown at the Hannover
the next few years. show in September 2004. Sales of the new
model began in early 2005.
The company has invested some 2bn in the

renewal of its model range and in 2005 some
70% of its revenue was derived from new
products compared with 49% in 2003.
- 60 -
Figure 37: Iveco's product range
IVECO
Daily 1999 N E E N Light V ans/
Chassis cabs
EuroCargo 1991 E E/F N F M edium
EuroTech 1992 E N F M edium-Heavy
Road Trucks
EuroTrakker 1993 E E T Heavy
(Co nst ruct io n)
Trakker 2004 I Heavy
(Co nst ruct io n)
EuroStar 1993 E E T Heavy (Road )
Stralis 2002 I F Heavy (Road )
I: Intro ductio n T: T erm inatio n N: New M o del F : Facelift E: New Engine X: range extensio n
Iveco Magirus - produces the Stralis as well

PRODUCTION STRATEGY
as fire-fighting vehicles. Output from the
plant at Ulm was about 800 units higher at
In Europe the principal truck manufacturing
14,315 units in 2004.
companies within Iveco are:
Astra Veicoli Industriali - manufactures
Iveco SpA - which produced 35,941 trucks
special purpose vehicles such as dumper
(for buses see Irisbus) from its Italian plants
trucks for quarries and mines at its plant in
in 2004, about 500 more than in 2003.
Piacenza. It also makes military vehicles.
Iveco Pegaso - responsible for about 25% of Some Astra vehicles are sold through the
European production of the Daily van CNH network. In 2002 Astra acquired
which is produced at Valladolid. The SIVI, a bodybuilder which specialises in
Madrid plant produces the Trakker and the converting Iveco vehicles for special
Stralis which is also produced by Iveco applications. Astra produced 1,615 vehicles
Magirus. The plant also produces Seddon in 2004, about 100 fewer than the previous
Atkinson models (see below). Production year.
of 3.5t plus trucks at Pegaso was 19,123
units in 2004 about 300 more than the
previous year. The plant received 12m of
the 170m invested in the new model.
- 61 -
Seddon Atkinson - the UK company China

produced 542 vehicles in 2001, down from In China, Naveco is Iveco's 50-50 joint venture
646 units in 2000. In March 2002 it was with Yuejin Motor Corporation for the
announced that production of SA trucks production of up to 60,000 Daily vans and
was to be moved to Madrid. The decision
75,000 engines annually. Naveco launched its
meant the closure of the Oldham, UK plant
new 'Power Daily' in March 2004. It is
and about 150 of 200 jobs were cut, the
produced at the group's factory in Nanjing. In
remaining employees concentrate on
2004, it manufactured and sold 15,000 units,
marketing and after-sales service. Seddon
Atkinson, whose first vehicle was a steam about 2.4% more than in 2003.
wagon in 1916, made cumulative losses of
During 2001 a further Chinese joint venture
24m over the five years to 2001.
was announced. CBC-Iveco a 50:50 venture
Irisbus - the former joint venture with between Iveco and the Changzhou Bus
RVI, now wholly owned by Iveco sold Company entailed an investment of $36m by
8,262 vehicles in 2004, 0.5% less than the Iveco. The new company produces three new
previous year. The company has plants at: ranges of buses - minibuses, town buses and
Annonay, France (1,993 employees), touring coaches - with chassis, engines and
Vysoke Myto, Czech Republic (1,768 mechanical assemblies developed by Iveco.
employees), Valle Ufita, Italy (1,134 Production began in 2001 and in 2003 it sold
employees), Budapest-Szekesfehervar, 4,593 buses and chassis. However, in August
Hungary (798 employees), Rorthais, France 2005 Iveco announced it was to sue CBC over
(475 employees), Barcelonamataro, Spain irregularities. It is assumed that the venture
(403 employees), Modena, Italy (80 will soon end.
employees) and at Changzhou in China (see
Acquisitions & Alliances) where 2,580 In December 2005 Iveco signed an agreement
people are employed. with SAIC Motor Corporation and the
Chongqing Heavy Vehicles Group, to establish
Defence Vehicles - the Defence Vehicles
a long-term partnership in China to produce
division supplied 1,884 trucks to the Italian
heavy-duty trucks and engines with Iveco
army in 2002. These units - which include
technology.
light-armoured vehicles and tanks - do not
appear in our production database.
The agreement envisages the acquisition of a
South America 67% stake in Chongqing Hongyan Automotive
Iveco's Argentine subsidiary decided not to - a subsidiary of the Chongqing Heavy Vehicle
suspend the production of heavy trucks at its Group - by a 50-50 joint venture to be set up by
Cordoba plant and switch them to Brazil, as Iveco and SAIC. The Chongqing Heavy Vehicle
announced in 2001. However, it no longer Group will control the remaining 33%.
exports the EuroTech and the Eurocargo
models to Brazil. Cordoba supplies cabins for India
the production of trucks at a new production In India, Ashok Leyland in which Iveco holds a
line at the company's Sete Lagoas plant, in 15% stake, produced 54,067 vehicles in the year
Brazil. In 2004 it produced 2,500 units, up from to March 2005, 12% more than the previous
1,500 in 2003. year. In February 2005 Iveco and Ashok
Leyland concluded a new agreement to
Iveco has invested $8.3m to expand its Brazilian significantly enlarge their co-operation.
plant. The expanded line was inaugurated in
April 2004. An extra 120 people are employed
taking the total to 550 workers at the plant. In
Brazil the company produced 15,800 vehicles in
2004.
- 62 -
Turkey NOTES ON FINANCIAL STATISTICS

Iveco owns 27% of Otoyol Pazarlama AS (the Statistics are provided for Fiat Group and Iveco.
distributor) and Otoyol Sanayi AS (the
industrial company). Most of the rest of the Iveco is registered in the Netherlands, therefore
equity is owned by the Turkish industrial group the native currency shown in the financial
Vehbi Koc. Otoyol began vehicle production in statistics was Dutch guilders until the euro's
1966 and began producing Iveco vehicles under debut in 2001. There is good disclosure in the
license in 1989. It currently assembles trucks, accounts. As Iveco also produces and sells
pickups and mini/midi-buses. It employed 972 commercial vehicles of less than 6t GVW and
people at the end of 2004, down from 1,057 in buses, the company's financial data includes the
2003. contribution from these sides of the business.
The plant at Sakarya assembles Iveco tractors From 1988-93, the Fiat Group data reflects the
and rigids, all of which pre-date the Euro- consolidated results of the industrial companies
range. The plant's stated capacity is 12,500upa only, with financial services on an equity basis.
but over the past five years its average output
has been only about 5,300upa. During 2004 In 1996, the financial services group Fidis SpA
Otoyol produced: was merged into Fiat and the related financing
activities were transferred to the automotive
1,792 (2003: 1,711) trucks of 3.5-12t; sectors. The results from finance activities are
14 (60) rigid trucks greater than 12t; now consolidated on a line by line basis and
2,917 (2,610) LCVs. operating profit is calculated after deducting
the interest expense related to financing
Russia activity. The data for 1994 and 1995 have been
In April 2002 Iveco signed a preliminary restated.
agreement with Russian group Gorky
Automobile Plant (Gaz), to start manufacturing
commercial vehicles in Russia. The two groups
were to set up a joint venture initially to
manufacture people carriers of up to 1.5t.
Heavier vehicles could be manufactured at a
later stage of the project. However, the status of
this project is currently unclear.
- 63 -
CHAPTER 7: MAN NUTZFAHRZEUGE

MAN had a successful run during the nineties,
OVERVIEW increasing its share of the West European sub-
MAN Nutzfahrzeuge is the truck and bus 16t and 16t-plus sectors. The improvement
division of MAN AG, the German industrial reflected the success of its L2000, M2000 and
conglomerate. It is the largest division within F2000 trucks, introduced between 1993 and
the group in terms of revenue, employees and 1996. It also reflected a push by MAN to reduce
(usually) profit contribution. The truck division its dependence on the German and Austrian
is mostly focused on west European markets markets. In 1993 and 1994 some 70% of MANs
and typically 60-70% of its output is in the 16t- West European sales took place in Germany
plus sector. MAN was the worlds eleventh and Austria. By 2004 this figure had reduced to
largest truck producer in 2004 and the 45%.
thirteenth largest bus and coach producer. The
The sales success has helped MAN to remain
following discussion focuses solely on MAN
profitable at the operating level from 1990 to
Nutzfahrzeuge unless otherwise stated.
2003 with an average operating margin of 4.2%.
From its origins in the 1840's until the end of However, it reported net losses in 2001 and
the 20th century, MAN's growth was mostly 2002 as the European truck market turned
self-generated, though there were exceptions: down and it was adversely affected by
accounting irregularities at ERF and production
Bssing, a long-established truck and bus problems with the recently launched TG-A
builder based in Braunschweig, was taken range.
over by MAN in 1972. The Bssing logo,
the Braunschweig lion, is still incorporated Following this downturn the company made a
in the MAN grille badge. good recovery in 2003 and its earnings growth
gained momentum in 2004.
In 1990 MAN acquired the truck-building
business of Steyr (Austria) having Previous editions of this report have
previously acquired sterreichische commented that if further scale economies are
Automobilfabrik (AF) Grf & Stift - a sought MAN would be likely to negotiate
specialist vehicle builder. project-specific ventures with other
During 2000 MAN acquired two small truckmakers or suppliers. This type of
truckmakers: ERF the UK producer and Star, collaboration seems more likely to succeed for
based in Poland. Also during 2000 MAN MAN than trying to acquire or merge with
announced its plan to take over Neoplan Bus another large truckmaker.
(formerly Gottlob Auwrter) the German bus
manufacturer. The acquisition was completed Over the past three years MAN has announced
in July 2001 following approval by the several such joint ventures, the main ones being
competition authorities. These acquisitions with Scania, Navistar and India's Force Motors.
increased to six, the number of brands
controlled by the division (MAN, Steyr, AF,
ERF, Star and Neoplan).
- 64 -
MAN Group has said that each of the its these criteria depends on the parameters
divisions should hold at least third place in its selected. For example from a global perspective
relevant market, while aiming to reach second it is nowhere near third place in sales terms.
or first place. Each division must have the However, from a purely European perspective
critical mass needed to generate its own it just about meets the market criterion.
growth. Whether the truck division meets
Figure 38: Latest results - MAN Nutzfahrzeuge
MAN Nutzfahrzeuge
Unit 9M o-05 Q3-05 H1-05 Yr to De c 04 9M o-04 Q3-04 H1-04 Yr to De c 03
Revenue mils 5,521 7.3 1,820 5.8 3,701 8 .1 7,409 10 .5 5,144 11.2 1,721 8 .9 3,423 12 .5 6,707 2 .2
Operating prof it mils 282 56 .7 102 43 .7 180 6 5.1 341 6 8 .0 180 14 0 .0 71 10 8 .8 109 165.9 203 9 9 .0
Pre-tax prof it mils 0 260 114 .9 121 611.8 49 2 2 6.7 72 3,50 0.0 121 8 3 0 .8
Net prof it mils - - - - - - - 107 (72 9.4 )
Employees 000's 33.51 (1.7) 33.51 (1.7) 33.91 0 .1 33.81 (0 .8 ) 34.09 (1.3 ) 34.09 (1.3 ) 33.87 (2 .4) 34.09 (0.9 )
Unit s ale s 000's - - - 69.35 11.6 - - - 62.13 0 .9

Trucks 000's - - - 63.35 13 .4 - - - 55.85 3 .6
Buses 000's - - - 6.00 (4.5) - - - 6.28 (17.9 )
Pe r unit
Revenue - - - 106,835 (1.0 ) - - - 107,949 1.2
Operating prof it - - - 4,917 50 .5 - - - 3,267 9 7.2
Pre-tax prof it - - - 3,749 9 2 .5 - - - 1,947 8 22 .1
Net prof it - - - - - - - 1,722 (723 .5)
Pe r e m ploye e
Revenue 164,781 9.2 54,320 7.6 109,132 8 .0 219,136 11.4 150,904 12.7 50,487 10.4 101,069 15.2 196,721 3 .1
Operating prof it 8,417 59.4 3,044 4 6.2 5,308 64 .9 10,086 6 9 .4 5,280 14 3 .2 2,083 111.6 3,218 172.4 5,954 10 0 .8
Pre-tax prof it 0 (100 .0) 0 (100 .0 ) 0 (10 0 .0 ) 7,690 116 .7 3,550 6 21.2 1,437 2 31.0 2,126 3 ,58 8 .1 3,549 8 39 .1
Net prof it - - - - - - - 3,138 (735.0 )
Sales units - - - 2.1 12 .6 - - - 1.8 1.8
Operating prof it % 5.1 1.6 5.6 1.5 4.9 1.7 4.6 1.6 3.5 1.9 4.1 2 .0 3.2 1.8 3.0 1.5
Pre-tax prof it % 0.0 (2 .4) 0.0 (2 .8) 0.0 (2.1) 3.5 1.7 2.4 2 .0 2.8 1.9 2.1 2.0 1.8 1.6
Net prof it % - - - - - - - 1.6 1.9

Trucks mils 4,711 9.0 1,545 5.1 3,166 10 .9 6,167 12 .3 4,324 13 .0 1,470 14.9 2,854 12.0 5,492 1.6
Buses mils 810 (1.2) 275 9.6 535 (6 .0 ) 1,242 2 .2 820 3 .0 251 (16.6) 569 14.9 1,215 5.1
Other mils 0
Trucks mils 273 6 9.6 96 3 9 .1 177 92 .4 304 53 .5 161 9 8 .8 69 13 7.9 92 76.9 198 13 .8
Buses mils 9 (52 .6) 6 2 0 0.0 3 (8 2 .4 ) 37 64 0 .0 19 (416 .7) 2 (6 0.0) 17 (2 54 .5) 5
Revenue increased by 10.5% to 7.4bn boosted

RECENT PERFORMANCE by an 11.6% rise in unit sales to 69,350 trucks
and buses as demand improved in most
2004 results
European markets including the new EU
MAN Nutzfahrzeuge reported strong member states. MAN improved its share of the
improvements in revenue and profit for 2004 6t-plus truck market in western Europe from
marking its third year of improvement 14.9% in 2003 to 15.2% and its share of the bus
following a pre-tax loss in 2001- its first since market rose from 14.2% to 14.4%.
1994.
Revenue in the truck unit rose by 12.3% to
6.17bn and the bus unit saw a 2.2% rise to
1.24bn.
- 65 -
Figure 39: MAN Nutzfahrzeuge revenue & operating profit trend
450
Revenue Op. Profit
400
350
300
Index (1989 = 100)
250
200
150
100
50
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Figure 40: MAN Nutzfahrzeuge net profit trend
600
500
400
Index (1989 = 100)
300
200
100
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
-100
- 66 -
Figure 41: MAN Group revenue by division
Divis ion / Yr to Jun/De c 1998 1999 2000 2001 2002 2003 2004
Commercial vehicles 35.5% 36.8% 39.5% 38.4% 38.3% 46.4% 46.3%
Industrial services 25.4% 19.9% 17.1% 17.3% 17.8% 19.9% 19.9%
Printing machines 10.7% 12.5% 12.4% 11.9% 10.8% 10.5% 10.1%
Diesel engines 7.7% 7.7% 7.4% 8.5% 8.5% 9.1% 8.9%
Industrial eq't 20.6% 23.1% 23.6% 21.9% 8.4% 9.7% 9.2%
Financial services - - - 2.1% 2.6% 4.3% 5.6%
Discontinued op's - - - - 13.7% 0.0% 0.0%
Total 100% 100% 100% 100% 100% 100% 100%
Year end changed to Decemb er in 2001
Operating profit increased by 68% to 341m Ferrostaal - a provider of industrial services

and the margin rose by 1.6pts to 4.6%. Pre-tax with three core divisions: Facility
profit was 115% higher at 260m. The truck Construction & Contracting, Industrial
unit improved its operating profit by 54% to Equipment & Systems and Steel Trading &
304m and its operating margin rose by 1.3pts Logistics.
to 4.9%. The bus unit increased its operating MAN Roland - a manufacturer of printing
profit more than seven-fold to 37m and its machinery;
margin grew to 3% from 0.4%. MAN B&W - diesel engines for marine and
other applications;
Interim results MAN Turbomaschinen - turbines and
compressors;
MAN Nutzfahrzeuge reported a 7% rise in
Industrial equipment and facilities - this
revenue to 5.52bn over the first nine months
division includes various businesses, mostly
of 2005. In the truck division revenue was 9%
in unrelated sectors: Renk; MAN
higher at 4.7bn helped particularly by strong
Technologie; MAN DWE, SHW.
sales of road tractors.
In the bus division revenue dropped by 1% to MAN is aiming to establish its products within
810m as a strong third-quarter performance the top three best-sellers in their respective
mostly offset a weak first half. markets. The company also has the objective of
increasing its business volume by 50% over the
Operating profit was 57% higher at 282m. The
five years to December 2004.
improvement was mostly attributable to
improved capacity utilisation. In the truck Within MAN Nutzfahrzeuge growth is being
division profit rose by 70% to 273m while in achieved by a combination of product-led sales
the bus division there was a 53% fall to 9m. growth and the acquisitions of Star, ERF and
Neoplan (see Production Strategy for more
BUSINESS STRUCTURE details).
Besides trucks and buses MAN has four
principal industrial divisions and one for During 2001 the truck and bus division
financial services: announced a new organisational structure to
reflect the integration of its new subsidiaries.
- 67 -
Figure 42: MAN Nutzfahrzeuge unit sales:
Cale ndar ye ar 1998 1999 2000 2001 2002 2003 2004 2005(e )
Germany 22,322 25,931 27,898 24,113 18,397 20,060 22,072 24,270

Share of MAN total 46% 47% 43% 35% 31% 32% 33% 34%
A ustria 2,984 3,559 3,468 3,525 3,170 3,498 4,215 4,110

UK 6,752 7,140 7,672 9,150 6,147 6,098 6,167 5,020

Spain 3,215 4,509 4,596 4,956 4,283 4,742 4,991 5,320

France 2,602 3,249 3,668 4,056 3,216 3,089 3,069 4,140

Netherlands 1,754 1,570 1,583 1,573 1,354 1,213 1,359 1,400

Other 9,371 9,142 15,665 21,477 23,124 23,431 25,850 27,540

Total 49,000 55,100 64,550 68,850 59,691 62,131 67,723 71,800
Note: New definition of b us kits from 2002 led to lower sales figures
The new structure which was introduced at the 3.5-15.9t

beginning of 2002 sees the creation of a number
MAN's share of the European sub-16t sector
of profit centres or business units. There are
rose in 2003 and 2004 following two years of
separate units for MAN brand heavy trucks and
decline. The increase reflects gains in key
for its medium and light trucks.
markets such as Austria, France, Germany and
the UK. The new TG-L and TG-MC ranges
There are also units for special vehicles,
should improve MAN's share further in the
engines, pressings, Star Trucks, ERF and four
next few years.
units within the bus and coach division.
16t-plus
MARKETS MANs share of the heavy sector rose by 0.3pts
During 2004 MAN sold 63,348 trucks, a 13% to 15.1%, helped by rises across a range of
increase. About 71% of the trucks sold were markets with a particularly strong gain in the
heavy trucks compared with 70% in 2003. The Nordic region. We are expecting MAN's share
bus unit sold 6,062 buses, a 4% decrease. Please to rise further over the next two years helped
note that the definition of bus sales was by the TG-M.
changed in 2003 to exclude the sales of kits.
The 2002 data has been restated. UK defence contract
In April 2005 MAN ERF UK Ltd was awarded
Data for 2005 was not available at the time of an order for just under 5,200 trucks by the
writing but we expect full year truck sales to British Ministry of Defence. The contract is
have been 6-7% higher at around 68,000 units. worth 1.5bn and also provides for an option
for approximately 2,100 further vehicles.
Deliveries of the vehicles will commence in
2007 and be completed in 2013. (See
Production also).
- 68 -
Figure 43: MAN market shares, western Europe (%)
2001 2002 2003 2004 2005(e ) 2006(f)

3.5t-6.0t
Austria 0.0 0.0 0.0 0.0 0.0 0.0
France 0.0 0.0 0.0 0.0 0.0 0.0
Germany 0.1 0.1 0.0 0.0 0.0 0.0
Italy 0.0 0.0 0.0 0.0 0.0 0.0
Netherlands 0.0 0.0 0.0 0.0 0.0 0.0
Portugal 0.0 0.0 0.0 0.0 0.0 0.0
Spain 0.0 0.0 0.0 0.0 0.0 0.0
UK 0.0 0.0 0.0 0.0 0.0 0.0
Nordic markets 0.0 0.0 0.0 0.0 0.0 0.0
Other 0.0 0.0 0.0 0.0 0.0 0.0
Total W. Europe 35.4 0.0 0.0 0.0 0.0 0.0
6.1t-10.0t
Austria 30.1 32.0 32.0 17.8 15.6 20.7
France 2.0 1.8 1.8 1.1 1.6 2.1
Germany 25.5 20.2 22.2 21.1 21.5 22.5
Italy 1.5 0.9 1.1 1.6 1.5 1.7
Netherlands 11.1 10.3 11.1 10.6 9.6 11.7
Portugal 1.5 1.1 0.9 1.0 1.7 2.7
Spain 11.5 1.5 2.1 5.5 6.8 7.2
UK 13.8 9.7 13.1 11.2 9.8 11.8
Nordic markets 12.4 10.6 7.6 8.1 10.1 10.9
Other 5.2 4.7 4.5 3.7 5.9 6.7
Total W. Europe 16.0 11.4 13.5 13.1 12.8 14.0
10.1t-15.9t
Austria 41.7 43.4 41.1 33.6 34.0 33.9
France 6.4 6.8 7.9 7.7 8.9 10.1
Germany 28.4 23.2 27.0 26.0 26.4 27.5
Italy 5.0 3.7 3.9 3.7 4.6 5.2
Netherlands 11.5 15.0 15.4 12.5 13.1 15.3
Portugal 14.2 11.7 7.6 14.3 14.7 13.1
Spain 19.2 4.9 9.8 13.4 14.7 15.7
UK 5.5 7.4 10.5 16.9 8.5 15.5
Nordic markets 13.6 14.4 14.5 22.4 21.2 22.5
Other 21.0 14.5 9.5 12.4 13.7 14.5
Total W. Europe 15.1 11.8 15.0 17.6 16.2 17.0
3.5-15.9t
Austria 27.6 27.7 29.0 20.7 19.6 21.3
France 4.1 4.4 5.0 4.0 5.5 6.2
Germany 17.8 13.9 15.8 15.7 16.0 16.2
Italy 2.4 1.7 1.5 1.5 1.6 2.2
Netherlands 8.7 9.7 8.7 8.2 8.2 10.2
Portugal 4.2 2.8 2.1 4.2 4.8 4.8
Spain 8.1 1.3 2.5 4.8 5.8 6.1
UK 10.3 7.4 9.8 9.3 7.3 9.6
Nordic markets 4.1 3.7 3.1 5.1 5.3 5.6
Other 7.7 5.3 3.7 4.1 5.3 6.0
Total W. Europe 10.8 7.9 9.1 9.5 9.3 10.1
16t plus
Austria 40.6 42.3 39.4 39.2 40.7 40.4
France 7.2 6.2 7.0 6.4 8.0 8.5
Germany 28.7 26.1 27.6 27.8 28.6 28.7
Italy 8.4 8.4 7.9 8.3 9.1 8.8
Netherlands 9.2 9.4 9.1 9.8 10.3 10.5
Portugal 11.2 8.7 10.3 11.1 10.4 9.7
Spain 12.7 12.5 14.0 13.3 13.6 13.5
UK 20.2 14.5 11.3 11.7 8.9 11.8
Nordic markets 8.3 8.8 7.7 9.4 9.4 9.7
Other 15.9 13.6 13.1 12.1 12.2 11.7
Total W. Europe 16.2 14.3 14.8 15.1 15.4 16.1
- 69 -
Figure 44: MAN's product range
MAN
L2000 1993 T Repl. G90,
TG-L 2005 IE Repl. L2000
M2000 1996 N T Repl. M 90,
TGM 2003 IE Repl. M 2000
F2000 1994 E N T Repl. F90
TG-A 2000 I N FE Repl. F2000
I: Intro ductio n T: Term inatio n N: New M o del F: Facelift E: N ew Engine X: range extensio n
Military vehicles from MAN are in operation in Towards the end of 2005 or early 2006 the TG-
more than 65 countries (a contract to supply M will replace the M2000. The first TGM
143 vehicles to Denmark was announced in model to make its public debut was the 18t
December 2005). The high-mobility SX and HX model at the European Road Transport Show
ranges were developed specifically for off-road 2005 in Amsterdam. In the course of 2006 the
use in the military sector. They are used in range will be extended step by step until the
civilian applications too, for example in disaster MAN TGM family is complete.
relief or as expedition vehicles.
PRODUCTION STRATEGY
MODELS
The principal production units are described
The TG-A range made its debut in all European below.
countries in spring 2000. The range was
completed during 2003 and sales of the F2000 Heavy trucks This unit is responsible for the
in Europe ceased. By the end of 2004 the F2000 production of the TG-A at the Munich and
was phased out of markets outside Europe. Salzgitter plants. The main components for it
come from MAN's other German plants: the
The TG-A has been followed by the TG-L, frame and metal pressings from Gustavsburg
replacing the L2000 range in early 2005. The and Steyr, engines from Nuremberg, wiring
TG-L spans the 7.5-12t weight range following harnesses from Penzberg. Some heavy vehicles
four years of development and 200m. The TG- for specialist applications continue to be
L makes use of some of the TG-A modules produced at Vienna in Austria (see below).
During 2005 the Penzberg plant was spun-off

as an independent entity, 40% owned by MAN.
In 2004 the division produced 42,341 heavy

trucks and employed 6,320 people.
- 70 -
MAN Nutzfahrzeuge sterreich AG. In Austria ERF In January 2000 MAN took over UK
the former divisions of Steyr Nutzfahrzeuge AG truckmaker ERF, giving MAN its fifth brand.
and MAN Sonderfahrzeuge AG were merged in ERF sells mainly in the UK heavy sector and
2004. The division concentrates on produced 2,800 vehicles in 2001 at its plant in
light/medium trucks at Steyr and special- Middlewich. MAN was aiming to lift annual
purpose heavy duty vehicles at Vienna. output to around 3,000 trucks but the problems
at ERF (see below) led MAN to decide to switch
Steyr also produces cabs for the heavy range. In production to Munich and Salzgitter. About
2004 the division produced 18,571 light and 200 ERF employees lost their jobs when
medium trucks. production at Middlewich ceased in July 2002,
leaving about 50 employees who now adapt
At the end of 2004 the business unit employed Munich-built vehicles for specific customer
2,583 people at Steyr and 644 at Vienna. needs.
MAN Star Trucks & Buses In December 1999 In August 2001 it emerged there were
MAN took over Star, the Polish producer of accounting irregularities at ERF, where losses
medium trucks based in Starachowice. In were deliberately concealed. MAN identified
August 2003 MAN merged Star with MAN Bus irregularities back to 1998 and is suing Western
Polska to form MAN Star Trucks & Buses. The Star, which sold ERF to MAN in March 2000.
unit was restructured to focus on buses during Western Star was of course acquired by DC's
2003. The Starachowice plant can now supply Freightliner unit in July 2000, so if any
up to 2,500 bus body structures per year and compensation is due it will ultimately come
delivered for final assembly to either Poznan or from DC. In its turn, DC is suing ERF's
Salzgitter prior to finishing at either Pilsting or auditors, Ernst & Young.
Salzgitter. Both the MAN and Neoplan brands
are produced at each plant. The unit built 1,235 In October 2005 MAN won its case against DC
buses in 2004 and at the end of the year it though the amount of damages has not yet been
employed 2,586 people. decided.
MAN Turkey In 1994 MAN purchased a 33% While accounting fraud is of course to be
stake in the Turkish company MAN Kamyon deplored and MAN is right to pursue damages,
VE Otobs A.S. (MANAS) and assumed one does not have to be an excessive optimist to
management control of its plant in Ankara. In say there was a positive aspect to the situation.
1996 MAN increased its control over the The problems at ERF gave MAN the
Turkish firm by becoming the majority opportunity to implement a substantial
shareholder. Now renamed MAN Turkey, it is restructuring of the firm, drastically trimming
being used as a springboard for its expansion in the workforce and integrating its product
Eastern Europe and as a low-cost production range. Irrespective of ERFs fraudulent
source for the labour-intensive production accounting record, this substantial
tasks. restructuring probably gives MAN the best
chance of making its subsidiary profitable in
In 2004 the unit produced 1,259 buses and future and should improve capacity utilisation
coaches, an increase of 16%. During 2004 at the German plants.
capacity was increased from 6upd to about
10upd. In 2004 the total number of employees
was 2,532.
Poznan In Poland MAN began bus production

at a newly built plant near Poznan in January
1998. In 2003 this operation was merged with
Star Trucks (see above).
- 71 -
Neoplan In September 2000 MAN announced Other plants

the planned acquisition of bus manufacturer In South Africa MAN has a wholly-owned
Gottlob Auwrter, the producer of Neoplan assembly facility near Johannesburg. It employs
buses. The acquisition was approved by the 400 people and assembles about 500 trucks
European competition authorities in June 2001. annually. ERF also has a presence in South
Under the umbrella of the newly created Africa through a 30% stake in a local assembler.
Neoman Bus GmbH, three Neoplan companies
were consolidated with effect from July 1st 2001 MAN also has a wholly-owned assembly
and a further six were consolidated with effect facility in Australia. It employs 150 people and
from December 31st 2001. assembles about 100 buses annually.
MAN previously supplied about half the Joint ventures / alliances

engines for Neoplan buses and also supplied
Yutong In January 2002 MAN agreed a JV with
some bus chassis for its export models. In
China's Yutong Bus, the country's second
December 2001 production of coaches in Berlin
largest bus producer. MAN is to invest 10m in
was phased out and transferred to Plauen and
the JV which is aiming to build 6,000 bus
Pilsting. The Neoman Bus brands took a 14.4%
chassis per year. The JV is to supply not only
share of the West European market in 2004.
Yutong but also other bus manufacturers in
Maz-MAN In the CIS MAN has a joint venture China. In 2003 the venture assembled and sold
with Maz. A Maz-MAN truck was developed over 900 bus chassis.
from MAN's modular component range and the
Scania In April 2003 MAN and Scania
first of these vehicles were produced in July
announced plans for long-term collaboration in
1998. Following completion of trial operations
the development and production of powertrain
the Maz-MAN joint venture officially
components. MAN will adapt some of its axles
commenced its activities in Minsk, Belarus, on
and transfer-boxes for use in Scania trucks.
8th September 1999. MAN holds 51% of the
Scania will adapt some of its gearboxes for use
venture, the state-run "Minsk Automobile
in MAN trucks. Production is scheduled to start
Plant" holds 39% and Lada-OMC Holding of
after a development phase of about 3 years.
Minsk the remaining 10%.
Bajaj Tempo / Force Motors In October 2003
During 2003 the venture was restructured with
MAN and India's Bajaj Tempo concluded a co-
Infobank Holding, becoming a new partner.
operation agreement for 6-16t trucks. MAN
Infobank will concern itself mainly with the
supplies its D08 diesel engines and the L2000
financing of sales and projects. MAN will
cab to Bajaj for use in a Bajaj-designed truck.
continue supplying the principal commercial
The medium-term production target is
vehicle components and product expertise
6,000upa. Bajaj will be building a completely
within the joint venture.
new production facility for engines near Pune
In 2003 Maz-MAN produced 14,000 trucks and and an assembly line for the L2000 cabs. Bajaj
500 buses. has now been renamed as Force Motors.
New plant in eastern Europe

In August 2005 MAN announced plans for a
new truck assembly plant in Cracow, Poland.
The new plant will eventually have a capacity
of 15,000upa and employ about 650 people.
Construction started in autumn 2005, and the
first heavy truck is expected to leave the plant
in mid-2007.
- 72 -
In November 2005 MAN and Force Motors The chassis will be assembled at the Vienna
announced plans for a joint venture to plant but bodies will be completely produced in
manufacture heavy trucks for the Indian and the UK, giving the vehicles a high local
other Asian markets. Production for India is content. The UK body manufacturers involved
due to commence in 2006. From 2007 the include Marshall SV Ltd, EKA, Fluid Transfer,
venture will produce MAN heavy trucks for the Andover Trailers and Atlas Cranes.
entire Asian region. The vehicles will be
marketed in India by the joint venture and
outside India by MAN. Medium-term planning NOTES ON FINANCIAL STATISTICS
envisages production of 24,000upa. The Data is presented for what the company terms
vehicles will not be exported to Europe. the MAN Nutzfahrzeuge Subgroup, which
comprises MAN Nutzfahrzeuge and its
Navistar In December 2004 MAN and Navistar consolidated subsidiaries. The division's
announced they had signed a strategic consolidated subsidiaries include AF and
agreement to collaborate on design, Steyr (see under Business Structure).
development, sourcing and manufacturing of
components and systems for commercial The company's financial year end was June 30th
vehicles, including a range of diesel engines. until June 2000. Thereafter it is December 31st
Full details have yet to be announced but the and the transition period from July 1st to
deal is clearly aimed at delivering scale December 31st, 2000 is shown as a short
economies to both companies in the financial year.
increasingly onerous area of powertrain
development and manufacturing. This will be a In 1998/99 MAN changed its accounts to
project-specific alliance. The companies have conform with International Accounting
stressed that their intention is for both to Standards (IAS). The figures for 1997/98 have
remain independent. been restated. The switch to IAS caused MAN
Nutzfahrzeuge's net profit to drop by DM13m
UK MOD contract in the restated figures for 1997/98.
The vehicles ordered by the UK's ministry of
defence are from the off-road ranges HX and
SX with two and three/four axles respectively.
- 73 -
CHAPTER 8: MITSUBISHI FUSO TRUCK & BUS

In Japan, Fuso expects sales of approximately
OVERVIEW 65,000 units, a 6% increase. Overseas sales are
Mitsubishi Fuso Truck & Bus came into being forecast at around 120,000 units, 1% higher and
in January 2003 when it was spun off as an a new record for the company.
independent entity by Mitsubishi Motors
In Japan MMC's truck range is marketed under
Corporation.
the Fuso brand. The range comprises:
Two months later, DC (a 34% shareholder in
Canter - badged with FB, FC, FD, FE, FF or FG
MMC) bought a 43% stake in MFTB as
prefixes, light duty trucks, 3.5-8.0t GVW. In
previously agreed. MMC had a 42% stake and
June 2002 the new generation Canter (2-4.85t
other Mitsubishi group companies held the
payload) and Canter Guts (1.25-1.75t payload)
remaining 15%.
made their market debuts in Japan. This
In March 2004 DC took a further 22% of MFTB marked the first full model change for the
taking its stake to 65% and MFTB became a Canter in 8 years. In 2005, the new Canter
consolidated subsidiary of the German firm. debuted in Europe and other export markets.
Fuso will launch a hybrid version of the Canter
The aggregate amount paid by DC for its 65% on the Japanese market in 2006.
controlling interest in MFTB was 1,251m.
MFTB made net profits of 1.5bn (11m) and Fighter - a new Fighter range was launched in
17.5bn (130m) in the years to March 2003 Japan in October 2005. It spans the GVW range
and 2004 respectively. 8.5-15.1t. The range is badged with FH, FK, FL
or FM prefixes.
During 2003 and 2004 it emerged that like
MMC, MFTB had been guilty of concealing Super Great - launched in 1996, badged with
vehicle defects from the authorities. The FP, FS, FT, FU or FV prefixes, heavy range
affected vehicles (about 900,000) had to be 19.8-24.9t GVW.
recalled for safety checks and remedial work.
In March 2005 DC and MMC reached a final
agreement over compensation. The agreement MFTB's financial year runs to March 31st. Only
mainly entailed: a cash payment from MMC to limited data was published and since the
DC; the transfer of MMCs 20% stake in MFTB company became a consolidated subsidiary of
to DC (taking DC's stake to 85%); the DC its results are no longer available.
agreement that MMC will continue to maintain
100% ownership of NedCar; additional co- Data in the appendices is shown for MMC also
operation between MMC and MFTB in various but this includes MMC's car operations.
other areas.
Data from MMC's consolidated accounts are
shown from 1987 onwards. Prior data refers to
SALES & MODELS the non-consolidated accounts.
For the year to March 2006, MFTB expects sales
Other discussion upon MFTB is now included
of 185,000 units, an increase of about 3% over
under DC.
the 179,500 units sold the previous year.
- 74 -
CHAPTER 9: NAVISTAR INTERNATIONAL CORPORATION

These initiatives were mostly introduced by
OVERVIEW Daniel Ustian who began succeeding John
Navistar operates in three industry sectors: Horne in 2002 and is now Navistar's chairman,
trucks (including school buses), engines and president and CEO.
financial services. In its financial year ending
Since taking over Mr Ustian has shown a
October 2004 it sold 112,700 trucks and school
continuing enthusiasm for taking the company
buses and 357,900 engines to other
in new directions. Among other things he has:
manufacturers.
launched a giant pickup for the consumer
Selling vehicles under the International brand,
market;
Navistar is the leader in the US market for class
6-7 trucks (8.8-14.9t). Worldwide sales of its developed a vehicle intended to replace the
Class 6-7 trucks were 45,500 units, sales of Humvee for the US military;
Class-8 trucks rose to 47,500 units and school begun developing a heavy-duty engine;
bus sales totalled 19,000 units. increased the company's international presence
through alliances.
Navistar implemented a significant
restructuring in the mid-1990s in a bid to In theory the company should now be less
reduce its dependence on North American vulnerable to cyclical downturns. The
truck demand and the consequent volatility of operational changes have given it more
its earnings. The company had acquired a flexibility in its cost structure and the strategic
reputation for profits falling off a cliff when changes have led to a substantial proportion of
truck demand turns down. It suffered four earnings being generated by the medium truck
years of operating and net losses from 1990- and engine businesses which are seen as
1993 as it was hit by the cyclical downturn and offering less volatility than the heavy truck
had a similarly weak start to the eighties. business. Similarly Navistar is targeting the
military sector for its contra-cyclical features.
Navistars weak reputation was reinforced by
comparisons with its principal rival, Paccar, The validity of this theory remains untested
which has remained profitable throughout the although we can conclude that the contra-
past 65 years. cyclical side of the business was not sufficiently
developed to prevent red ink in the 2000-2002
Under the leadership of John Horne, who downturn. It reported a small net loss in the
became president in 1990 and CEO in 1995, year to October 2001, a larger loss the following
Navistar's performance substantially improved. year, albeit distorted by non-recurring charges
On the operational side, profitability was and disruption from strike action and another
boosted by reducing product and small loss in the year to October 2003.
manufacturing complexity and by achieving
competitive wage, benefit and productivity It returned to profit in the year to October 2004
levels. and is expected to report a further profit for
2004/05 but its results have been delayed so
While restructuring and optimising the core were not available at the time of writing.
business, Navistar also made strategic changes:
boosting the importance of its engine business;
expanding internationally; forming a
partnership with Ford to supply engines and to
build medium-duty trucks.
- 75 -
Given the scale of the contraction in US It has gone some way to addressing this need
demand, with Class-8 volumes falling by over with the announcement of joint ventures with
50% from their 1999 peak and Class 5-7 MAN, for powertrain development and
volumes down by around 25%, it was not manufacturing, and Mahindra & Mahindra to
surprising that Navistar lost money. The produce and sell trucks in India and elsewhere.
company's restructuring certainly helped to
limit the extent of its losses, as profits from the These initiatives will help the company
engine division partly offset the losses in the towards its target for 2008/09 of $15bn in
truck division. revenue (compared with $10bn in 2003/04) and
a reduction in cost per vehicle of $8,500
However, the inevitable comparisons with compared with 2002/03.
Paccar, which remained profitable during the
recent downturn, as it has done in every other
over the past six decades, leave Navistar still
looking the weaker and less reliable player.
Previous editions of this report have

commented that if Navistar wants to avoid
losses in the future it still needs to do more to
reduce its exposure to the North American
truck market and/or improve its scale
economies to match those available to its major
rivals.
Figure 45: Latest results - Navistar
Navistar
Unit 9M o-04/05 Q3-04/05 H1-04/05 Yr to Oct 04 9M o-03/04 Q3-03/04 H1-03/04 Yr to Oct 03
Revenue $ mils 8,522 2 8.2 2,994 2 7.5 5,528 2 8 .6 9,724 2 8 .2 6,647 2 4 .6 2,349 2 4 .0 4,298 2 4.9 7,585.0 8.0
Operating profit $ mils 351 157 3 3 .1 194 47.0 460 28 3 .3 250 118 76.1 132 (2 57.1) 120.0
Pre-tax profit $ mils 205 53 .0 97 18 .3 108 107.7 311 134 (19 5.0) 82 156 .3 52 (13 0.1) (49.0)
Net profit $ mils 135 53 .4 64 2 8 .0 71 8 6 .8 247 88 (19 2.6) 50 177.8 38 (13 3 .6 ) (21.0)
Employees 000's 15.0 3 .4 15.0 3 .4 15.0 4 .2 14.8 4 .2 14.5 (2.0) 14.5 (2 .0 ) 14.4 (7.1) 14.2 (13 .9 )
Unit s ale s 000's 93.3 2 0.9 32.2 14 .2 61.1 2 4 .8 112.2 3 2 .5 77.1 2 5.8 28.1 3 2 .9 49.0 2 2.0 84.7 0 .7
Pe r unit
Revenue $ 91,376 6 .0 93,123 11.6 90,457 3 .1 86,667 (3.2 ) 86,195 (1.0) 83,449 (6 .7) 87,773 2.3 89,551 7.3
Operating profit $ 3,764 16 .1 4,883 16 .5 3,174 17.8 4,100 18 9 .4 3,242 ##### 4,192 32 .5 2,696 #### 1,417 (12 0 .4 )
Pre-tax profit $ 2,198 2 6.5 3,017 3 .6 1,767 6 6 .4 2,772 1,738 (175.6) 2,913 9 2 .8 1,062 (12 4 .6 ) (579) (93 .7)
Net profit $ 1,448 2 6.8 1,991 12 .1 1,162 49 .7 2,201 1,141 (173 .6) 1,776 10 9 .0 776 (127.6 ) (248) (9 6.1)
Pe r e m ploye e
Revenue $ 568,133 2 3.9 199,600 2 3 .2 368,533 23 .5 657,027 2 3 .0 458,414 27.1 162,000 2 6 .6 298,472 3 4.4 534,155 2 5.5
Operating profit $ 23,400 10,467 2 8 .6 12,933 31,081 26 7.8 17,241 8,138 79 .8 9,167 8,451 (12 3 .9 )
Pre-tax profit $ 13,667 4 7.9 6,467 14 .3 7,200 9 9 .4 21,014 9,241 (19 7.0) 5,655 16 1.6 3,611 (13 2 .4 ) (3,451) (9 2 .6 )
Net profit $ 9,000 4 8.3 4,267 2 3 .7 4,733 79 .4 16,689 6,069 (19 4.5) 3,448 183 .5 2,639 (13 6 .2 ) (1,479) (9 5.5)
Sales units 6.2 16.9 2.1 10 .4 4.1 19 .8 7.6 2 7.1 5.3 2 8 .4 1.9 3 5.7 3.4 3 1.3 6.0 17.0
Operating profit % 4.1 0 .4 5.2 0 .2 3.5 0 .4 4.7 3 .1 3.8 4 .1 5.0 1.5 3.1 5.5 1.6 9.9
Pre-tax profit % 2.4 0 .4 3.2 (0 .3 ) 2.0 0 .7 3.2 3 .8 2.0 4 .7 3.5 1.8 1.2 6.2 (0.6) 10.3
Net profit % 1.6 0 .3 2.1 0 .0 1.3 0 .4 2.5 2 .8 1.3 3 .1 2.1 1.2 0.9 4.2 (0.3) 7.4

Truck $ mils 6,419 2 9.8 2,211 2 3 .0 4,208 33 .7 7,256 3 6 .6 4,944 3 5.3 1,797 3 7.5 3,147 3 4 .1 5,312.0 7.6
Engine $ mils 1,899 13.0 712 7.2 1,187 16 .8 2,829 14 .6 1,680 (6.9) 664 5.9 1,016 (13 .7) 2,469.0 9.8
Financial Services $ mils 188 (5.5) 65 (5.8 ) 123 (5.4 ) 289 (11.1) 199 (22 .0) 69 (2 3 .3 ) 130 (2 1.2 ) 325.0 1.6
Other & Intra-group $ mils 16 (109 .1) 6 (10 3 .3 ) 10 10 0 .0 (650) (176) (53.3) (181) 3 9 .2 5 (10 2 .0 ) (521.0) 7.9
Note s : (1) Q1 is Nov-Jan, Q2 is Feb-Apr, Q3 is May-Jul, Q4 is A ug-Oct (2) % ch is change versus corresponding year-ago data
(3) Full-year data may not reconcile to interim data due to restatements.
Index (1983 = minus 100)
Index (1983 = minus 100)
-125
-100
-75
-50
-25
0
25
50
75
100
125
-125
-100
-75
-50
-25
0
25
50
75
100
125
1983
revenue (1983 = 100)
1983
1984
0
100
200
300
400
500
600
1984
1985
1985 1983
1986
1986 1984
1985 1987
1987
1986 1988
1988
1989
Figure 47: Navistar net profit trend

1987
1989
1988 1990
Revenue ($)
1990
1989
$
1991
1991
1990 1992
1992
1991

1993 1993

1992
Figure 46: Navistar revenue & operating profit trend
- 76 -
1994 1994
1993
1995 1995
Op. Profit ($)
1994
1996 1996
1995
1997 1996 1997
1998 1997 1998
1999 1998 1999
2000 1999 2000
2001 2000 2001
2002 2001
2002
2003 2002
2003
2004 2003
2004
2005 2004
2005
0
2,000
4,000
6,000
-6,000
-4,000
-2,000
Op. profit (1983 = 100)

- 77 -
The group's gross profit rose by 31% to $520m

RECENT PERFORMANCE but operating profit rose by just 4.8% to $152m
and the operating margin fell to 4.8% from
2003/2004 results
5.8%. The weaker operating performance
Navistar reported a consolidated net profit for mainly reflects a 38% rise in R&D expense to
the year to October 2004 following three $91m and a 37% rise in postretirement benefits
successive years of loss. to $59m.
Consolidated revenue for the year rose by The truck and bus division contributed $113m
28.2% to $9.72bn, as buoyant growth in US to the group operating profit, a 33% increase
demand helped truck and bus sales rise by 32% and a margin of 5.1% compared with 4.8% a
to 112,000 units. Engine sales rose by 9.3% to year earlier.
432,800 units.
The engine division contributed $13m, a 62%
The company reported a pre-tax profit of fall and a margin of 1.5% compared with 5.1% a
$311m compared with a year-ago loss of year earlier. The decline was mainly
$(49)m. Net profit was $247m compared with a attributable to the division's heavy R&D
net loss of $(21)m. burden.
Interim results & forecast The Financial Services division contributed

Navistar reported a 28% rise in net profit for its $26m, unchanged from a year earlier, the
fiscal third quarter, the three months ending margin fell to 32.1% from 39.4% a year earlier.
July 31st. A strong sales performance helped
offset negative influences including increased Group pre-tax profit was 18.3% higher at $97m.
material costs, higher R&D spending and an The result included a $14m non-recurring
adverse accounting change. adjustments to the accounts of a foundry
operation. Net profit was 28% higher at $64m.
Revenue for the period rose by 27% to $2.99bn. Over the first nine months of its fiscal year
The truck and bus division contributed Navistar's net profit was 53% higher at $135m.
$2.21bn, a 23% increase reflecting a 14.6% rise
in sales to 32,200 units and a richer product mix The company has stuck to its full year forecast
as sales of heavy trucks rose by 26% to 10,828 for industry sales of 408,000 trucks and buses in
units and sales of Severe Service trucks rose by the US and Canada. It expects full-year revenue
29% to 4,622 units. to be $11.4-11.7bn, with net profit of $364-
386m.
The engine division's contribution rose by 41%
to $712m, boosted by a 31% increase in sales to The release of the full year results has been
133,379 units. The increase was mainly delayed by technical problems with the audit.
attributable to the first-time contribution of
MWM Motores Diesel, a major Brazilian diesel
BUSINESS STRUCTURE
engine producer making about 85,000 engines
annually, acquired by Navistar during the Navistar International is a holding company
quarter. However, engine sales to Ford also rose and its principal operating subsidiary until 2000
by 6.7% to a record 80,848 units. was Navistar International Transportation. In
March 2000 the operating company's name was
The Financial Services division reported a 16% changed to International Truck and Engine.
increase in revenue to $65m. This makes a more explicit link between the
operating company's name and the brand name,
International, under which its products are
sold.
- 78 -
Figure 48: Navistar revenue & profit contribution by division
Divis ion / Yr to Oct 1998 1999 2000 2001 2002 2003 2004 05(e )
$m $m $m $m $m $m $m
Trucks & buses 6,276 6,628 6,341 4,628 4,936 5,312 7,256 8,600
Engines 1,353 1,698 1,754 1,772 1,789 1,970 2,212 2,640
Fin. Services 201 256 322 320 285 292 249 260
Total 7,830 8,582 8,417 6,720 7,010 7,574 9,717 11,500
All trucks and buses are now sold under the Bus vehicle centre - Navistar is the market
International nameplate, whereas previously leader for integrated school buses through
some buses were badged Amtran, the badge of IC Corporation, a wholly-owned
American Transportation, acquired by Navistar subsidiary.
in 1990.
3. Export/Military operations - co-ordinates
Navistar was formerly called International assembly of trucks in Mexico and Brazil plus
Harvester (IH) when it was also engaged in the export operations. Also supplies vehicles to the
agricultural equipment business. IH ran into military in the US and elsewhere. The unit was
difficulties in the 1970s, when it had to file for formed in October 2003 and mainly uses
protection from creditors under the US Section existing medium truck and parts platforms The
11 bankruptcy law. Various assets were sold, company has a co-operative agreement with
including its UK subsidiary Seddon Atkinson, Vision Technologies Systems to jointly design
now owned by Iveco. The agricultural division and market a high mobility multipurpose
was sold in 1985 to Tenneco. The change of wheeled vehicle which includes an
name to Navistar occurred in 1986. International 4.5-litre V-6 engine and a hybrid
electric drive with plug-in power.
Navistar now has six main divisions, some
further divided into business units: In February 2006 the US army, selected
International Military and Government, LLC, a
1. Heavy trucks wholly owned subsidiary of Navistar and
Heavy Vehicle Centre - responsible for Lockheed Martin o build demonstrator
conventional road tractors for long haul use armoured vehicles, narrowing the competition
and regional distribution. from four companies to two. In the past two
Severe service vehicle centre - dealing with years, Navistar has received military contracts
heavy duty trucks for construction, waste from the US and allies with the potential for
and other rugged applications. more than 10,000 vehicles totalling about $1bn.
The new vehicle will be modular so it can be
reconfigured for an variety of applications.
2. Medium trucks & school bus chassis
Medium vehicle centre - Class 5-7, mainly
producing delivery trucks and those used
by utilities and local authorities.
- 79 -
4. International Engine Group - Navistar claims The decision was helped by state aid from the
leadership in the production of mid-range (160- Canadian government and the province of
325hp) diesel engines. In 1998 this division Ontario, amounting to US$45m. It was also
won a major contract to supply Ford with V-6 helped by the Canadian Auto Workers union
and V-8 diesel engines. As mentioned, the V-6 agreeing to a new labour contract which was
contract was cancelled by Ford in 2002, but the expected to result in annual savings of $31m.
V-8 contract is continuing.
Brazil
Sales to external customers in 2003/2004
In October the Brazilian authorities approved
amounted to 357,900 units, of which 330,170
the acquisition by Navistar's South American
were supplied to Ford. Including in-house
engine subsidiary of MWM Motores Diesel
supply the division shipped 432,735 units
(MWM), a major Brazilian diesel engine
during the year. The engine division
producer.
contributed about 21% of group revenue during
the year. MWM produces a broad line of medium and
high speed diesel engines 50-310hp for use in
5. International Financial Services - financing
pick-ups, vans, light and semi-heavy trucks, as
for retail customers plus insurance.
well as agricultural, marine and electric
generator applications. OEM customers include
6. Parts operations - Navistar states that it has
GM, VW and Nissan. Annual production
the largest truck parts distribution organisation
exceeds 85,000 engines with 2004 revenues for
in North America, with more than 1,000 dealer
the privately held company of approximately
locations.
$370m.
Restructuring Navistars South American engine operations

In October 2000 Navistar took a $306m are now operated as MWM International
restructuring charge to cover 3,100 job losses, Indstria de Motores da Amrica do Sul
the termination of various dealership contracts Navistar entered the South American market in
and the sale of Harco, an insurance subsidiary March 1999, when it acquired 50% of a
(completed in November 2001). company that was renamed Maxion
International Motores. In January 2001,
In October 2002 it took a further charge of Navistar became the sole owner of Maxion
$372m in connection with: International Motores and shortly thereafter,
the closure of its heavy truck plant at the company was renamed.
Chatham, Ontario and the transfer of
production to Escobedo;
closure of the body plant and one assembly ALLIANCES & JOINT VENTURES
line at Springfield, Ohio;
Ford
the elimination of 3,500 jobs by mid-2003;
the termination and sale of its Brazilian Following the engine contract, Navistar's
truck assembly operation; relationship with Ford developed further. In
asset write-downs following the launch of February 2001 the two firms announced outline
new products. plans for a joint venture to build trucks. The JV,
subsequently named Blue Diamond Truck
The Chatham plant was due to close in July Company, began building medium commercial
2003 but the closure was postponed and in trucks (Ford F-650, F-750) on a common chassis
September 2003 the company announced that at Navistar's plant in Escobedo, Mexico in
the plant will remain open December 2002.
- 80 -
Figure 49: Navistar unit sales
Se gm e nt / Yr to Octobe r 1999 2000 2001 2002 2003 2004 2005(e )
Medium truck 55,324 56,466 43,374 32,907 34,920 45,489 49,100

Share of Navistar total 43.4% 45.2% 48.7% 39.4% 41.3% 40.6% 38.9%
Heavy truck 38,880 33,897 17,446 20,920 17,216 32,620 38,900

Severe service 11,614 11,123 7,325 10,266 11,117 14,882 19,200

Bus 21,676 23,440 20,834 19,460 21,398 19,169 19,100

Total 127,494 124,926 88,979 83,553 84,651 112,160 126,300
Engine shipments 374,192 392,898 394,336 375,500 395,987 432,735 489,000
MAN
MARKETS & MODELS
In December 2004 MAN and Navistar
announced they had signed a strategic In the year to October 2004 Navistar shipped:
agreement to collaborate on design, 45,500 medium trucks, up 30.4% from the
development, sourcing and manufacturing of prior year's 34,900 units;
components and systems for commercial 47,500 heavy trucks (including severe
vehicles, including a range of diesel engines. service); up 67.8% from the prior year's
Full details have yet to be announced but the 28,300 units;
deal is clearly aimed at delivering scale 19,000 school buses, down 11.2% from the
economies to both companies in the prior year's 21,400 units.
increasingly onerous area of powertrain
development and manufacturing. This will be a Most of these vehicles were absorbed by the US
project-specific alliance. The companies have and Canadian markets. The company's
stressed that their intention is for both to combined market share for the US and Canada
remain independent. was 28%, similar to the previous year.
Mahindra & Mahindra Data for the year to October 2005 were not
available at the time of writing but the
In June 2005, Navistar and Mahindra &
company is expected to have sold around
Mahindra announced a joint venture (51%
126,000 vehicles.
M&M and 49% Navistar) to produce and
market light, medium and heavy commercial
Having abandoned the Brazilian market (where
vehicles for India and export markets. More
it sold 400 units in 2002) Navistar currently has
than $80m will be invested in the JV, to be
almost no presence outside Nafta. It sold about
named Mahindra International, over the next
400 units in South Africa and 100-200 units in
two to three years. As part of the JV, a
other markets. However, its international
development centre (ultimately employing 300
presence should increase with the Mahindra
engineers) will be opened at a yet-to-be
venture and we expect further international
determined location in India. Mahindra
expansion in the near future.
International is expected to produce
commercial trucks and buses starting in 2007 in
an updated Mahindra facility. The vehicles will
have 90% local content from the start.
- 81 -
Navistar's product range is badged as follows: PRODUCTION STRATEGY

Navistar has traditionally had a higher level of
Heavy road tractors are badged as the
vertical integration than most US truckmakers,
International 8000 and 9000i Series. 'Eagle'
making many powertrain components that
models are offered with higher trim and
other producers would typically buy from
specification.
outside suppliers. For its heavy trucks, engines
In January 2006 the company announced that were usually purchased from outside suppliers,
the name of its new 2007MY Class 8 tractor is while medium trucks were fitted with
to be ProStar. The company has invested Navistars own engines. This changed during
$300m in the new model. ProStar is to be the the 1993/94 financial year when Navistar
first of several new products planned for the introduced the T444E engine as an option for
next few years. Shipments to dealers begin in its heavy truck range.
Q1-2007. The truck will be produced at the
Navistar assembles its trucks and buses at seven
International Assembly Plant in Chatham,
plants. Buses are produced at Conway, Arkansas
Ontario, Canada.
and Tulsa, Oklahoma.
Heavy duty rigid trucks (the responsibility of
The Tulsa facility was opened in June 2001. The
the Severe Service Vehicle centre) are badged
plant builds the International IC school bus, the
as International 5000 and 7000 Series.
industrys first integrated conventional school
Medium trucks are badged as 1000, 3000 and bus that combines assembly of the chassis and
4000 Series. Also, in early 2005 Navistar the bus body, in a continuous operation, under
launched its new CF Series trucks. The cabover one roof.
model features the new 275 V6 diesel engine,
Trucks are produced at:
production of which started in 2004. The CF is
available in two models: the Class-4 CF 500 Chatham, Ontario, where the 9000i is
and the Class-5 CF 600. produced. This plant is no longer scheduled
for closure (see comment above).
Buses are based on a 3000 Series chassis
Springfield, Ohio, where the 4000 Series is
Pickups - The CXT, MXT and RXT are billed as produced;
the "world's largest pickups". They are in the 6-
11t GVW range. Garland, Texas, sole source for the 5000
and 7000 Series. It also produces the new
In February 2001 Navistar launched the first 8500 Series tractor for the regional haulage
examples of its new High Performance Truck business and the new CXT/MXT/RXT.
(HPT) which it claims is the most significant
new truck product development in the Escobedo, Mexico, which produces the
company's history, requiring investment of 4000 and 9000 Series models and the Blue
some $900m. New versions of the 4000, 7000 Diamond trucks and school bus chassis.
and 8000 models were launched during the Escobedo is also the sole source for the
new CF.
year. During 2002 the company launched
several more new versions of the 4000, 7000
Caxias, Brazil, Agrale produced the 4000
and 8000 Series models with different engine
and 9000 Series models under contract
options. One of the engine options is the until its termination in October 2002.
companys new V8 diesel unit which was
launched in April 2002.
- 82 -
In April 1999 Navistar announced an NOTES UPON FINANCIAL STATISTICS

investment of $250m to build a facility to
Navistar's financial year runs to October 31st.
design and produce diesel engines in
From 1988 the data in the appendix is
Huntsville, Alabama. The plant began
presented for Navistar Consolidated including
production of a new generation of V8 diesel
the financial services.
engines in the early part of 2002. The plant
joins Navistar's two existing engine production Data for 1986 & 1987 refers to Navistar
facilities in the US at Melrose Park, Illinois and Consolidated. Data for 1983 to 1985 refers to
Indianapolis, Indiana. In autumn 2004 the plant International Harvester consolidated.
started production of the new VT 275 V6
engine.
- 83 -
CHAPTER 10: NISSAN DIESEL

The data in the appendix shows Nissan Diesel
OVERVIEW to have generated an average operating margin
Nissan Diesel, as it is now called, was of 0.8% over the sixteen years to March 1998
established in 1935 under the name of Nihon (i.e. before the Asian downturn), with a peak
Diesel Industries to produce diesel engines and margin of 2.2% during that time. In only one of
introduced its first line of trucks in 1940. It those years was the company's operating profit
now offers a range of light, medium and heavy sufficient to cover its interest payments.
duty trucks as well as buses, bus chassis,
Similarly, return on equity during the sixteen
engines, components and special purpose
years to March 1998 averaged 2.7% with a peak
vehicles.
of 12.4%. At rival Hino, the return on equity
In the year to March 2005 the company sold was more than twice as high.
40,600 own-brand vehicles and produced a
Over the past 5-6 years ND has made a
further 37,100 light trucks under contract for
concerted effort to improve efficiency and
Nissan Motor. This level of output was similar
lower its debt burden and it has been largely
to the previous year but still some 28% lower
successful. Interest-bearing debt at the end of
than NDs peak output of 108,600 units in 1991.
March 2005 had been reduced to about 155bn
The decline in sales since the early nineties from Y438bn four years before. The company
brought to the fore, many problems with NDs thus beat its target of reducing debt to 225bn
structure, processes and underlying philosophy. or less by the year to March 2005.
The company, typically referred to in
Some of the debt reduction was achieved
newspaper reports as 'beleaguered', 'ailing' or
through a 105bn bailout by its three main
'struggling' used to provide a good example of
lenders and Nissan Motor in a debt-for-equity
how Japan's keiretsu system can engender
swap. Nissan Motor now holds a 23.9% stake in
ineffective managements and inhibit the fresh,
ND.
bold thinking necessary to maintain
competitiveness.
Various restructuring measures helped ND to
return to profit for the first time in four years
With Nissan Motor as its principal shareholder
in the year to March 2001 and it remained in
Nissan Diesel was protected from the sort of
the black the following year, but in 2002/03
scrutiny and accountability which would
and 2003/04 it reported net losses, partly due to
probably have enabled its many problems to be
non-recurring factors. However, it returned to
addressed much earlier - or put it out of
profit in 2004/05 and earned a respectable
business.
operating margin of 7.2%.
NDs problems were of course substantially
During 2003, ND and Nissan Motor announced
exacerbated by the Asian downturn and the
plans to jointly develop and produce light
continuing low level of truck demand in Japan.
trucks. ND has also formed a joint venture with
However, the problems pre-dated those events
Nissan Motor's Chinese partner, Dongfeng.
- it had long been a sloppily managed
inadequate performer which, if subject to
normal commercial pressures, would have lost
its independence some time ago.
- 84 -
Following the Renault - Nissan merger there Now that ND is on a more secure footing, its
was a widespread assumption that ND would near-term survival looks assured. From our
soon be taken over by another truckmaker, but perspective, its principal shareholders, Nissan
the company's heavy debts and relative Motor and Renault, should recognise that truck
insignificance in the world's truck industry making is not a core part of their business and
deterred potential partners. For example Volvo see this as an opportune time to sell the
held some preliminary talks with ND but business. ND remains a relative minnow in the
subsequently said it was not interested in truck industry and its best chance of long-term
acquiring the firm survival still lies in an alliance with, or takeover
by, another truckmaker.
Figure 50: Latest results - Nissan Diesel
Nissan Diesel
Unit 9M o-05/06 Q3-05/06 H1-05/06 Yr to M ar 05 9M o-04/05 Q3-04/05 H1-04/05 Yr to M ar 04
Revenue bn 348.5 6 .2 109.1 7.5 239.4 5.6 461.2 1.8 328.2 101.5 226.7 0.3 453.0 18 .8
Operating prof it bn 20.8 (11.0 ) 5.2 2 4 .7 15.6 (18 .6 ) 33.4 18 .2 23.3 4.1 19.2 6 9.9 28.2 14 6.5
Pre-tax prof it bn 21.3 (3 .4 ) 4.8 6 .8 16.5 (6 .0 ) 34.5 80 .6 22.1 4.5 17.6 2 66 .7 19.1 217.6
Net prof it bn 18.6 0 .7 1.6 (18.7) 17.0 3 .1 30.0 (174 .5) 18.5 2.0 16.5 (2 71.0) (40.3) 1,10 3 .3
Employees 000's 8.9 (0.7) 8.89 (0.7) 8.9 (0 .7) 8.9 (1.1) 9.0 9.0 9.0 (1.6) 9.0 (3.0 )
Unit s ale s 000's 29.9 2 .7 9.3 9.1 20.5 0 .0 40.6 0 .7 29.1 8.5 20.5 (0 .3) 40.3 57.6
Japan 000's 15.0 14 .5 5.5 53.1 9.5 0 .0 19.6 (15.9 ) 13.1 3.6 9.5 (18 .3) 23.3 51.7
Overseas 000's 14.9 (7.0 ) 3.8 (2 2 .6 ) 11.0 0 .0 21.0 23 .6 16.0 5.0 11.0 2 3 .1 17.0 6 6.5
Pe r unit
Revenue mils 11.67 3 .4 11.70 (1.4 ) 11.66 5.6 11.36 1.1 11.29 11.88 11.04 0.6 11.24 (2 4.6 )
Operating prof it mils 0.70 (13 .3 ) 0.55 14 .3 0.76 (18 .6 ) 0.82 17.3 0.80 0.48 0.93 70.4 0.70 56.5
Pre-tax prof it mils 0.71 (5.9 ) 0.51 (2 .1) 0.81 (6 .0 ) 0.85 79 .2 0.76 0.52 0.86 2 67.8 0.47 10 1.5
Net prof it mils 0.62 (1.9 ) 0.17 (25.5) 0.83 3 .1 0.74 (174 .0 ) 0.63 0.23 0.80 (2 71.5) (1.00) 6 6 3 .6
Pe r e m ploye e
Revenue mils 39.22 6 .9 12.28 8 .3 26.94 6 .3 51.90 3 .0 36.67 11.34 25.33 2.0 50.40 2 2.5
Operating prof it mils 2.34 (10 .3 ) 0.58 2 5.6 1.76 (18.1) 3.76 19 .5 2.61 0.46 2.15 72.8 3.14 154 .2
Pre-tax prof it mils 2.40 (2.7) 0.54 7.6 1.86 (5.4 ) 3.89 8 2 .7 2.46 0.50 1.97 2 72.8 2.13 2 27.5
Net prof it mils 2.09 1.5 0.18 (18 .1) 1.91 3 .8 3.38 (175.4 ) 2.06 0.22 1.84 (273 .9) (4.48) 1,14 0.7
Sales units 3.4 3 .4 1.0 9 .9 2.3 0 .7 4.6 1.9 3.2 1.0 2.3 1.4 4.5 6 2.5
Operating prof it % 6.0 (1.1) 4.7 0 .7 6.5 (1.9 ) 7.2 1.0 7.1 4.1 8.5 3 .5 6.2 3 .2
Pre-tax prof it % 6.1 (0 .6 ) 4.4 (0 .0 ) 6.9 (0 .9 ) 7.5 3 .3 6.7 4.4 7.8 5.6 4.2 2 .6
Net prof it % 5.3 (0 .3 ) 1.5 (0.5) 7.1 (0 .2 ) 6.5 15.4 5.6 1.9 7.3 11.5 (8.9) (8.0 )

V ehicles bn - - - 284.9 0 .0 - - - 284.9 3 3 .2
Components bn - - - 55.7 0 .0 - - - 55.7 3 .6
Diesel Engines bn - - - 31.3 0 .0 - - - 31.3 2 2 .3
Other bn - - - 81.1 0 .0 - - - 81.1 (8.0 )
Note s : (1) Q1: A pr-Jun, Q2: Jul-Sep, Q3: Oct-Dec, Q4: Jan-Mar (2) % ch is change -v- corresponding year-ago data
- 85 -
Figure 51: Nissan Diesel (unconsolidated) revenue & operating profit trend
1,000
Revenue (yen)
140
Op. Profit (yen) 800
120
600
100 400
Index (1983 = 100)
200
80
0
60
-200
40
-400
20
-600
0 -800
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Figure 52: Nissan Diesel (unconsolidated) net profit trend
4,000
3,000
2,000
1,000
0
Index (1983 = 100)
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
-1,000
-2,000
-3,000
-4,000
-5,000
-6,000
Yen
-7,000
- 86 -
Revenue grew by 6.2% to 348.5bn as sales

RECENT PERFORMANCE grew by 2.7%. However, increased material
costs and product promotion expenses caused
2004/2005 results
operating profit to fall by 11% to 20.8bn. the
Nissan reported a consolidated net profit for the operating margin was 1.1pts lower at a still
year to March 2005, following two years when respectable 6.0%.
non-recurring charges caused it to make a net
loss. Group pre-tax profit dipped 3.4% to 21.3bn
but a lower tax charge helped net profit to rise
Revenue increased by just 1.8% as sales rose by 0.7% to 18.6bn.
just 0.7%, reflecting strong growth overseas
mostly offset by a decline in the domestic For the year to March 2006 the company
market. expects revenue to rise by 7% to 493bn and
net profit to dip by 6% to 28bn.
Operating profit was 18.2% higher at a record
33.4bn, a margin of 7.2% compared with 6.2%
a year earlier. The increase was mostly due to BUSINESS STRUCTURE
cost reduction efforts.
ND manufactures and distributes in its own
name:
Pre-tax profit was 34.5bn compared with a
loss of (44.6)bn the previous year when the heavy-duty trucks (payload 8t-plus),
result was affected by non-recurring charges of medium-duty trucks (payload 4-5t);
some 54bn. light-duty trucks (payload <4t)
buses.
Similarly the net result was a profit of 30bn
compared with a net loss of (40.3)bn. It also produces diesel engines for use in
vehicles, generators, marine applications and
Interim results & forecast industrial machinery. Typical annual volumes
are 120,000-130,000 units, the main customer
ND's performance dipped during the first nine
being Nissan Motor.
months of 2005/06.
Figure 53: Nissan Diesel revenue by division (%)
Divis ion / Yr to M arch 2002 2003 2004 2005
Heavy-duty vehicles 31.3 30.1 36.2 35.6
Medium-duty vehicles 10.0 11.5 12.6 11.1
Light-duty vehicles 13.9 14.5 14.1 13.8
Diesel engines 6.8 6.7 6.9 9.0
Components 13.7 14.1 12.3 12.3
Others 24.3 23.1 17.9 18.2
Total 100.0 100.0 100.0 100.0
- 87 -
Light-duty trucks (payload 1-3.5t) are produced ND has ended its ties with FHI and
by ND under contract for Nissan Motor. consolidating all the assembly work at Nishi-
Nippon Shatai, a subsidiary of Nishi-Nippon
2006-08 plan Railroad. NDs move was the latest in the
ND's medium-term business plan for the three restructuring of Japans bus industry and
years to March 2009 is called the Plan for followed:
Vision (PFV).
The January 2002 announcement by Hino
One of the plan's principal goals is to reform and Isuzu that they are to integrate their
ND's financial structure through such measures bus businesses (see the discussions upon
as a capital increase and the elimination of those manufacturers).
consolidated losses carried forward.
The December 2001 announcement by ND
The goals set for fiscal 2006 are to achieve an that joint bus-manufacturing and sales
operating margin of 5.5% or greater, to reduce company in the Philippines was being
interest-bearing debt to 150bn or less and to dissolved. The joint venture, Nissan Diesel
attain a net equity ratio of 20% or greater. The Philippines Corp., supplied large
company is on track to achieve each of these sightseeing buses in the Philippines and
numerical targets one year ahead of schedule. abroad. ND held a 48.5% share in the unit,
and Fuji Heavy Industries also owned a
By 2008/09 the company is aiming for revenue stake. The joint venture was founded in
of 600bn and an operating margin of 8%. 1991 and began exports to Japan in 1996.
Since the Asian economic crisis of 1997,
Part of the revenue increase will come from output had been falling. ND is
consolidating production of large
developing overseas sales by adding new
sightseeing buses at its plant in Saitama
products and entering new markets. In
Prefecture.
particular it wants to strengthen its position in
China, developing its joint venture: Dongfeng Nissan Motor
Nissan Diesel. During 2003 ND and Nissan Motor announced
an agreement to jointly develop small trucks
Alliances & joint ventures with payloads of 1-2 tons that meet the diesel
Hino emission standards that took effect in 2005.
Nissan Motor aims to bolster its weak
During 2004 Hino began supplying medium-
commercial vehicle division by creating a
sized diesel engines (the Hino J-series engine)
group-wide development and production
to Nissan Diesel under an agreement
system, and support Nissan Diesel, by sub-
announced in 2001. Nissan Diesel has stopped
contracting production to it.
its in-house production of such engines. Hino is
expected to supply 13-14,000upa.
Under the current arrangement, Nissan Diesel
supplies Nissan Motor with 1-ton trucks while
FHI
both companies procure 2-ton trucks through
In early 2002 ND announced it would similar agreements with Isuzu. The Isuzu link
terminate its bus business contract with Fuji will be dissolved when the new trucks go on
Heavy Industries. Under that agreement, ND the market.
produced bus platforms and commissioned FHI
and Nishi-Nippon Shatai Kogyo to do the
coachbuilding work, installing bus bodies on
the platforms.
- 88 -
Figure 54: Nissan Diesel, unit sales
M ark e t / Yr to M arch 2003 2004 2005
Japan 15,229 23,973 19,578
A sia ex. Japan 7,561 8,808 9,475
A frica 2,433 3,040 4,796
Naf ta 1,820 2,456 2,861
Middle East 972 1,137 2,122
Oceania 1,025 1,132 1,442
Central / South A merica 246 241 281
Europe 25 18 47
Sub-total ow n brand 29,311 40,805 40,602
Sales to Nissan 33,320 39,583 37,101
Total 62,631 80,388 77,703
A joint development company was established ND will buy its extra stake from the joint
in October 2003, capitalised at 1bn, with ventures other two participants, Sumitomo and
Nissan holding 85% of the capital and ND the Tan Chong. It will take operational control
holding the rest. ND. has an option to increase by sending an executive to become president.
its ownership in the new firm to as high as
25%. Dongfeng Nissan Diesel Motor manufactures
large trucks, receiving technological support
The new firm will develop, manufacture and and parts from Nissan Diesel. In 2004, it sold
market light duty truck bodies, drivetrains and about 820 vehicles but ND plans to expand the
parts. The venture will mainly target overseas range and volume of vehicles sold.
markets, such as China and Europe, and aim to
launch the new products on the global market
from around 2006. MARKETS & MODELS
In the year to March 2005 ND sold 19,578 own-
Dongfeng brand trucks and buses in its domestic market,
In September 2002 Nissan Motor and Dongfeng an 18.3% fall from the previous year when sales
announced a joint venture agreement to build rose by 45% to 24,000 units, boosted by a
cars, trucks and buses in China. change in emission standards.
In August 2005 ND announced it plans to raise ND's domestic sales remain a long way from
its stake in the venture (Dongfeng Nissan Diesel their 1991 peak of 39,800 units.
Motor) from 25% to 50% within a year. The
move, which will put a Chinese production The total figure for 2004/05 comprised 10,630
joint venture under the effective control of a (year-ago: 12,158) heavy trucks, 7,487 (9,699)
Japanese truckmaker for the first time. medium trucks, 715 (1,257) light-duty trucks
and 746 (859) buses.
- 89 -
ND's shares of the heavy truck, medium truck ND has been slower to establish overseas
and bus sectors were: 24.4% (21.6%), 15.2% production capacity than its main domestic
(15.4%) and 14.3% (14.8%) respectively. competitors. Low volume assembly of its trucks
or buses, some under technical licence, is
The company sold 21,024 units overseas, a 25% carried out in fifteen countries, the affiliated
rise following a 21% increase the previous year. enterprises being in: China (25% though see
In unit terms the biggest increase was in sales earlier comment on the planned increase to
to Africa which rose by 1.750 units to 4,800 50%), Indonesia (12.5%), Pakistan (15%),
units. In percentage terms the Middle East was Philippines (1.6%), South and Thailand (30%).
the fastest growing market with a rise of 87% to The bracketed percentage figures refer to ND's
2,100 units. equity stake in each enterprise.
The company believes that overseas sales hold South Africa

the key to its future growth and is working to
During 2002 ND acquired Nissan Motors South
develop its most profitable markets, with China
African truck assembly operation and renamed
being given the highest priority. The US, South
it Nissan Diesel South Africa. ND invested
Africa, Malaysia and Indonesia are also seen as
$26m in the company as part of the deal. ND is
priority areas.
using use South Africa as a base from which to
During 2004/05 ND introduced its new heavy export trucks to the rest of Africa.
truck, the Quon.
China
In August 2001 the company signed an
PRODUCTION STRATEGY agreement with China's largest diesel engine
ND produced an estimated 39,923 own-brand maker, Dongfeng Chaoyang Diesel, under
units in 2004/05, a 1% drop from the previous which the Chinese firm makes about 20,000upa
year. Production of vehicles for Nissan Motor of a 3.15-litre diesel engine, based on ND
was 6.2% lower at 37,135 units. technology. The venture turned profitable in
2001.
The ND-Nissan light truck venture will source
some trucks from the Kounosu plant and some In 2005 ND and parts maker Press Kogyo
from a Dongfeng plant in China. The firms signed a contract for a joint venture in China.
forecast annual sales of 60,000 units, 16,000 The Hangzhou-based venture, PK-UD Axle
from domestic sales and 44,000 from overseas. Co., will be owned 45% by ND and 55% by
Press Kogyo. Production is due to start in early
Over the past few years ND has been 2007. Its initial main customer will be
rationalising its domestic production, looking at Dongfeng Nissan Diesel Motor.
both facilities and products. The principal
actions taken or planned are:
Truck production at the Gunma plant
Information is presented in the appendices for
ended in September 1999 and all trucks are
ND's non-consolidated operations from 1983.
now produced at the Ageo facility.
Beginning in the year to March 2000 the
By spring 2002 the company had halved
the number of parts used in trucks to company has begun reporting consolidated
300,000, mainly by eliminating specialised figures. No comparable figures for earlier years
parts now used in export models. The move have been disclosed. The level of disclosure in
should reduce downtime, tooling costs, the annual reports was poor in the past but has
component costs and inventory costs. improved in recent years.
- 90 -
CHAPTER 11: PACCAR

Paccar's purchase of Daf can be seen as having
OVERVIEW kicked off the recent round of industry
Paccar is now the third largest manufacturer of consolidation, followed as it was by alliances or
heavy duty trucks in the world, having been takeovers involving:
ousted from second place by Volvo's takeover DC - Hyundai, MMC, Sterling and Western
of RVI. It is the sixth largest producer of trucks Star;
above 6t. In 2004 it sold 124,000 trucks of 6t- MAN - ERF and Star;
plus, some 33% above the previous year. Volvo - RVI and MMC (subsequently
terminated);
In the US Paccar is number two in the Class-8 Scania - Hino and VW.
segment, having regained this spot from the
Having got the ball rolling, Paccar has looked
Volvo Group.
in danger of being left behind as the rate of
consolidation gained momentum, especially as
The company used to derive more than 90% of
other manufacturers take advantage of the
its revenue from sales in the USA and Canada
buying opportunities being presented by the
where it operates under the Kenworth and
troubled Asian truckmakers.
Peterbilt brand names.
In April 2000 the company's chairman

However its geographical spread was altered
acknowledged that Paccar was considering
significantly towards the end of 1996 when it
acquisition opportunities "with a sense of
acquired Daf, the Netherlands based truck
urgency", the comment being sparked by the
producer. Along with Foden, the low-volume,
news of the Volvo/RVI merger.
UK based heavy truck producer acquired by
Paccar in 1980, this has given Paccar a 12-13%
There have been no tangible developments
share of the west European heavy truck sector
since that time and Paccar's "sense of urgency"
and an 8-9% share of the light/medium sector
mostly had to be directed towards dealing with
over 6t.
the severe downturn in the US heavy truck
market. The company acted quickly to reduce
At the time Paccar bought Daf the Dutch firm
costs, staying profitable during the downturn
was operating profitably following its collapse
and reporting substantial profit increases now
in 1993 and subsequent restructuring with the
that the US market has entered its up-cycle.
assistance of the Dutch and Belgian
governments.
Speaking during 2004 Paccar's chairman, Mark
Piggott, said that acquisition or partnership
Daf has since gone from strength to strength
with the right company could aid Paccar's
and this has enabled Paccar to build upon its
growth strategy. However, he thought it more
record of having generated a profit every year
likely that organic growth would give a better
for over 60 consecutive years.
rate of return.
This would be a creditable achievement in any
Paccar has long had a very healthy cash surplus
industry but for a company exposed to the
in its manufacturing operations, amounting to
marked cyclical swings of the truck industry,
about $2.2bn in December 2005. Previous
particularly the North American heavy truck
editions of this report have commented that in
sector, it is a remarkable feat.
the absence of any major investment, such as an
acquisition, the company will soon start to be
pressed to return some of its surplus funds to
shareholders.
- 91 -
Responding to these comments Mr. Piggott has This has started to happen in the form of share
said he has received no pressure whatever from buy-backs. During 2005 the company
shareholders. Given the company's consistently completed the buy-back of five million shares
strong performance we have to accept this under an authorisation dating from December
response as true and it is understandable that 2004. In October the Board of Directors
shareholders with every reason to be pleased approved the repurchase of a further five
with their investment may not be inclined to million shares.
rock the boat.
However, we have argued that the fact remains

that Paccar's cash cushion substantially exceeds
its needs and in the absence of fresh investment
opportunities (and the company is right to be
cautious about the real benefits) Paccar should
return some to its owners.
Figure 55: Latest results - Paccar
Paccar
Unit Yr to De c 05 Q4-05 9M o-05 H1-05 Yr to De c 04 Q4-04 9M o-04 H1-04
Revenue $ mils 14,057 2 3 .4 3,635 13 .9 10,422 2 7.0 6,881 3 0 .1 11,396 3 9 .1 3,190 4 4.5 8,206 3 7.1 5,288 3 4 .6
Operating prof it $ mils 1,752 3 0 .4 445 16 .7 1,307 3 5.9 846 3 7.0 1,343 75.0 381 6 5.6 962 78 .9 617 79 .6
Pre-tax prof it $ mils 1,774 2 9 .6 450 2 2 .7 1,324 3 2 .2 869 3 5.5 1,368 6 9 .9 367 52 .9 1,002 77.1 641 76 .4
Net prof it $ mils 1,133 2 5.0 313 2 9 .6 820 2 3 .3 516 2 3 .1 907 72 .2 241 51.7 665 8 1.1 419 78 .2
Employees 000's 21.9 6 .8 21.9 6 .8 21.5 12 .0 20.5 10 .8 20.5 2 0 .6 20.5 2 0 .6 19.2 15.0 18.5 11.4
Unit s ale s 000's 148.5 19 .8 - - - 124.0 3 3 .3 - - -

Pe r unit
Revenue $ 94,663 3 .0 - - - 91,906 4 .3 - - -
Operating prof it $ 11,797 8 .9 - - - 10,831 3 1.2 - - -
Pre-tax prof it $ 11,943 8 .2 - - - 11,034 2 7.4 - - -
Net prof it $ 7,631 4 .3 - - - 7,313 2 9 .2 - - -
Pe r e m ploye e
Revenue $ 641,890 15.5 165,982 6 .7 484,763 13 .4 335,678 17.4 555,917 15.3 155,629 19 .9 427,391 19 .2 285,843 2 0 .8
Operating prof it $ 79,995 2 2 .1 20,297 9 .3 60,809 2 1.3 41,249 2 3 .6 65,517 4 5.1 18,576 3 7.4 50,120 55.6 33,362 6 1.1
Pre-tax prof it $ 80,986 2 1.3 20,539 14 .9 61,572 18 .0 42,380 2 2 .3 66,741 4 0 .9 17,883 2 6 .8 52,167 54 .0 34,659 58 .3
Net prof it $ 51,744 17.0 14,288 2 1.3 38,153 10 .1 25,146 11.1 44,234 4 2 .8 11,776 2 5.8 34,656 57.5 22,632 59 .9
Sales units - - - - - - - -
Operating prof it % 12.5 0 .7 12.2 0 .3 12.5 0 .8 12.3 0 .6 11.8 2 .4 11.9 1.5 11.7 2 .7 11.7 2 .9
Pre-tax prof it % 12.6 0 .6 12.4 0 .9 12.7 0 .5 12.6 0 .5 12.0 2 .2 11.5 0 .6 12.2 2 .8 12.1 2 .9
Net prof it % 8.1 0 .1 8.6 1.0 7.9 (0 .2 ) 7.5 (0 .4 ) 8.0 1.5 7.6 0 .4 8.1 2 .0 7.9 1.9

Truck $ mils 13,298 2 2 .8 3,426 13 .0 9,873 2 6 .5 6,528 2 9 .8 10,834 4 0 .3 3,031 4 5.6 7,802 3 8 .4 5,028 3 5.9
Financial Services $ mils 759 3 4 .9 210 3 1.7 550 3 6 .2 354 3 5.9 563 18 .7 159 2 7.5 404 15.6 260 12 .9
PBT by divis ion

Truck $ mils 1,517 3 3 .1 377 2 2 .6 1,140 3 6 .9 745 4 0 .1 1,140 77.9 308 58 .5 832 8 6 .4 532 8 5.9
Financial Services $ mils 200 18 .7 56 2 2 .0 144 17.5 97 2 3 .4 168 3 6 .2 46 2 7.8 123 3 9 .7 79 4 2 .0
Other $ mils 57 (5.0 ) 17 2 6 .9 40 (14 .2 ) 26 (13 .8 ) 60 4 5.0 13 3 2.7 47 4 9 .0 30 4 0.1
- 92 -
Figure 56 Paccar (Manufacturing) revenue & operating profit trend
5,000
4,500
4,000 Revenue ($) Op. Profit ($)
3,500
Index (1983 = 100)
3,000
2,500
2,000
1,500
1,000
500
0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Figure 57: Paccar net profit trend
3,000
2,500
4,000 $
2,000
3,500
Index (1983 = 100)
3,000 Revenue ($) Op. Profit ($)

1,500
Index (1983 = 100)
2,500
2,000
1,000
1,500
500
1,000
5000
1983 1983
1984 1984
1985 1985
1986 1986
1987 1987
1988 1988
1989 1989
1990 1990
1991 1991
1992 1992
1993 1993
1994 1994
1995 1995
1996 1996
1997 1997
1998 1998
1999 1999
2000 2000
2001 2001
2002 2002
2003 2003
2004 2004
2005
- 93 -
The division's pre-tax income was 33% higher

RECENT PERFORMANCE at $1.52bn. The pre-tax margin was 11.4%, up
from 10.5% in 2004. The improvement
2005 results
reflected the increased revenue and lower
Paccar reported record revenue and net profit selling expense.
for 2005, its fourth year of growth.
Pre-tax income from the Financial Services
Group revenue increased by 23% to $14.06bn division rose by 18.7% to $200m.
and net profit rose by 25% to $1.13bn.
In the Truck Division revenue rose by 23% to

$13.3bn, boosted by a 20% increase in sales to
148,500 units.
Figure 58: Paccar revenue & profit by division
Re ve nue ($m ) 1999 2000 2001 2002 2003 2004 2005(e )

Trucks 8,413 7,386 5,576 6,733 7,661 10,762 13,200
Share of Paccar total 93.3% 93.1% 91.4% 93.3% 93.5% 94.4% 95.0%
Financial Services 373 479 459 433 474 563 592
Other 235 72 66 53 60 71 98
Total 9,021 7,937 6,101 7,219 8,195 11,396 13,890
Pre -tax profit ($m ) 1999 2000 2001 2002 2003 2004 2005(e )
Trucks 759.5 512.8 189.1 482.5 655.4 1,139.9 1,516.8
Financial Services 77.8 76.4 35.0 72.2 123.6 168.4 199.9
Other 85.9 75.9 31.2 19.4 26.5 59.9 56.9
Total 923.2 665.1 255.3 574.1 805.5 1,368.2 1,773.6
The purchase of Daf in 1996 gave Paccar its first

BUSINESS STRUCTURE significant exposure to the European market
The company can trace its roots back to 1915 and was also significant for going against the
when the Gerlinger Motor Company launched trend for European truckmakers to buy US
its first truck. Renamed Kenworth in 1923 producers (Daimler-Benz / Freightliner,
(combining the names of the two founding Renault / Mack and Volvo / White GMC).
partners) the company was bought by Pacific
In 1998 Paccar also made the widely
Car & Foundry, later to become Paccar, in
anticipated purchase of Leyland Truck
1945. Peterbilt was bought in 1958 and the
Manufacturing (LTM) which had separated
small UK truckmaker Foden in 1980.
from Daf following the collapse of the Leyland-
Daf group in early 1993
- 94 -
Paccar's primary business remains the Western Europe sub-16t

production and sale of trucks and parts. In 2002 Dafs share of the West European light/medium
the company was also involved in: truck sector rose by 0.6pts to 6.4% in 2004.
finance and leasing, principally but not Following the successful introduction of the
exclusively, of its own vehicles, Paccars LF45 and 55 ranges the company currently
financial services division had assets of claims 10.3% of the 6-10t segment and 7.8% of
$5.6bn at the end of 2003, up from $5.1bn the 10.1-15.9t segment.
in 2002;
the production of industrial winches; In its principal market, the UK, its share has
fluctuated around the 20% level in recent years.
The truck division and parts business is the In Dafs other principal market, the
most important element, accounting for 95% of Netherlands, it has consolidated the major gain
group revenue and 86% of group pre-tax profit made in 2001. The brand is slowly improving
in 2003, as shown in Figure 58. its minor shares of the sector in France,
Germany and Spain.
The company has had other interests over the
years but has increasingly focused on the truck We expect some decline in Paccar's share of the
business. In 1999 it sold Al's Auto Supply and 3.5-15.9t sector as competitors renew their
Grand Auto Supply, its chain of retail stores light/medium model ranges and the UK market
selling automotive parts. The sale resulted in a eases. Paccar remains a minor player in
post-tax gain of $17m. European terms because it continues to be
handicapped by over-dependence upon just 3
The sale of the retail parts division in 1999 markets - the UK, the Netherlands and
followed the 1997 disposal of Paccar's oilfield Belgium.
equipment business, Trico Industries, in 1997.
Both disposals are said to have enabled the Market share - western Europe 16t-plus
company to focus on its core truck business,
Paccar's share of the heavy sector dipped by
which begs the question: why not the winch
0.2pts to 12.9% in 2004 following three
division? However, the disposal of this division
successive years of growth. Following another
would represent a fairly minor housekeeping
increase in 2005 some decline is expected
operation.
during the forecast period, mainly due to
market weighting factors.
MARKETS & MODELS
The company has said its long-term target is to
Nafta region achieve a 20% share of the heavy sector in
The US is Paccar's largest single market in Europe. We find it hard to believe that this
terms of both sales and profitability. Retail sales target is achievable in full but there is no
of the company's Class-7/8 trucks in the US denying the steady upward trend of Daf's share
rose by 12% in 2005 to 66,040 units. in recent years.
Sales of Kenworth brand Class-8 vehicles were With its 16t-plus models Daf has achieved a
27,153 units (2004: 23,294 units) and sales of wider market spread than in the lighter sector,
Class-7 trucks were 3,874 units (5,020 units). having shares of 10% or better in seven markets
including France and Spain.
Peterbilt sold 30,274 Class-8 trucks (26,145
units) and 4,739 Class-7 units (4,495 units).
Paccar's share of the Class 8 market in 2005 was
22.7%, down from a record 24.3% in 2004.
- 95 -
Figure 59: Paccar's share of W. European truck market (%)
2001 2002 2003 2004 2005(e ) 2006(f)

3.5t-6.0t
A ustria 0.0 0.0 0.0 0.0 0.0 0.0
France 0.0 0.0 0.0 0.0 0.0 0.0
Germany 0.0 0.0 0.0 0.0 0.0 0.0
Italy 0.0 0.0 0.0 0.0 0.0 0.0
Netherlands 0.0 0.0 0.0 0.0 0.0 0.0
Portugal 0.0 0.0 0.0 0.0 0.0 0.0
Spain 0.0 0.0 0.0 0.0 0.0 0.0
UK 0.0 0.0 0.0 0.0 0.0 0.0
Nordic markets 0.0 0.0 0.0 0.0 0.0 0.0
Other 0.0 0.1 0.3 0.8 0.5 0.7
Total W. Europe 0.0 0.0 0.0 0.0 0.0 0.0
6.1t-10.0t
A ustria
France 0.7 1.5 0.9 1.8 1.8 1.5
Germany 1.7 2.1 2.0 1.7 1.9 2.1
Italy 3.4 3.5 3.3 2.7 2.6 2.6
Netherlands 30.0 30.6 29.1 23.3 21.5 23.1
Portugal 0.1 0.2 0.1 0.4 0.4 0.5
Spain 6.0 5.5 2.1 5.1 1.3 1.2
UK 23.4 25.1 24.2 27.3 32.7 27.6
Nordic markets 2.0 2.8 1.9 3.4 3.8 3.7
Other 6.9 7.6 8.6 7.8 7.4 7.1
Total W. Europe 8.9 9.6 9.5 10.6 11.6 9.7
10.1t-15.9t
A ustria 3.8 3.4 6.6 2.7 5.4 4.9
France 2.5 2.9 4.4 4.5 4.4 3.4
Germany 1.8 2.2 2.6 2.9 3.2 3.6
Italy 2.5 3.6 3.1 3.5 2.6 3.5
Netherlands 19.7 20.0 24.8 25.0 24.1 23.6
Portugal 18.2 14.8 21.9 14.5 13.7 16.9
Spain 4.7 6.3 6.3 8.2 10.2 9.7
UK 29.9 35.8 33.9 29.3 34.5 27.6
Nordic markets 1.3 2.0 1.7 1.0 1.3 1.3
Other 4.3 9.0 10.6 12.7 14.2 13.0
Total W. Europe 6.0 7.2 8.0 8.0 8.2 7.4
3.5-15.9t
A ustria 3.8 2.9 4.0 1.6 3.0 2.9
France 1.6 2.1 2.7 2.6 3.0 2.3
Germany 1.1 1.4 1.5 1.5 1.6 1.7
Italy 2.1 2.6 1.9 1.8 1.4 1.9
Netherlands 19.3 19.6 17.3 16.9 16.4 17.6
Portugal 4.5 2.8 4.6 4.0 3.8 4.5
Spain 2.9 2.9 1.9 3.5 3.0 2.8
UK 19.8 21.2 19.8 21.4 25.0 21.4
Nordic markets 0.5 0.7 0.5 0.6 0.8 0.7
Other 3.4 5.2 5.6 6.0 6.2 6.0
Total W. Europe 5.4 6.0 5.8 6.4 6.9 6.0
16t plus
A ustria 9.0 8.1 10.5 9.7 8.9 9.8
France 11.3 12.0 12.8 11.0 11.9 12.1
Germany 6.6 6.5 6.4 8.0 8.1 7.2
Italy 6.3 6.9 8.2 7.7 8.4 8.6
Netherlands 35.6 32.0 31.2 32.8 30.8 30.3
Portugal 17.7 12.3 17.4 22.4 17.3 16.4
Spain 9.9 10.1 10.9 10.0 10.7 10.2
UK 19.8 24.6 24.4 25.0 27.5 25.1
Nordic markets 3.2 2.6 3.3 3.7 4.1 3.8
Other 6.1 7.8 10.1 12.1 12.0 12.5
Total W. Europe 11.9 12.4 13.1 12.9 13.4 12.7
- 96 -
Figure 60: Daf's product range
Paccar (Daf)
45 Series 1990 T Cum m ins eng's
LF 45/55 I F Current cab fro m RVI
Iveco -Cum m ins engines

50 Series 1990
55 Series 1995 T Repl fo r 50 Series
& D A F 1100-1700
60 Series 1991
CF65 1993 N F/E E FA cab pre-98

New chassis 2001
New chassis 2001
New chassis 2001
95XF 1997 F E XF95 2002
XF105 N/E
I: Intro ductio n T: T erm inatio n N: New M o del F: Facelift E: New Engine X: range extensio n
Other markets Their most popular models are the long-

bonneted road tractors that most people would
Paccar is represented in Australia through
picture when they think of an American truck,
Kenworth Australia which is market leader.
although there has been a trend in recent years
New registrations in 2005 were 2,283 units,
towards more aerodynamic designs such as the
similar to the previous year.
Kenworth T2000.
Elsewhere in the world Paccar International
Customers can choose from a wide variety of
targets sectors requiring specialised trucks, such
options, from the make and technical
as logging, mining and oil exploration. Less
characteristics of engines and gearboxes,
than 1% of Paccar's sales are generated in Asia
through to the comfort features inside the cab.
and South America.
Peterbilt offers the models: 387, 386, 385, 379,
North American models 378, 357, 335 (introduced in March 2004), 320
Kenworth and Peterbilt trucks each have a and 270 each suiting different applications. The
reputation for robustness, durability and 330 is a Class-7 vehicle launched in 2000. A
reliability. Peterbilt models are considered the Class-6 version was also launched. The
more upmarket of the two and usually have Peterbilt 270, which uses the Daf 45 series cab,
higher specification and trim levels. was also launched in 2000.
Kenworth offers:
T2000 its flagship model introduced in
1996;
W900 classically styled bonneted
introduced in 1982;
- 97 -
T800 & T600 introduced in 1989 and 1992 In 1995 Daf filled a gap in its market coverage
respectively, the T800 is suited for from 11-18t GVW with the 55 Series, which
construction and similar applications; was developed by LTM. The LF range, a
T300 introduced in 1994 and updated in replacement for the FA55 and the older, lighter
2002 is a medium-duty (Class 7) truck; FA45 Series, was launched at the beginning of
K300 introduced in December 1999, using 2001. The LF45s and 55s are designed and
the Daf 45 series cab. produced at Leyland. They feature RVI
C500 - heavy duty vocational truck. developed cabs and Cummins designed four and
six cylinder engines.
European models
The Foden range of heavy rigids and artics -
Dafs current truck range comprises the LF45,
from 18t GVW - comprises the new Next
LF55, CF65, CF75, CF85, XF95 and (from 2006)
Generation Alpha 2000 and 3000 series,
XF105.
announced in late 2001. All feature weight
In October 2005 Daf presented the new XF105 saving construction with proprietary engines
at the Amsterdam Show. The range-topping and transmissions. The Alpha range features
model has a restyled cab and is equipped with modified Daf CF85 cabs. The Alpha range has
the all-new 12.9-litre MX engine with SCR been assembled at the Leyland plant since its
exhaust gas after-treatment for Euro-4 and introduction when the old factory at Sandbach
Euro-5 emission levels. was closed.
Daf claims the new model will offer:

PRODUCTION STRATEGY
up to 4% better fuel efficiency;
As mentioned in the introductory comments,
up to 10% lower repair and maintenance
Paccar has a low level of industry integration as
cost;
its N American operation buys in the major
up to 15% higher resale value;
powertrain components (engines, transmission
service interval extended to 150,000km.
and axles) for its trucks. This helps the
The new model entered production in January company provide a high degree of product
2006. customising to suit individual customer
requirements. However, this approach contrasts
Daf launched the 95XF, a long distance version to that in Europe, where Daf is more vertically
of the 95 series with a new 12.6-litre engine in integrated.
1997. The XF95, a mid-life facelift, was
announced in autumn 2002. The XF95 will Paccar is looking to exploit the potential for
remain in Daf's line-up while the demand exists component sharing between its US and
but will eventually be superseded by the European operations but it has decided against
XF105. creating a common cab structure to be used as
the basis for both bonneted trucks in Nafta and
The CF65/75/85 model range received a new the cabover style preferred in Europe. The
chassis and reworked cabs in late 2000. The company contends that this would involve too
CF85 is expected to get the new MX engine many compromises, although other
during 2006 manufacturers (e.g. Volvo) are adopting this
strategy. However, there are plenty of
opportunities to share the development and
manufacturing/purchasing costs in powertrain,
electronics, chassis and suspension systems.
- 98 -
One of the major developments is this sphere Paccar operates four truck assembly plants in
will be the launch of the Daf-designed and built the US (Chillicothe, Ohio; Renton,
MX engine in Paccar's North American trucks. Washington; Denton, Texas; and Madison,
Tennessee), one in Canada (Ste Therese where
Although common cab designs for European the Daf 55- based Kenworth T300 and Peterbilt
heavy-duty and US Class 8 operations have 270 are assembled) and one in Mexico (San Luis
been ruled out, Paccar is not holding back from Mexicali). During 2001 a plant at Seattle,
integrating its two European marques, Daf and Washington was closed and production of its
Foden, as shown by the sharing of cabs Kenworth trucks switched to Renton. Paccar
between Daf's CF and Foden's new Alpha produced 9,546 trucks in Mexico and 4,246 in
range. The Kenworth and Peterbilt brands also Canada during 2004.
offer urban delivery vehicles based on the new
Leyland-designed LF range. In February 2001 Paccar announced it had
entered into two long-term supply agreements
Given an increasing level of commonality it with Cummins, covering heavy-duty engines
was a logical progression to switch production for the US and medium-duty engines for the
of Foden models from its under-utilised plant at Daf LF Series trucks.
Sandbach to the Leyland facility. This was done
in 2000. Other regions
In Australia Kenworth manufactures vehicles
RVI co-operated with Daf in the development
for the Australian market, producing 650-750
and supply of cabs for trucks in the 6-19t range,
units in each of the last three years. A new
and is supplying cabs for the new LF45/55
assembly operation in South Africa was
range. Cabs for the previous models were
established during 1999.
sourced externally from Mayflower.
In October 2002 Daf entered the South African.
In addition to the truck and engine assembly
It is now the fastest growing truck brand in the
facilities at Eindhoven in the Netherlands, Daf
South African market; and its market share in
manufactures cabs and axles at Westerlo in
the segment above 15t has reached 10%.
Belgium. Truck production capacity in the
Netherlands has been steadily increased in
recent years and the plant now produces more NOTES UPON FINANCIAL STATISTICS
than 40,000 units a year.
Paccar's financial year ends in December. The
The Leyland facility assembles the LF range, all data sheets in the appendix show information
CF65 2-axle rigids, all right-hand-drive for Paccar's manufacturing operations with
versions of the CF75 and CF85 6x4 and 8x4 financial services included on an equity basis.
rigids, and CF85 6x2 tractors. It also assembles Financial information is provided for Daf
the Foden range. The Leyland plant has an Trucks from 1993-95.
assembly capacity of about 18,000upa.
The data for 1983-1986 reflects Paccar's
Paccars European facilities produced about consolidated accounts. The data for 1987
53,500 units in 2005, a rise of 22% from 2004. onwards reflects data for Manufacturing only
Of these, about 45,000 were in the 16t-plus down to and including interest expense entries.
sector. From 1987 onwards the balance sheet items
reflect Manufacturing data for current assets,
The increase partly reflects a rise in sales in current liabilities and long term debt.
western Europe but also a growing number of
vehicles sold in central and eastern Europe,
including Turkey.
- 99 -
CHAPTER 12: RENAULT VHICULES INDUSTRIELS

The expected benefits of the alliance are the
OVERVIEW familiar ones of scale economies in
The commercial vehicles division was Renault development, purchasing, manufacturing,
Group's second largest, contributing 17.5% of investment and marketing. The new alliance
group revenue in 2000. The division was rejuvenated some elements of the broader
formed in 1978 when, under a government alliance planned by Renault and Volvo back in
initiative, Renault's existing truck subsidiary, 1993, which failed due to resistance by Volvo's
Saviem, was merged with Berliet to form RVI. shareholders. Indeed it was only in 1997 that
The US company Mack Trucks became a Volvo disposed of the last of its shareholding in
consolidated subsidiary of RVI in 1990, the two Renault, acquired at the time of the proposed
companies having developed a technical alliance.
alliance during the preceding 4-5 years.
The only query we would raise is why Renault
RVI (including Mack) produced a record 96,100 bothered to take a stake in Volvo instead of
trucks in 2000, including 8,300 vehicles below cash. Renault states that:
5t. In terms of heavy trucks, the company's
"As Volvo's largest shareholder, Renault would
output of 68,800 vehicles put it in fourth place
secure on a long-term basis its presence in the
worldwide.
truck sector, under optimum conditions for
Volvo announced in April 2000 that it was to both RVI/Mack's customers and employees, as
acquire 100% of RVI's equity in exchange for well as for its shareholders, with strengthened
Renault taking 15% of Volvo's shares. Renault prospects in terms of growth and profitability."
was to buy a further 5% of Volvo's equity on
Renault's stake will also secure a presence in
the open market. The transfer of ownership
Volvo's other divisions: buses, construction
took place on January 2, 2001, following
equipment, marine & industrial engines and
approval by the competition authorities in
aerospace.
Europe and the US. At the time of the initial
agreement RVI's 15% stake in Volvo was worth
We may see Renault reducing its stake in Volvo
about 1.7bn.
in the future, but this is unlikely to happen
within the next two or three years.
This looked like an excellent move for both
Renault and Volvo. The combined group
became the second largest heavy truck RVI PRESENTATION
producer in the world. Volvo/RVI is a clear
market leader in the European heavy truck The rest of the discussion upon RVI is now
sector. In the US RVI/Volvo is the third best- contained within the Volvo chapter.
selling group in the Class 8 market, behind
DaimlerChrysler and Paccar.
Renault's financial year runs to December 31st.
The statistics in the appendix are presented for
Renault Group and RVI. The consolidated
accounts provide full information upon Renault
Group with more limited disclosure for RVI.
Renault's annual reports provided
commendably comprehensive information on
the key operating statistics.
- 100 -
Since 1993 the financial services division has 235m in 1997;

been included in the group accounts on a 600m in 1996;
consolidated basis. The affected figures for 1991 40m in 1995;
and 1992 are restated. Operating profit is 100m in 1994;
calculated after the deduction of cost of sales 239m in 1993;
financing. 190m in 1992;
195m in 1991;
Group operating expenses include restructuring 295m in 1990.
costs of:
210m in 2000 Please note all the above figures are converted
680m in 1999; from French francs into euros at the fixed rate
245m in 1998; of FFr6.56 per 1.
- 101 -
CHAPTER 13: SCANIA

The flotation was well timed from Scania's
OVERVIEW perspective, as it came at a time of peak profitability
Scania delivered 52,567 trucks in 2005 and 5,816 with an operating margin of 15.4%. In the following
heavy buses. five years the margin was, on average, 6.4pts lower as
the company was adversely affected by various
The origins of the company can be traced back to factors including: launch costs for the new 4-Series;
1891 when VABIS (Vagnfabriks-Aktiebolaget i price competition in western Europe; the
Sdertelge) produced railway rolling stock. In 1902 appreciation of the Swedish krona and the downturn
Vabis and its competitor Scania, in southern Sweden, in South America.
each built their first trucks. The two companies
merged in 1911 to form Scania-VABIS. In 1921 the However, even at its reduced profit levels Scania has
company was reorganised after declaring remained the most profitable of the world's major
bankruptcy. During the thirties Scania-VABIS truckmakers in most years and has returned a profit
produced more buses than trucks but by the late in every year since 1934.
forties had decided its future lay primarily in truck
The company's consistently strong profit
production. In 1969 it merged with Saab to form
performance can be attributed to three long term
Saab-Scania.
features of its business strategy:
Scania has grown almost entirely organically, a modular construction strategy,
establishing its first plant outside Sweden, in Brazil, it competes only in the heavy sector
during 1957. Seven years later a plant was built at organic growth.
Zwolle in the Netherlands and in 1976 bus and truck Scania also claims that its profitability stems from its
production began in Argentina. high level of vertical integration, with an added
value of 40-50% of each truck's price compared with
International expansion accelerated in the 1990s as
15-20% for a low integration operation. However,
Scania acquired capacity in France, Poland, Mexico
Scania's main rival for the title of most profitable
and Denmark.
truckmaker is a manufacturer with just such a low-
integration approach - Paccar.
During 1995 Scania became an independent
company again when the Saab-Scania group to
Considering the company's record as one of the
which it belonged was divided into Saab AB and
world's most consistently profitable truckmaker with
Scania AB. This ended a 25 year period for Scania of
a solid record of outperforming its rivals, it has had a
being part of the same group as Saab. Saab-Scania AB
surprisingly volatile time over the past few years
had been a wholly owned subsidiary of Investor, the
with regard to its ownership structure.
investment arm of the Wallenberg industrial empire,
since 1991. First Volvo, then VW and then Hino have all
emerged as either parents, suitors, possible suitors or
During 1996 Investor floated 55% of Scania's share
just good friends - depending on who one asks and
capital in a public offering which was three times
when one asks.
oversubscribed and placed a value of SKR36bn on the
company. The sale wiped out Scania's net debt at the The Volvo connection has now been severed and
end of 1995 of SKR8bn. although we are critical of VW's continuing stake it
looks as though Scania's independence is no longer in
question.
- 102 -
Figure 61: Latest results - Scania
Scania
Unit Yr to De c 05 Q4-05 9M o-05 Yr to De c 04 Q4-04 9M o-04 Yr to De c 03
Group data Data % ch. Data % ch. Data % ch. Data % ch. Data % ch. Data % ch. Data % ch.
Revenue SEK m 63,328 11.5 18,286 12 .4 45,042 11.1 56,788 12 .3 16,264 16 .2 40,524 10 .8 50,581 7.0
Operating prof it SEK m 6,859 4 .4 2,157 (1.7) 4,702 7.4 6,572 2 8 .2 2,195 4 7.4 4,377 2 0 .4 5,125 16 .3
Pre-tax prof it SEK m 6,765 8 .3 2,170 1.7 4,595 11.6 6,249 3 5.7 2,133 52 .4 4,116 2 8 .5 4,604 2 3 .7
Net prof it SEK m 4,665 8 .8 1,524 7.5 3,141 9 .5 4,286 4 1.3 1,418 55.0 2,868 3 5.3 3,034 10 .8
Employees 000's 30.8 2 .6 30.8 2 .6 30.7 1.9 30.0 3 .0 30.0 3 .0 30.1 4 .0 29.1 3 .1
Unit s ale s 000's 57.9 3 .3 17.1 1.6 40.8 4 .0 56.1 12 .3 16.9 16 .4 39.2 10 .6 50.0 14 .4
Trucks 000's 52.6 4 .0 15.7 2 .9 36.9 4 .4 50.6 12 .2 15.2 17.0 35.3 10 .3 45.0 12 .9
Buses 000's 5.4 (2 .9 ) 1.5 (10 .1) 3.9 0 .1 5.5 12 .4 1.6 10 .8 3.9 13 .1 4.9 3 0 .1
Pe r unit
Revenue SEK 1,093,295 8 .0 1,067,235 10 .6 1,104,241 6 .9 1,012,589 0 .0 964,536 (0 .2 ) 1,033,248 0 .2 1,012,531 (6 .5)
Operating prof it SEK 118,414 1.0 125,890 (3 .3 ) 115,273 3 .3 117,186 14 .2 130,174 2 6 .6 111,601 8 .9 102,592 1.7
Pre-tax prof it SEK 116,791 4 .8 126,649 0 .1 112,650 7.3 111,426 2 0 .9 126,497 3 0 .9 104,946 16 .2 92,163 8 .1
Net prof it SEK 80,537 5.4 88,946 5.8 77,004 5.3 76,424 2 5.8 84,094 3 3 .1 73,126 2 2 .4 60,735 (3 .2 )
Pe r e m ploye e
Revenue SEK 2,058,443 8 .7 594,377 9 .6 1,468,362 9 .1 1,893,375 9 .0 542,260 12 .8 1,345,820 6 .5 1,737,462 3 .7
Operating prof it SEK 222,948 1.7 70,112 (4 .2 ) 153,284 5.5 219,118 2 4 .5 73,184 4 3 .1 145,362 15.8 176,044 12 .8
Pre-tax prof it SEK 219,893 5.5 70,535 (0 .8 ) 149,796 9 .6 208,349 3 1.7 71,117 4 7.9 136,694 2 3 .6 158,148 19 .9
Net prof it SEK 151,633 6 .1 49,537 4 .8 102,396 7.5 142,900 3 7.1 47,278 50 .4 95,248 3 0 .2 104,218 7.4
Sales units 1.9 0 .7 0.6 (0 .9 ) 1.3 2 .1 1.9 9 .0 0.6 13 .0 1.3 6 .3 1.7 10 .9
Operating prof it % 10.8 (0 .7) 11.8 (1.7) 10.4 (0 .4 ) 11.6 1.4 13.5 2 .9 10.8 0 .9 10.1 0 .8
Pre-tax prof it % 10.7 (0 .3 ) 11.9 (1.2 ) 10.2 0 .0 11.0 1.9 13.1 3 .1 10.2 1.4 9.1 1.2
Net prof it % 7.4 (0 .2 ) 8.3 (0 .4 ) 7.0 (0 .1) 7.5 1.5 8.7 2 .2 7.1 1.3 6.0 0 .2

Trucks SEK m 37,778 13 .1 11,486 12 .6 26,292 13 .3 33,407 13 .1 10,202 2 1.2 23,205 9 .9 29,537 8 .7
Buses SEK m 6,256 13 .7 1,809 12 .1 4,447 14 .3 5,504 7.6 1,614 9 .6 3,890 6 .8 5,115 2 8 .2
Engines SEK m 803 2 2 .0 277 3 5.1 526 16 .1 658 4 5.3 205 6 8 .0 453 3 6 .9 453 (2 .4 )
Service-related SEK m 12,591 10 .3 3,470 17.3 9,121 7.8 11,418 6 .1 2,959 6 .1 8,459 6 .1 10,759 1.5
Other SEK m 5,900 1.7 1,244 (3 .1) 4,656 3 .1 5,801 2 3 .0 1,284 7.3 4,517 2 8 .3 4,717 (6 .5)

Vehicles & Service SEK m 6,330 3 .4 2,025 (2 .6 ) 4,305 6 .5 6,122 2 8 .6 2,080 4 8 .7 4,042 2 0 .3 4,759 3 4 .1
Customer Finance SEK m 529 17.6 132 14 .8 397 18 .5 450 2 3 .0 115 2 7.8 335 2 1.4 366 18 .8
Other SEK m 0 - 0 - 0 - 0 - 0 - 0 - 0 (10 0 .0 )
The revenue contribution by the main business

RECENT PERFORMANCE units was as follows:
2005 results new trucks SKr37.8bn (up 13%);

new buses SKr6.3bn (up 14%);
Scania reported another strong set of results for
service parts SKr12.6bn (up 10%);
2005 continuing the recovery which began in
engines SKr803m (up 22%);
2002 following its weakest profit for over ten
used vehicles SKr7.7bn (up 13%).
years in 2001.
In geographic terms the revenue increase
Revenue rose by 11.5% to SKr63.3bn as the reflects rises of:
benefit of a 4% rise in truck deliveries to 52,600 9% in western Europe to SKr42bn;
units was partly offset by a 3% drop in bus 34% to SKr7.6bn in America;
deliveries to 5,400 units. Favourable currency 13% to SKr5.6bn in central/ eastern Europe;
effects contributed SKr2.3bn or about 4.0pts to 4% to SKr4.1bn in Asia.
the increase.
- 103 -
Figure 62: Scania revenue & operating profit trend
650
550
Revenue (SKr) Op. Profit (SKr)
450
Index (1983 = 100)
350
250
150
50
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
-50
Figure 63: Scania net profit trend
1,200
Native
1,000
800
Index 1993 = 100
600
400
200
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
- 104 -
Figure 64: Scania revenue by division (%)
Divis ion 1998 1999 2000 2001 2002 2003 2004 2005
Trucks 59.7 63.3 60.5 54.8 57.5 58.4 58.8 59.7
Buses 7.8 8.2 7.2 8.8 8.4 10.1 9.7 9.9
Engines 0.9 1.0 0.9 1.1 1.0 0.9 1.2 1.3
Parts & service 13.8 15.7 15.8 19.3 22.4 21.3 20.1 19.9
Other 17.8 11.8 15.6 15.9 10.7 9.3 10.2 9.3
Total 100 100 100 100 100 100 100 100
Operating profit from vehicles and servicing These products were imported by Svenska
rose by 3% to SKr6.33bn and the operating Volkswagen AB, a company jointly owned by
margin fell by 0.8pts to 10.8%. The margin Scania and VW since 1948. Scania also owned
decline reflects higher material and production Din Bil Sverige AB which sold the vehicles
costs as well as increased R&D expense. through its Swedish dealerships.
At a group level Scania's operating income grew As mentioned, both companies were sold to
by 4% to SKr6.86bn. The higher rate of VW during the early part of 2002. The
increase reflects an 18% rise in the finance combined purchase price was SKr1.3bn and
divisions operating income to SKr529m. Scania recorded a gain of SKr550m on the sale.
The company's net profit rose by 8% to Scania's customer finance operation has become
SKr4.66bn. a more significant contributor to group profit in
recent years. The 18% rise in operating profit
during 2005 was the division's ninth
BUSINESS STRUCTURE consecutive year of increase.
Scanias divisions
During the past few years Scania has been
Scania is primarily engaged in the manufacture expanding its sales and service organisation,
and distribution of trucks, buses and coaches acquiring its distributors in: Brazil, Finland,
but it also produces industrial and marine Italy, Latvia, Malaysia, Netherlands, Norway,
engines and until recently imported and sold Taiwan and Thailand. It has also been investing
VW, Audi, Porsche, Seat and Skoda products in significantly in South Korea, improving its
Sweden. network and establishing a local customer
finance operation.
At the end of 2004 the sales and service

organisation accounted for 35% of all Scania's
employees.
- 105 -
Volvo, VW & Investor As a condition of the EU competition authority

approving Volvo's takeover of RVI, it stipulated
In January 1999 Volvo began acquiring Scania's
that Volvo must divest its holding in Scania by
equity in a surprise move that followed Volvo's
April 2004. Private sales to either VW, MAN or
sale of its car division to Ford. The average
Hino were discussed but no agreements were
price paid by Volvo (SKr266 per share)
reached. In March 2004 Volvo sold its holding
represented a 138% premium to Scania's share
of Scania's B-Shares, representing 31.8% of its
price in October 1998. Scania's majority
capital but only 5.8% of voting rights. As a
shareholder, Investor, was initially opposed to
result of the transaction, Volvo received about
the proposed takeover by Volvo but then
SKr15bn. Following the sale, Volvo owned
supported it. However, in early March 2000,
about 27.3m A-shares in Scania, corresponding
the takeover was blocked by the European
to about 24.8% of the votes and 13.7% of the
Commission on the grounds that the Volvo-
capital. These A-shares were subsequently put
Scania combine would dominate Europe's
into to a new holding company, Ainax. About
Nordic markets to an unacceptable extent.
99% of Ainax was spun off to Volvo's
The blocking of this takeover led to Scania shareholders, a distribution valued at SKr6.1bn.
holding discussions with VW (the two
In December 2004 Scania offered to acquire all
companies have had a business relationship
outstanding shares in Ainax. The offer was
since 1948) and at the end of March VW
accepted by 96.3% of Ainax shareholders
announced it was to buy an 18.7% stake (34%
meaning Ainax is now a subsidiary of Scania.
of the voting rights) in Scania for SKr14bn
During 2006 Scania plans to liquidate Ainax.
(about SKr370 per share).
Figure 65: Scania unit sales by market (trucks & buses)
M ark e t 1997 1998 1999 2000 2001 2002 2003 2004 2005(e )
Brazil 8,401 6,477 4,961 6,400 6,119 3,535 4,612 6,670 5,817
Share of Scania total 18% 13% 10% 11% 13% 8% 9% 12% 10%
Great Britain 5,634 6,028 6,308 7,253 5,562 5,238 6,780 6,307 6,142
France 2,854 3,728 4,711 4,993 4,320 3,906 3,858 3,741 4,487
Germany 3,227 4,446 5,627 5,817 4,292 3,683 3,316 3,507 4,200
Other W. Europe 18,564 22,558 23,013 22,031 19,314 17,323 17,847 19,083 18,834
Other 8,296 6,433 5,794 9,998 8,724 9,984 13,542 16,774 18,903
Total 46,976 49,670 50,414 56,492 48,331 43,669 49,955 56,082 58,383
- 106 -
Figure 66: Scania European market shares (%)
2001 2002 2003 2004 2005(e ) 2006(f)
16t plus
A ustria 14.9 11.8 12.5 11.6 12.9 12.8
France 9.2 9.5 10.1 7.5 11.1 11.4
Germany 8.3 8.3 7.4 7.0 7.4 8.1
Italy 12.8 12.3 12.2 12.5 13.8 13.6
Netherlands 17.2 16.6 19.4 19.0 19.5 19.5
Portugal 12.9 15.5 13.1 10.7 14.6 15.9
Spain 12.4 11.4 12.3 11.0 12.0 13.5
UK 15.9 16.4 19.4 17.3 16.2 17.3
Nordic markets 35.4 33.7 33.8 32.3 33.4 33.3
Other 19.6 19.7 17.8 17.9 19.6 18.8
Total W. Europe 13.5 13.2 14.0 12.5 13.7 14.1
Figure
gure 67: Scania product range
SCANIA
M ode l De but 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Series 4 1995 E T
Series R 2003 I E E
Series P 2003 I E
Series T 2003 I E
I: Intro ductio n T: Term inatio n N : New M o del F: Facelift E: New Engine X: range extensio n
- 107 -
Four engine series (9-litre in-line 5-cylinder,

MARKETS 11, 12, litre in-line 6-cylinders and a V8
15.5-litre unit launched in 2000) with a
2003
choice of thirteen power outputs. The new
Scania delivered 52,567 trucks in 2005, a 4% R-Series saw the introduction of a Euro-4
rise from 2004. It sold: version of the 12-litre engine. We expect the
31,392 in W. Europe, up 3.6%; 11 & 12-litre units will be combined into one
5,415 in Asia, down 0.9%; 13-litre in future. Relying on XPi common
7,776 in South America, up 2.3%; rail system, up to 2,200 bar compared with
5,693 in central and eastern Europe, up 8% 1,800 today. Scania will be able to achieve
2,291 in other regions, up 20%. Euro-5 with these high injector pressures.
Four chassis classes (C - construction, D -
Scania's share of the West European heavy
urban/regional distribution, G - heavy duty
improved in 2005 to an estimated 13.7% as sales
& L - long distance).
of the new R-Series got underway.
Various gearbox, axle gear and axle
combinations and suspension systems.
MODELS
Scanias product range has long been based PRODUCTION STRATEGY
upon modular concepts whereby a small Like Volvo, Scania produces the majority of its
number of components can be offered in a wide vehicles outside Sweden. Its principal truck and
variety of permutations to suit individual bus assembly plants are as follows:
operator needs.
Zwolle, Netherlands - trucks;
Sdertlje, Sweden - trucks and buses;
The Series-4 was introduced in 1995 but with
Angers, France - trucks and buses;
its latest model introduction Scania has broken
Sao Paulo, Brazil - trucks and buses;
with its traditional "Series-X" nomenclature.
Tucumn, Argentina - trucks;
The reason for this is the company's
Slupsk, Poland - truck and bus assembly -
recognition that new model development tends
just buses from mid-2002.
now to be a continuous process rather than a
"big bang". Scania vehicles are also assembled in low
volume in, Australia, Botswana, China, Egypt,
So the latest generation, launched on March 31, Estonia, Kenya, Malaysia, Morocco, Mexico,
2004, is referred to as the new R-Series. The 'R' Pakistan, South Africa, South Korea, Thailand,
designation refers to the cab and continues Tunisia and Zimbabwe.
Scania's existing cab nomenclature for its three
basic cab structures: P - low forward control, R During 2002 Scania announced that its Polish
- high forward control and T - conventional plant would concentrate exclusively on buses,
bonneted. New versions of the P and T cabs with effect from the middle of the year. Also
were shown at the Hannover show in during 2002 Scania began assembling buses at
September 2004. its new St Petersburg plant. The facility has the
capacity to produce 200 buses per year.
The cabs share components where possible.
Various combinations of day-cabs, sleeper-cabs, Since 1996 Scania has been concentrating its
crew-cabs etc. are available. European component production in Sweden,
first switching the production of cab frames
The product range is currently based upon: from Meppel in the Netherlands to
Oskarshamn. Between 1999 and 2001
production of the 6-cylinder and 8-cylinder
engines was transferred to Sdertlje and axle
production was concentrated in Falun.
- 108 -
In 2002, cab production in the Netherlands was MAN

transferred to Scania Cabs in Oskarshamn, In April 2003 MAN and Scania announced
where SKr850m was invested in a new plans for long-term collaboration in the
finishing paint shop and a new cab fitting-out development and production of powertrain
line. Scania has invested about SKR1.5bn at components. MAN will adapt some of its axles
Oskarshamn since the introduction of the 4- and transfer-boxes for use in Scania trucks.
Series trucks in the mid-1990s, representing Scania will adapt some of its gearboxes for use
one of the biggest single investments in in MAN trucks. Production is scheduled to start
production facilities in the companys history. after a development phase of about 3 years.
From 2002, the cabs for Scanias entire
European truck building operation are supplied Cummins
from Oskarshamn.
In August 2005 Scania signed a new joint
In October 2005 the company announced plans venture agreement with Cummins for the
to conduct a review of its production structure production of the new generation of high-
in Sweden. The review primarily concerns pressure injectors for diesel engines XPI or
operations in Sdertlje, Falun and Sibbhult Xtra-High Pressure Injection. The new
related to axles, gearboxes and components. agreement builds on the joint development co-
Some 1 800 employees are today employed in operation that Scania launched in 1992 with
these operations. The review is looking at a Cummins. That co-operation led to the
"structural streamlining" that has potential to development of HPI (High Pressure Injection),
yield substantial cost savings. Scanias the injection system that is currently fitted to
assessment is that it should be possible to carry Scanias trucks. Scania and Cummins expect
out co-ordination of production in Sweden that XPI will replace the current-generation
within a period of 2-3 years. The review will HPI system.
be completed in Q1-2006.
Hino
The data is presented for Scania Group. For the
In March 2002 Hino and Scania announced an
years prior to the formation of Scania as a
alliance. In the first phase of their partnership
separate entity, data is drawn from the Saab-
Hino buys some heavy trucks from Scania for
Scania AB annual reports but the level of
sale in Japan. However, volumes have been
disclosure was limited. Statistics for Saab-Scania
fairly insignificant with about 12- units sold
AB are provided until 1994.
between May 2003 (the first delivery) and
September 2005.
Only preliminary data for 2005 was available at
the time of writing.
In exchange, Hino will supply the Swedish
company with 7-litre to 8-litre diesel engines.
The two firms will also pool their emission
reduction expertise and technology.
According to Hinos president, other potential

areas for co-operation are for the two firms to
use each other's production bases in Southeast
Asia, China and South America, as well as to
co-operate in vehicle maintenance and other
businesses. The option of Hino supplying
medium trucks to Scania is also being
investigated.
- 109 -
CHAPTER 14: VOLVO TRUCKS & BUSES

The rationale for such a move was little
OVERVIEW changed from that which applied when Renault
Volvo is the world's third largest truckmaker and Volvo tried to merge in 1993. That merger
and second largest heavy truck producer. It would have had Volvo taking the lead role in
makes more trucks in Europe than any other the truck sector and Renault in cars and the
producer. In 2005 it delivered 214,400 units logic for combining forces in the truck sector
worldwide of Mack, Renault and Volvo remained compelling. The deal was approved
branded trucks. It also produced 10,700 buses by the European and US competition
and bus chassis. authorities in 2000 and became effective on
January 2, 2001.
Towards the end of the nineties the Volvo
group began reducing the breadth of its Having finally succeeded in bolstering its
portfolio of industrial holdings and increasing strategic weight in Europe and North America,
its depth, concentrating on the automotive and Volvo's Asian strategy promptly began to
transport vehicle industries, having previously unravel. In April 2001 it was forced to sell its
acquired interests in a number of unrelated stake in Mitsubishi Motors (MMC) to DC, in
industry sectors. recognition of DC's increasing control over the
Japanese firm.
This rationalisation process was taken a stage
further in early 1999 when the car division was Volvo currently appears content to expand
sold and Volvo's focus was narrowed to the organically rather than by acquisition. Having
following commercial transport industries: not performed particularly well during the
recent downturns in North America and
trucks;
Europe, the company needs to concentrate on
buses;
the integration of the Mack, RVI and Volvo
construction equipment;
operations in order to take full advantage of the
marine and industrial engines;
current upturn.
aerospace equipment.
However, it may not be long before the
It also has a financial services division.
company returns to the acquisition trail as it
seeks to remain competitive with DC.
The truck division is now the group's largest in
terms of revenue and usually in profit terms as
Now that Nissan Diesel has restructured and
well, though not in 2000 and 2001 when its
reduced its substantial debt burden it would be
earnings were weak or negative.
no surprise if Volvo were once again to run a
slide rule over the company and assess its
Following the blocking of Volvo's bid for
strategic fit. Volvo's links with Renault and
Scania (see Scania discussion) Volvo announced
Nissan (which until recently held a 41% stake
the proposed purchase of RVI from Renault in
in Nissan Diesel) put it in a good negotiating
2000. The deal provided for Volvo to acquire
position.
100% of RVI's equity in exchange for Renault
taking 20% of Volvo's shares.
- 110 -
Figure 68: Latest results - Volvo
Volvo
Unit Yr to De c 05 Q4-05 9M o-05 Yr to De c 04 Q4-04 9M o-04 Yr to De c 03
Group data Data % ch. Data % ch. Data % ch. Data % ch. Data % ch. Data % ch. Data % ch.
Revenue SEK m 231,191 14 .3 65,287 14 .3 165,904 14 .3 202,307 15.8 57,113 17.2 145,194 15.2 174,768 (6 .1)
Operating prof it SEK m 18,151 2 4 .1 4,261 13,890 3 9 .2 14,626 4 8 4 .1 4,644 9,982 10 9 .4 2,504 (11.7)
Pre-tax prof it SEK m 18,014 3 8 .7 4,143 (9 .1) 13,871 6 4 .5 12,991 6 8 4 .0 4,559 (2 8 6 .8 ) 8,432 10 5.8 1,657 (17.7)
Net prof it SEK m 13,107 3 2 .4 2,994 (14 .3 ) 10,113 57.9 9,897 3 ,2 2 1.1 3,494 (2 2 1.1) 6,403 10 1.1 298 (78 .6 )
Employees 000's 81.9 1.0 81.9 1.0 83.0 4 .5 81.1 7.0 81.1 7.0 79.5 7.1 75.7 6 .4
Unit s ale s 000's 225.1 11.7 92.7 50 .2 163.2 16 .8 201.4 2 3 .0 61.8 2 3 .4 139.7 2 2 .8 163.8 (1.4 )
V olvo Trucks 000's 103.7 6 .6 58.6 9 2 .8 76.0 13 .6 97.3 2 9 .1 30.4 3 3 .4 66.9 2 7.3 75.3 8 .4
RVI Trucks 000's 74.5 5.6 21.7 2 .4 52.7 7.0 70.5 14 .3 21.2 8 .1 49.3 17.1 61.7 (4 .2 )
Mack Trucks 000's 36.2 4 2 .4 9.1 16 .8 27.1 53 .7 25.4 3 4 .0 7.8 4 7.4 17.6 2 8 .7 19.0 (18 .3 )
Buses 000's 10.7 2 9 .7 3.3 4 1.8 7.3 2 4 .8 8.2 5.3 2.4 0 .7 5.9 7.3 7.8 (13 .7)
Pe r unit
Revenue SEK 1,027,269 2 .3 703,933 (2 3 .9 ) 1,016,837 (2 .2 ) 1,004,399 (5.9 ) 924,862 (5.1) 1,039,565 (6 .2 ) 1,066,921 (4 .8 )
Operating prof it SEK 80,652 11.1 45,943 (3 8 .9 ) 85,133 19 .1 72,614 3 75.0 75,203 (2 6 6 .2 ) 71,469 70 .5 15,286 (10 .5)
Pre-tax prof it SEK 80,043 2 4 .1 44,670 (3 9 .5) 85,016 4 0 .8 64,497 53 7.6 73,826 (2 51.3 ) 60,372 6 7.6 10,116 (16 .5)
Net prof it SEK 58,239 18 .5 32,282 (4 2 .9 ) 61,983 3 5.2 49,136 2 ,6 0 0 .9 56,580 (19 8 .1) 45,844 6 3 .8 1,819 (78 .3 )
Pe r e m ploye e
Revenue SEK 2,824,362 13 .2 797,584 13 .2 1,997,736 9 .3 2,495,214 8 .1 704,420 9 .5 1,827,443 7.6 2,307,382 (11.8 )
Operating prof it SEK 221,743 2 2 .9 52,055 (9 .1) 167,257 3 3 .1 180,394 4 4 5.7 57,278 (2 9 1.6 ) 125,636 9 5.5 33,059 (17.1)
Pre-tax prof it SEK 220,069 3 7.3 50,613 (10 .0 ) 167,028 57.4 160,228 6 3 2 .4 56,230 (2 74 .5) 106,127 9 2 .2 21,877 (2 2 .7)
Net prof it SEK 160,123 3 1.2 36,576 (15.1) 121,776 51.1 122,068 3 ,0 0 2 .6 43,094 (2 13 .1) 80,590 8 7.8 3,934 (79 .9 )
Sales units 2.7 10 .7 1.1 4 8 .8 2.0 11.8 2.5 14 .9 0.8 15.3 1.8 14 .6 2.2 (7.4 )
Operating prof it % 7.9 0 .6 6.5 (1.6 ) 8.4 1.5 7.2 5.8 8.1 12 .8 6.9 3 .1 1.4 (0 .1)
Pre-tax prof it % 7.8 1.4 6.3 (1.6 ) 8.4 2 .6 6.4 5.5 8.0 13 .0 5.8 2 .6 0.9 (0 .1)
Net prof it % 5.7 0 .8 4.6 (1.5) 6.1 1.7 4.9 4 .7 6.1 12 .0 4.4 1.9 0.2 (0 .6 )

Trucks SEK m 155,396 13 .5 43,441 10 .0 111,955 15.0 136,879 17.0 39,504 18 .9 97,375 16 .3 116,969 (1.5)
Buses SEK m 16,589 3 0 .4 5,260 4 4 .9 11,329 2 4 .6 12,722 6 .2 3,631 17.1 9,091 2 .4 11,978 (14 .7)
Construction SEK m 34,816 18 .0 10,301 2 8 .2 24,515 14 .2 29,496 2 7.4 8,035 2 3 .6 21,461 2 8 .9 23,154 10 .2
Penta SEK m 9,776 7.9 2,428 11.4 7,348 6 .8 9,057 19 .2 2,179 17.7 6,878 19 .7 7,596 (1.0 )
Aero SEK m 7,538 8 .9 2,110 16 .3 5,428 6 .2 6,925 (13 .8 ) 1,814 (13 .4 ) 5,111 (13 .9 ) 8,030 (9 .1)
Financial Services SEK m (10 0 .0 )
Other SEK m 7,076 (2 .1) 1,747 (10 .4 ) 5,329 1.0 7,228 2 .7 1,950 0 .0 5,278 3 .7 7,041 18 .0

Trucks SEK m 11,717 2 8 .2 2,742 (2 0 .7) 8,975 58 .0 9,138 13 1.3 3,458 13 7.3 5,680 12 7.7 3,951 2 3 2 .3
Buses SEK m 470 10 3 .5 134 (19 .8 ) 336 4 2 5.0 231 (12 9 .2 ) 167 (2 74 .0 ) 64 (12 4 .2 ) (790) 74 0 .4
Construction SEK m 2,752 58 .3 736 176 .7 2,016 3 6 .9 1,739 9 1.5 266 10 0 .0 1,473 9 0 .1 908 12 3 .6
Penta SEK m 943 0 .6 205 (12 .8 ) 738 5.1 937 3 4 .8 235 3 7.4 702 3 4 .0 695 7.4
Aero SEK m 836 110 .6 219 3 ,0 2 8 .6 617 58 .2 397 (1,0 0 2 .3 ) 7 (114 .9 ) 390 12 ,9 0 0 .0 (44) (9 8 0 .0 )
Financial Services SEK m 2,033 4 8 .9 479 10 .4 1,554 6 6 .9 1,365 4 7.4 434 72 .9 931 3 7.9 926 8 9 .0
Other SEK m (600) (173 .3 ) (254) (4 2 9 .9 ) (346) (14 6 .6 ) 819 (12 6 .1) 77 (10 1.9 ) 742 3 2 .0 (3,142) (1,719 .6 )
Note s : (1) Q1 is Jan-Mar, Q2 is Apr-Jun, Q3 is Jul-Sep, Q4 is Oct-Dec (2) % ch is change versus corresponding year-ago data
The truck division reported a 13.5% revenue as

RECENT PERFORMANCE unit sales rose by 11%. The division improved
its operating profit by 30% SKr11.7bn,
2005 results
generating a margin of 7.5% compared with
Volvo Group reported a strong profit increase 6.6% the previous year.
for 2005 boosted by increased contributions by
all divisions. The bus division reported a 30% increase in
revenue to SKr16.6bn as sales also rose by 30%
Group operating profit rose 24% to SKr18.15bn, to 10,675 units. The division's operating profit
a margin of 7.9% compared with 7.3% in 2004. grew by 86% to SKr470m and the margin rose
Group net profit rose by 32% to SKr13.1bn. by 0.8pts to 2.8%.
- 111 -
Figure 69: Volvo truck & bus revenue & operating profit trend
3,000
2,500
Revenue (SKr)
2,000 Op. Profit (SKr)
1,500
Index (1983 = 100)
1,000
500
0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
-500
-1,000
BUSINESS STRUCTURE Volvo's final links with the car division were
severed in June 2001 when it sold its 50% stake
In the wake of the abandoned merger with in AB Volvofinans to Ford Credit for SKr871m.
Renault, Mr Pehr Gyllenhammar who was at Volvofinans is primarily engaged in providing
the head of Volvo Group for more than two credit for passenger car buyers.
decades, was forced out. His successor, Mr
Sren Gyll, made fundamental changes to the Volvo / MMC
strategy and structure of the company, a
Until 2001 Volvo held a 3.3% stake in MMC. It
process continued by Mr Leif Johansson,
had held the stake since 1999 when the firms
formerly chief executive of Electrolux who
announced a plan for MMC to split its truck
replaced Mr. Gyll in 1997.
and bus division into a separate company
during 2001 and Volvo was to acquire up to
Following the sale of the car division Volvo is
19.9% of the new company. The firms were
now concentrating on the five industrial
developing a medium-heavy truck together and
businesses shown in Figure 70. It also has a
co-operating in various other ways.
financial services division.
As soon as DC formed an alliance with MMC
The background to the decision to dispose of
we began to question whether the Volvo-MMC
the car division was its record of low
alliance had a viable future. Despite the
profitability, consistently lower than the truck
insistence of all three companies that the
division, and the limited options for
alliance would continue we were of the opinion
improvement for a relatively small player
that it would be in neither DC's nor Volvo's
(400,000 units in 1998) in an industry
interests for this to happen.
dominated by companies making upwards of
2m units annually.
- 112 -
Figure 70: Volvo Group revenue by division
Divis ion 1997 1998 1999 2000 2001 2002 2003 2004 2005
Truck Group 24.2 26.1 48.2 45.4 61.6 63.8 63.8 67.7 67.2
Buses 5.8 6.7 11.8 13.2 8.8 7.5 6.5 6.3 7.2
Volvo Construction 9.1 9.1 15.1 15.4 11.2 11.3 12.6 14.5 15.1
Marine / industrial engines 2.4 2.3 4.6 5.1 3.9 4.1 4.1 4.5 4.2
Aero Group 4.1 4.0 8.0 8.2 6.2 4.7 4.4 3.4 3.3
Fin. Services 2.8 3.4 6.9 7.4 5.0 5.3 5.0 0.0 0.0
Car Group 52.5 48.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other & Eliminations -0.9 -0.4 5.4 5.2 3.3 3.2 3.5 3.6 3.1
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Back in 2000 we commented that "there is Volvo Global Trucks was formed to co-ordinate
considerable room for doubt as to whether and optimise the development of the three
MMC's original plan for twin alliances will brands (Mack, RVI and Volvo). Having
come to fruition. As DC's bargaining hand has completed much of the integration the
been strengthened it may try to capture MMC's company abandoned the VGT structure in 2002
heavy truck business (a valuable business for its and established the three brands as separate
exposure to emerging Asian markets), as well as business areas to enable better focus on each
the car operations." brand's customers.
So it proved. In April 2001 DC paid Volvo RVI was a good fit for Volvo in terms of
SKr3.2bn for its 3.3% stake in MMC, taking geographical sales distribution and product
DC's holding in the Japanese firm to 37.3%. range. RVI offers exposure to markets where
The price included the rights to the medium Volvo was relatively weak, such as southern
truck programme being undertaken by Volvo Europe where RVI typically takes a 23% share
and MMC. of the heavy truck market compared with
Volvo's 13%.
Volvo / Scania
The only market where the two companies are
As discussed in the opening comments Volvo's
relatively equally matched in terms of heavy
bid for Scania was blocked by Europes
truck market share is in North America.
competition authority, in March 2000. The
However, even here the overlap is actually
main reason for the bid being blocked was the
relatively low as about half of Volvo-brand
dominance that a Volvo/Scania combine would
sales are to the long-haulage sector while Mack
have over Europes Nordic markets.
trucks are primarily used in heavy construction
Subsequent developments are covered in the and regional distribution.
Scania discussion.
At the time of the RVI takeover Volvo said it
planned to maintain separate brand names, and
Volvo / RVI
sales organisations, which sounded sensible
The takeover of RVI was described in the enough; but also to maintain separate assembly
introductory comments. plants tied to each brand, which didn't.
- 113 -
Dogmatic adherence to such a policy would Volvo said the takeover would generate annual
have inhibited the new alliance from extracting savings of SKr3.5bn after two years, with
all the scale economy benefits possible. The purchasing efficiencies accounting for about
idea of producing different brands in different half that figure.
plants is an unnecessary constraint which of
itself, does nothing to preserve different brand Longer term, an incremental annual saving of
identities. SKr3bn is being suggested as the consequence
of integration between the two companies
The closure of Mack's Winnsboro plant and the product ranges.
transfer of production to Volvo's North
American plant suggests that Volvo is indeed One tangible sign of the benefits of the
taking a pragmatic view of its production takeover is Volvo's plan to reduce the number
network. of engine platforms from eighteen to two.
In terms of product, about 40% of RVI's output Volvo / Bilia

is light/medium trucks compared with just 10% During Q3-2003 Volvo completed its
of Volvo's and even where the brands acquisition of the truck and construction
nominally overlap in the heavy sector, they equipment operations of Bilia - a leading
quite often compete in different niches as in service supplier and reseller of Volvo trucks
North America. and construction equipment. The acquired
operations were consolidated in the Volvo
Another consequence of the takeover was that
Group as of July 2003 but in May 2004 Bilia was
Volvo became one of the world's four largest
sold, resulting in a SKr24m non-recurring gain
producers of heavy diesel engines - defined by
for Volvo.
Volvo as being in excess of 8-litres. In
recognition of this the company has formed a
new business unit Volvo Powertrain, which
supplies the whole group with engines and
other powertrain components. It also supplies
some engines to other groups.
Figure 71: Volvo group truck sales by market
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Western Europe 59,098 59,096 71,743 75,771 83,399 90,460 87,486 82,672 90,746 91,087
Share of total 49% 44% 45% 45% 50% 58% 56% 53% 47% 42%
North A merica 39,860 48,015 60,563 73,016 57,533 34,645 36,515 34,756 49,273 64,974
Share of total 33% 36% 38% 44% 34% 22% 23% 22% 26% 30%
A sia 4,850 4,710 3,760 2,720 5,560 6,603 9,144 16,286 24,881 25,706
Share of total 4% 4% 2% 2% 3% 4% 6% 10% 13% 12%
Eastern Europe 2,660 3,430 4,540 2,900 4,090 7,581 8,803 9,411 11,920 12,535
Share of total 2% 3% 3% 2% 2% 5% 6% 6% 6% 6%
South A merica 4,980 6,970 6,020 3,900 4,530 5,789 5,358 5,976 9,190 11,248
Share of total 4% 5% 4% 2% 3% 4% 3% 4% 5% 5%
Other 9,143 10,918 13,053 9,236 13,063 10,233 9,827 6,888 7,209 8,829
Share of total 8% 8% 8% 6% 8% 7% 6% 4% 4% 4%
Total 120,591 133,139 159,679 167,543 168,175 155,311 157,133 155,989 193,219 214,379
- 114 -
Figure 72: Renault brand share of W. European truck market (%)
2001 2002 2003 2004 2005(e ) 2006(f)

3.5t-6.0t
A ustria 9.1 2.0 2.2 5.3 3.8 5.6
France 27.3 35.8 32.9 33.7 32.5 34.7
Germany 1.9 1.2 1.2 1.5 2.1 2.3
Italy 5.1 4.8 2.4 3.4 3.6 3.9
Netherlands 5.2 4.0 2.8 2.4 4.8 4.4
Portugal 11.6 20.2 22.3 12.8 18.3 18.4
Spain 12.3 2.2 3.5 5.1 5.5 5.6
UK 11.4 15.9 14.9 7.6 4.6 6.5
Nordic markets 1.8 1.4 0.7 0.7 1.2 1.4
Other 0.5 2.3 1.3 2.4 2.2 2.3
Total W. Europe 6.1 6.2 4.9 4.0 4.5 5.0
6.1t-10.0t
A ustria 4.8 5.4 9.9 1.6 1.8 2.2
France 42.5 39.8 44.5 45.9 45.3 44.4
Germany 1.9 1.5 1.9 2.3 3.1 2.9
Italy 12.0 11.0 9.7 11.2 12.8 12.4
Netherlands 7.1 8.4 8.2 9.4 8.6 8.5
Portugal 6.9 5.9 4.5 5.0 5.6 4.7
Spain 10.5 37.1 26.4 27.4 29.8 29.5
UK 8.0 5.1 9.0 9.6 9.8 8.1
Nordic markets 6.9 9.4 8.4 11.2 10.6 11.0
Other 3.7 3.7 3.3 3.7 5.7 6.8
Total W. Europe 8.0 9.0 9.4 8.4 10.6 10.1
10.1t-15.9t
A ustria 1.7 2.5 4.3 4.2 5.1 6.6
France 40.0 43.7 45.0 45.0 43.9 41.4
Germany 0.9 1.1 1.7 1.2 1.1 0.9
Italy 13.3 10.8 10.0 10.1 9.8 10.3
Netherlands 5.0 7.8 7.5 7.6 4.9 4.9
Portugal 10.9 14.2 13.9 17.6 17.9 16.0
Spain 12.1 20.0 13.4 23.0 16.2 15.4
UK 3.5 2.3 2.9 4.5 3.8 3.8
Nordic markets 3.8 6.5 5.5 4.8 4.3 4.6
Other 4.1 2.8 2.7 4.4 4.4 4.3
Total W. Europe 13.7 15.3 14.3 9.1 13.3 13.5
3.5-15.9t
A ustria 4.5 3.3 5.7 3.6 3.7 4.9
France 38.6 41.4 43.0 41.9 42.6 41.3
Germany 1.7 1.3 1.6 1.8 2.4 2.3
Italy 10.6 9.3 6.8 7.8 8.0 8.6
Netherlands 5.9 7.2 6.0 6.6 6.1 6.1
Portugal 9.0 10.1 10.0 9.9 11.7 10.6
Spain 11.7 17.0 12.7 16.4 15.7 15.3
UK 8.1 7.0 9.6 8.6 7.9 7.3
Nordic markets 2.8 3.3 2.4 2.8 3.1 3.2
Other 2.6 3.0 2.4 3.4 4.1 4.6
Total W. Europe 8.8 9.7 9.0 7.0 9.2 9.2
16t plus
A ustria 2.6 3.2 3.3 3.1 3.0 3.0
France 35.4 38.2 35.8 37.1 33.8 32.5
Germany 1.8 2.2 2.1 1.7 2.3 2.5
Italy 9.3 10.3 9.2 8.8 8.0 8.3
Netherlands 3.0 3.6 3.7 3.1 2.9 2.7
Portugal 18.2 19.6 21.4 19.7 18.8 18.2
Spain 17.8 19.5 17.2 17.3 17.1 16.8
UK 7.1 3.6 4.0 4.8 3.9 4.0
Nordic markets 2.6 2.9 2.9 2.2 2.6 2.7
Other 3.5 5.3 4.4 3.8 4.2 3.2
Total W. Europe 12.3 13.0 11.5 12.1 10.9 10.7
- 115 -
Figure 73: Volvo brand share of W. European truck market (%)
2001 2002 2003 2004 2005(e ) 2006(f)

6.1t-10.0t
A ustria 1.9 1.7 1.3 2.4 2.2 2.4
France 0.4 0.3 0.2 0.3 0.4 0.4
Germany 0.6 0.4 0.3 0.4 0.2 0.2
Italy 1.3 1.2 0.9 0.5 0.7 0.8
Netherlands 4.5 2.4 1.2 2.5 1.5 1.5
Portugal 0.0 0.0 0.0 0.0 0.0 0.0
Spain 1.5 0.0 0.0 0.0 0.0 0.0
UK 0.6 0.6 0.2 0.1 0.1 0.1
Nordic markets 5.4 5.4 2.8 2.7 3.2 3.3
Other 0.4 0.1 0.1 0.1 0.3 0.1
Total W. Europe 1.0 0.7 0.4 0.4 0.3 0.3
10.1t-15.9t
A ustria 6.2 4.5 6.0 3.9 4.0 4.2
France 8.1 4.8 4.2 4.7 5.1 5.3
Germany 2.8 2.2 2.5 1.5 1.1 1.1
Italy 5.9 5.2 3.9 3.6 3.6 3.8
Netherlands 21.4 15.2 15.5 11.1 17.9 15.4
Portugal 17.9 16.0 19.2 16.3 20.5 17.0
Spain 11.9 11.5 5.8 3.9 5.7 5.5
UK 11.4 9.0 8.8 8.0 7.7 8.9
Nordic markets 39.0 34.7 38.3 29.5 28.7 30.1
Other 15.0 11.2 13.1 10.9 18.3 14.9
Total W. Europe 10.0 7.6 7.2 6.4 6.7 6.8
3.5-15.9t
A ustria 3.3 2.4 3.2 2.6 2.5 2.7
France 4.6 2.8 2.4 2.3 3.0 3.1
Germany 0.8 0.6 0.7 0.5 0.3 0.3
Italy 2.6 2.4 1.4 1.2 1.1 1.5
Netherlands 9.7 6.6 5.9 5.1 7.4 6.6
Portugal 4.4 3.0 4.0 4.2 5.4 4.3
Spain 3.4 2.0 1.1 0.9 1.5 1.4
UK 1.7 1.5 1.2 0.9 0.9 1.1
Nordic markets 7.6 6.6 5.9 5.7 5.7 6.1
Other 4.5 2.7 2.6 2.3 4.2 3.4
Total W. Europe 2.9 2.2 1.9 1.6 1.8 1.8
16t plus
A ustria 12.3 13.8 13.5 12.7 9.9 10.8
France 12.0 10.2 11.5 10.9 11.4 11.0
Germany 7.8 9.3 9.2 8.5 7.3 7.6
Italy 10.4 9.7 11.1 10.6 11.1 10.5
Netherlands 16.8 18.0 18.6 19.3 18.7 18.4
Portugal 17.1 19.9 21.4 20.0 18.6 16.7
Spain 13.7 12.2 13.8 14.8 13.3 13.1
UK 18.2 16.9 17.0 16.6 18.7 16.6
Nordic markets 36.7 38.3 38.1 37.3 34.9 33.7
Other 20.8 22.0 22.9 21.0 19.8 19.4
Total W. Europe 14.4 14.1 15.1 14.5 14.3 13.6
- 116 -
Figure 74: Volvo group share of W. European truck market (%)
2001 2002 2003 2004 2005(e ) 2006(f)

3.5t-6.0t
A ustria 9.1 2.0 2.5 5.8 4.2 6.0
France 27.3 35.8 32.9 33.7 32.5 34.7
Germany 1.9 1.2 1.2 1.5 2.1 2.3
Italy 5.1 4.8 2.4 3.4 3.6 3.9
Netherlands 5.2 4.0 2.8 2.4 4.8 4.4
Portugal 11.6 20.2 22.3 12.8 18.3 18.4
Spain 12.3 2.2 3.5 5.1 5.5 5.6
UK 11.4 15.9 14.9 7.6 4.6 6.5
Nordic markets 1.8 1.4 0.7 0.7 1.2 1.4
Other 0.5 2.3 1.3 2.4 2.2 2.3
Total W. Europe 6.1 6.2 5.0 4.0 4.5 5.0
6.1t-10.0t
A ustria 6.7 7.1 11.2 4.0 4.0 4.6
France 42.9 40.1 44.7 46.2 45.7 44.8
Germany 2.5 2.0 2.2 2.7 3.3 3.1
Italy 13.3 12.2 10.6 11.8 13.5 13.2
Netherlands 11.6 10.8 9.4 11.9 10.1 10.0
Portugal 6.9 5.9 4.5 5.0 5.6 4.7
Spain 12.0 37.1 26.4 27.4 29.8 29.5
UK 8.6 5.7 9.1 9.6 9.9 8.2
Nordic markets 12.4 14.8 11.2 13.8 13.8 14.3
Other 4.1 3.8 3.4 3.7 6.0 6.9
Total W. Europe 9.0 9.7 9.9 8.8 10.9 10.4
10.1t-15.9t
A ustria 8.0 7.1 10.3 8.0 9.1 10.8
France 48.0 48.5 49.2 49.7 49.0 46.7
Germany 3.7 3.3 4.2 2.7 2.2 2.0
Italy 19.2 16.0 13.9 13.7 13.4 14.1
Netherlands 26.4 23.0 23.0 18.7 22.8 20.3
Portugal 28.8 30.1 33.1 33.9 38.4 33.0
Spain 24.0 31.4 19.2 26.9 21.9 20.9
UK 14.9 11.3 11.7 12.4 11.5 12.7
Nordic markets 42.8 41.2 43.8 34.3 33.0 34.7
Other 19.1 14.0 15.8 15.3 22.7 19.2
Total W. Europe 23.7 22.9 21.5 15.5 20.0 20.3
3.5-15.9t
A ustria 7.8 5.7 8.9 6.2 6.2 7.6
France 43.2 44.2 45.4 44.2 45.6 44.4
Germany 2.5 1.9 2.3 2.3 2.7 2.6
Italy 13.1 11.7 8.2 9.0 9.1 10.1
Netherlands 15.5 13.8 11.9 11.7 13.5 12.7
Portugal 13.4 13.0 14.0 14.2 17.0 14.9
Spain 15.1 19.0 13.8 17.2 17.1 16.7
UK 9.8 8.5 10.7 9.5 8.8 8.3
Nordic markets 10.4 9.9 8.3 8.4 8.8 9.3
Other 7.0 5.7 5.0 5.6 8.2 7.9
Total W. Europe 11.7 11.9 10.9 8.6 11.0 11.0
16t plus
A ustria 14.9 17.0 16.8 15.8 12.9 13.8
France 47.5 48.5 47.3 48.0 45.2 43.5
Germany 9.6 11.4 11.2 10.3 9.6 10.1
Italy 19.7 20.0 20.4 19.4 19.1 18.8
Netherlands 19.8 21.7 22.2 22.4 21.6 21.1
Portugal 35.3 39.4 42.8 39.7 37.4 34.9
Spain 31.5 31.8 31.0 32.1 30.4 29.9
UK 25.3 20.5 21.0 21.3 22.6 20.6
Nordic markets 39.3 41.3 41.0 39.5 37.5 36.4
Other 24.3 27.2 27.3 24.8 24.0 22.6
Total W. Europe 26.7 27.1 26.7 26.6 25.2 24.3
- 117 -
MARKETS US market
In the US Volvo branded trucks took a smaller
VGT sold 214,379 trucks in 2005, an 11% share than Mack of the Class 8 market in 2005,
increase from the previous year. Sales of Volvo at 10.5%, (up 0.5pts from 2004) compared with
brand trucks were 7% higher at 103,696 units, Mack's 10.8% (2004: 10.2%).
sales of Renault models were up by 6% at
74,461 units and those of Mack trucks were
42% higher at 36,222 units. Bus sales rose by MODELS
30% to 10,675 units as demand in most of its
major markets improved. Volvo
Within Europe, Volvo currently produces
On a regional basis, sales of Mack, Renault and trucks based upon three ranges of cabs, the FL,
Volvo brand trucks were as follows: FM and FH. The FM and FH have been fully
W. Europe - stable at 91,087 units; renewed over the past two years and the FL has
Nafta - up 32% at 64,974 units received a freshening prior to its expected
Asia - up 3% at 25,706 units; renewal in 2005.
E. Europe - up 5% at 12,535 units;
S. America - up 22% at 11,248 units; The facelifting of the FL in 2000 saw the end of
Other - up 22% at 8,829 units. the FLC badge, used on Volvo's lightest truck
(7.5-10t). The FL is available in weights from
Western Europe - sub-16t trucks 7.5-18t but the Perkins 4-cylinder engine used
In the West European light/medium sector the in the FLC has been dropped in favour of a
market share of Volvo-brand trucks dropped by Volvo 6-cylinder unit.
0.3pts to 1.6% in 2004, its lowest point for at
least nine years. The loss of its alliance with MMC meant Volvo
also lost the medium truck project the two
The introduction of Volvo's FLC light truck in firms were jointly pursuing which would have
autumn 1996 gave a temporary boost to its replaced Volvo's FL.
performance in this sector but an
uncompetitive payload meant it was never a However, in RVI it has acquired a company
very serious contender at the light end and its with an already established presence in this
share soon started slipping in response to sector of the market and recently updated
competition from products such as the Atego. versions of medium (Midlum) and light
(Mascott) product ranges. We expect the new
Now that Volvo has Renault on board the generation FL range (2006) also to be the basis
Volvo brand range will probably stop at 12t in for the new Midlum.
future. At the beginning of 2003 a small
number of Volvo dealers began offering the The FM series was first launched in 1998 and
Renault Mascott which covers the 3.5-6.5t was renewed at the end of 2001 (market launch
GVW range. in Q1-2002), shortly after a facelifted version of
the FH (with which it shares nearly 80% of its
Western Europe - 16t-plus trucks components) made its debut. More significant
than the changes to the FM's cab was the
The Volvo brand's share of the heavy sector fell
launch of a new 9-litre engine, the D9A. The
in 2004 having risen for the first time in six
new engine is also offered in Renault's heavy
years during 2003. A further small decline is
truck range.
expected in 2005 and 2006 as new products
from competitors make inroads and Volvo's key In September 2005 the new FM was launched
markets (Nordic region and the UK) grow more with new 9-litre and 13-litre engines meeting
slowly than the W. European average. Euro-4 and Euro-5 emission standards.
- 118 -
Figure 75: Volvo's European product range
VOLVO
M ODEL DEBUT 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 REM ARKS
FLC 1996 T 7.5-10 .0 T GV W
FL6 1985 F N W as t o b e 2 00 4
in JV wit h M M C
New mo del will also
replace M id lum
FS7 1991 T
FL7/10/12 1985 T Replacement (FM )
is b ased o n FH
FM 1998 N/E E/F
FH12/16 1993 N/E E E/F Repl. F SERIES
I: Intro ductio n T: Term inatio n N: New M o del F: Facelift E: New Engine X: range extensio n
Figure 76: RVI's European product range
RVI
Messenger 1981 T D er. fro m M aster

B Range Iveco cab
Mascott 1999 I N/E F R epl. M esseng
Midliner 1986 T N ew cab &

S / M Ranges engines
Midlum 2000 I X F/E N 18t 2-axle 2002
N ew with Vo lvo FL
Manager / Maxter
G Range 1981
Major
R Range
Premium 1996 E F E N E F N ew with Vo lvo FM

Kerax 1997
Magnum 1990 E F F/E A ssum e based

A E Range o n Vo lvo FH
I: Intro ductio n T: Term inatio n N: New M o del F: Facelift E: N ew Engine X: range extensio n
- 119 -
The third generation of the FH range was In South America Volvo launched a new
launched in Q1-2002, following sales of medium-weight model, the VM in early
200,000 units since the first generation was September 2003. The new model is the first
launched in 1993. The new FH saw the medium truck to be developed by Volvo
application of turbocompound technology to outside Europe and is based on the Midlum.
Volvo's 12-litre engine, a number of Production takes place at the company's
modifications to the cab internally and Curitiba plant in Brazil and the company was
externally, a new chassis range, the launch of aiming for sales of 1,500 units (about 10% of
Volvo's I-Shift fully automatic gearbox and an the Brazilian medium sector) in 2004, which it
extension of service intervals to as much as achieved.
100,000km in some cases. Together the FM and
FH changes required investment of SEK5.5bn. The company says $35m was invested in the
new model's development. This suggests the
In September 2005 the new FH was launched changes to the Midlum componentry were
alongside with new 9-litre and 13-litre engines minimal.
meeting Euro-4 and Euro-5 emission standards.
In February 2006 the company unveiled a new The VM was followed by an updated version of
version of the FH16. The greater part of the the NH range (Volvo's South American
investment of SKr300m was on the new 16 litre bonneted truck first introduced in 1999) later
engine, which with its 660hp is the most in September. The new model shares many
powerful in the truck industry. components with the FH and FM. Investment
in the new NH was also $35m.
In June 2003 Volvo launched a new 16-litre
engine. Demand for the previous 16-litre unit RVI
was fairly low, but Volvo sees opportunities to The current W. European range of models
install the new engine in Mack and RVI models produced in France and Spain comprises:
as well as perhaps selling it to outside firms.
Mascott (B-Series) - light truck produced at
In North America Volvo launched the new VN Batilly;
range in August 2002. The VN, which was
Midlum - medium truck produced at
developed at a cost of SEKr1.8bn, shares its
Blainville;
platform with the new FH and FM models and
the North American VHD model which Kerax - multi-wheel rigid produced at
competes primarily in the construction sector. Villaverde in Spain (though soon to be
transferred to Bourg-en Bresse);
At the beginning of 2005 Volvo presented the Premium (H100) - medium/heavy truck
new VT880, its flagship model for the North produced in France and Spain;
American market. The VT880 is equipped with Magnum - premium truck produced at
the Volvo 16-litre engine. A new variant, the Bourg-en Bresse.
VT800 was presented in August. The VT800
The heavier derivatives at 5.5 and 6.5t GVW of
also uses the 16-litre unit but the Cummins ISX
the new Mascott announced in April 2004
can be specified as an alternative.
feature a 3 litre, 4 cylinder Nissan engine
replacing the 2.8 litre Iveco unit.
- 120 -
The Midlum range was extended in 2002 to 18t Final assembly of the FL6/FS7 takes place at
GVW where its chassis/cab offers a weight Gent in Belgium. The FL and FH Series are
saving of some 500kg over the equivalent assembled at Gteborg in Sweden and Gent.
Premium range model. The new Midlum The plant at Gent is the largest, producing
featured RVIs 6.2 litre, common rail engine 29,819 units in 2004 (2003: 26,097); Gteborg
offering 220 or 270 hp. It is expected to switch produced 18,964 units (17,606).
to new Deutz family engines from Volvo, the
MD5, MD6 and MD7 engines 2004. A new During 2004 Volvo agreed a strategic alliance
model closely related to Volvos FL with ArvinMeritor under which ArvinMeritor
replacement is expected around 2006. is to be responsible for the supply of driven and
non-driven axles for Volvo group's trucks and
A new Premium Long Distance model was buses in Europe.
launched in September 2005 featuring an all-
new 10.8-litre DXi 11 engine (developed from Volvo's Nafta operations have been
the Volvo D9 unit) and a revised cab. significantly restructured in recent years, partly
in response to the market downturn and partly
The Magnum was given a revised engine in to develop an integrated manufacturing
2000 and an interior and exterior cab facelift in structure from the separate operations of Mack
late 2001. A fresh version was launched in and Volvo Trucks North America.
February 2005 with a new cab and the Volvo
12-litre D12 engine. The main elements of the restructuring were:
the closure of Mack's assembly plant in
Future model range renewal policy is Winnsboro with production transferred to
dependent on Volvo/RVI group strategy, which Volvos plant in Virginia; personnel reductions
is now moving strongly in the direction of and dealer restructuring in the US. The Virginia
common engine platforms for the Mack, plant produced 25,637 units in 2004 (2003:
Renault and Volvo marques but against the 17,079).
sharing of cabs. (See the Volvo section for
further details.). Apart from western Europe and North America
production/assembly occurs in the following
countries (all production figures refer to 2004):
PRODUCTION STRATEGY
In Europe, the cabs and all major components South America
for Volvo trucks are produced at plants in Curitiba, Brazil - 8,382 units;
Sweden, while final assembly (until 2000) was Lima, Peru (closed Q4-2001).
carried out at three locations in West Europe:
Asia / Middle East
Gent in Belgium, Gteborg in Sweden and
Teheran, Iran - 9,949 units;
Irvine in Great Britain. In 1998 it was decided
Brisbane, Australia - 1,221 units;
to close the Irvine plant. Production was
Jeddah, Saudi Arabia - 322 units;
subsequently wound down and during 2000
Bangkok, Thailand - 418 units;
assembly was transferred to Gteborg and Gent.
Kuala Lumpur, Malaysia - 206 units;
Bangalore, India - 500 units;
Some cabs for Europe are produced at Curitiba
Jinan, China - 430 units.
in Brazil which sent about 4,000 cabs to Europe
last year. Africa
Gaborone, Botswana - 912 units;
Casablanca, Morocco - 248 units;
Tunis, Tunisia - 84 units.
Eastern Europe
Moscow, Russia - 208 units.
- 121 -
At the end of 2001 Volvo ended truck Bourg-en-Bresse, France - Magnum and
production at its Polish plant in Wroclaw. The Premium;
plant is now used by Volvo's Construction Limoges, France - components &
Equipment division. reconditioning of military vehicles (see
Activa Capital comment below);
In March 2001 a new co-operative agreement Saint-Priest, France - driveshafts, axles;
with Saipa Diesel in Iran was approved by Vnissieux, France - engines, stamping,
Iran's Ministry of Industry. The joint venture casting;
produces FH12 and NH12 models and buoyant Villaverde, Spain - Kerax;
demand in 2004 helped Iran to become the Hagerstown, USA - engines & transmissions;
second biggest market for Volvo brand trucks Macungie, USA - MR, LE, DM, DMM, RB
after the US. and RD ranges
Winnsboro, USA - CH, CL, Vision, this plant
Russia was closed during 2002;
In March 2003 Volvo inaugurated its own plant Brisbane, Australia - assembly of Mack and
in Russia at Zelenograd, north of Moscow. It RVI models.
thus became the first Western truckmaker to During 2004 RVI announced that truck
establish its own plant for heavy trucks in manufacture at Villaverde will be phased out
Russia. The new plant produces both the Volvo from 2006 as manufacturing facilities in Spain
FH (tractor) and the Volvo FM (rigid). Volvo are reorganised to concentrate on metal
initially expects to produce 200-300upa for the machining. Kerax production of 6-7,000upa
Russian market. This move is the result of a will be transferred progressively to Bourg-en-
joint project together with Russian partner AFK Bresse. Crankshaft machining at Villaverde
Sistema. There are currently about 13,000 may eventually be transferred to newer
Volvo trucks on Russian roads. facilities in Madrid.
China In September 2005 RVI announced plans to

Towards the end of 2005 it emerged that Volvo enter an agreement with Activa Capital to
has closed its engine joint venture with China's develop the Spare Parts and Small Series
First Automotive Works (FAW) and China business activity (PRPS) in Limoges. The plant
National Heavy Truck Corp (CNHTC) because generates 80m annual revenue and employs
of operating losses. 350 people. Activa Capital is to take a majority
stake in PRPS and aims to develop the business.
For the same reason the truck joint venture
with CNHTC also faces closure and Volvo is Both RVI and Mack traditionally built most of
expected to terminate its overall partnership their key components (engines, transmissions,
with CNHTC. drivetrains and axles) in-house. Prior to Volvo's
takeover this pattern had been changing as RVI
Volvo set up the engine joint venture with conducted a critical examination of where its
FAW and CNHTC in 2004 and the project had core competences lay and the costs of
targeted annual production of 50,000 engines developing and manufacturing complex
by 2010. components.
RVI One tangible sign of this approach was RVI's

joint venture with transmission specialist ZF
Since 1999 RVI has introduced a greater degree
which effectively outsources gearbox supply to
of specialisation at its plants. The principal
ZF. Renault had a 40% stake in the venture,
plants and their activities are as follows:
which began at the end of 1997, to which it
Blainville sur Orner, France - Midlum and transferred its Bouthon transmission plant.
cabs for all models;
- 122 -
Volvo has a similar tradition of in-house In 1998 RVI and Iveco agreed to pool their bus
manufacture and has similarly been more open and coach operations in a 50/50 venture called
to the idea of outsourcing in recent years. The Irisbus. The new company came into being on
link between RVI and Volvo is giving the January 1, 1999. Included within Irisbus is
opportunity to increase the degree of vertical RVI's subsidiary, Karosa. RVI took a 34% stake
integration, as activities which were judged in the Czech bus and coach maker in 1994. This
uneconomic for a single producer, become was increased to 51% in 1996 when Karosa
viable for the two combined. became a consolidated subsidiary. In 1998 the
stake was increased to 94%. In July 1999 Irisbus
One sign of the group seeking to optimise its entered into a joint venture with Hungarian
economies of scale is the increasing penetration bus and coachbuilder, Ikarus. IkarusBus is 75%
of in-house engines in its Nafta sales. In 2001 owned by Irisbus.
Volvo supplied about 36% of the engines for its
North American trucks. By 2004 this had The European Commission's approval for
grown to 50% and further growth is expected Volvo's takeover of RVI was conditional upon
as Volvo introduces its new engines. RVI disposing of its interest in Irisbus and in
May 2001 it was announced that Iveco would
Apart from the production locations mentioned take full control of Irisbus in two stages over
above, outside Europe RVI trucks are assembled the next two years. For four years after the
(mostly at rates of less than 100 per year) in: signing of the agreement, Irisbus would retain
Algeria, Malaysia, Morocco, Poland, Tunisia the right to use the Renault trademark,
and Zimbabwe. Outside North America Mack allowing it to replace the brand gradually with
trucks are assembled in New Zealand and the Irisbus name and logo as the core trademark
Venezuela. of the Group. The Iveco brand will be similarly
phased out.
Before the Volvo alliance, RVI had formed
several alliances or strategic ties some of which
are unlikely to survive the current model cycle: NOTES UPON FINANCIAL STATISTICS
As Volvo Trucks and Volvo Buses are only
In 1994 Renault and Iveco formed a joint
divisions of the Volvo Group, the disclosure of
venture to develop cabin components used in
financial information is relatively limited.
Renault's Master and Mascott ranges and
Nevertheless information such as revenue,
Iveco's Daily.
operating income, R&D and capital spending is
In 1997 RVI and Daf agreed to co-operate in available for all years and this enables the
the development of cabs for mid-range trucks. discussion to concentrate primarily upon the
The jointly developed cab is now used in RVI's these divisions' performance and activities.
Midlum range and RVI supplies the cabs for the Data is presented for Volvo Group and Volvo
Daf LF, the replacement for 45 / 55 Series. Trucks and Buses.
Also in 1997 RVI established a distribution In the 1995 accounts, units sold refers to
joint venture with Sisu in Finland and agreed to invoiced units rather than retail sales as
provide components to Sisu. However, as a previously. Data back to 1991 has been altered
condition of the Volvo takeover the European to conform.
Commission ruled that RVI must terminate the
Only preliminary data for 2005 was available at
joint venture and this was done at the end of
the time of writing.
December 2000.
- 123 -
A new Annual Report Act became effective in statement showing 1994, 1995 and 1996 data in
Sweden on January 1, 1996 and has changed conformity with the new standards and this
the presentation of Volvo's accounts from 1997. data has been adopted in the appended data
Most of the changes are presentational but in sheets.
the income statement the cost of sales
calculation is changed, resulting in different Beginning in 1999 Volvo adopted new Swedish
(higher) gross profit figures. Operating profit accounting standards on the treatment of tax.
and other profit figures are unchanged. In The tax and net profit data for 1997 and 1998
Volvo's 1996 accounts it published an income has been restated.
- 124 -
CHAPTER 15: OTHER TRUCKMAKERS

In 2005 AIOS produced 2,709 trucks (2004:
INTRODUCTION 2,313) in the 3.5-12t GVW range. This
As shown in Chapter 1, there are a large compares with output of 1,685 trucks in 2003,
number of minor truck producers in the world, 1,340 in 2002, 591 in 2001 (the year in which
defined for present purposes as those producing the Turkish economy underwent a severe
fewer than 20,000 trucks per year. Many of recession) and 4,393 in 2000.
these producers are dependent in one way or
It also produced 1,788 pickups (2004: 1,692,
another upon one of the major producers and it
2003: 1,128, 2002: 924; 2001: 692;, 2000: 1,809)
is a safe bet that both the number and the
and 2,265 midi-buses (2,006 / 1,157 / 1,057 /
extent of their dependence will increase in
629 / 2,111). At the end of 2004 the company
future.
employed 735 people, up from 525 a year
A large proportion of the minor producers are earlier.
in emerging markets and details of financial
The companys financial year ends on
performance and key operating statistics are in
December 31st and in 2004 it made a net profit
many cases non-existent, unreliable or
of 15.6m on revenue of 201.6m. This
unavailable. This chapter provides what
compares with a 2003 net profit of 8.7m on
information there is on these producers and any
revenue of 105m.
of the larger truckmakers for which limited
data is available.
ASHOK LEYLAND (INDIA)
AIOS (TURKEY) Ashok Leyland (AL) is 51% owned by LRLIH
Ltd in which Iveco and India's Hinduja group
The company was established in 1965 under
have stakes of 30% and 70% respectively. Thus
the name Celik Montaj, to produce Skoda light
Iveco's stake in AL is normally quoted at 15%.
trucks and Jawa motorcycles. The name was
The company is India's second largest
amended to Anadolu Otomotiv Sanayi Ve
truckmaker and employs over 12,000 people.
Ticaret AS in 1981.
AL used to produce an LCV, the Chital, but that
Production of Isuzu trucks began, under license
ceased in 1996. It now concentrates on buses
in 1984 and production of Skoda vehicles
and medium to heavy trucks. AL is a leading
stopped in 1986, the year Isuzu and Itochu
player in Indias medium and heavy
Corporation took a combined 20% stake. That
commercial vehicle segment with a dominant
stake was increased to 35% in 1996, the year
market share in the south. Nationwide its
the companys name was changed to Anadolu
market share is around 32%.
Isuzu Otomotiv Sanayi Ve Ticaret AS. AIOS
went public in 1997, leading to a dilution of
The company used to produce Leyland models
Isuzu and Itochus shareholding.
but these have now been replaced by
production of Iveco's EuroCargo. The company
Currently Isuzu holds 17% of the capital and
has six plants, four of which (Ennore, Hosur 1
Itochu 12.5%. Isuzu supplies kits of the N-
& 2 and Bhandara) carry out at least some truck
Series and midi-buses for AIOS to assemble at
assembly. Ennore is the largest plant, typically
its new plant at Sekerpinar, which opened in
producing over 50% of AL's annual output. AL
2000. The factory has the capacity to produce
produces Hino and Toyota engines under
9,600 trucks per year on a single shift. It
licence.
produces the NPR, NKR WIDE, NQR and NKR
ranges. A bus plant on the same site has
capacity for 2,600upa.
- 125 -
Iveco and Hinduja had ambitious plans to Growth strategy

expand AL's capacity to 100,000upa, but the The Company's growth strategy is centred
downturn in Asian demand in 1997 and 1998 around a rapid new product introduction
constrained output and capacity is currently programme. The new 'H' series engine (based
about 77,000upa. on a Hino unit) was introduced in November
2002, and has helped AL to regain market
Year to March 2005 share. The company is increasing H engine
AL reported a 23% increase in revenue to production capacity to 100,000upa and H-
Rs41.8bn for the year to March 2005. The powered models now account for over two
increase mainly reflected: thirds of its sales.
a 13% rise in vehicle sales to 54,700 units; A new range, 'Ecomet' was launched in 2003-
a 23% rise in engine sales; 04 and the company has developed modern
a 52% rise in sales of castings; modular cabins for trucks for launch in 2006
a 22% rise in spare parts sales. and phased out the Iveco range of vehicle
engines, replacing them with engines made
The companys operating profit rose by 5.2% to
with technology from Hino.
Rs3,136m, constrained by increases in material
and labour costs. Net profit was 40% higher at AL is also moving into body building for tippers
Rs2,714m, helped by a 43% cut in its interest as well as mini and high-end luxury buses as
expense to Rs237m. part of its plan to develop in sectors that are less
cyclical than its core businesses of trucks and
Interim results buses.
AL reported a 37% increase in revenue to
Rs12.5bn for the three months to end- Financial data
September 2005, its fiscal second quarter. The AL's results have been added to the database for
increase mainly reflected a 19.3% rise in the first time in this edition.
vehicle sales to 14,895 units.
Second-quarter pre-tax profit was 60% higher ASKAM KAMYON

at Rs965m and net profit was 74% higher at
Rs750m. Chrysler Kamyon AS was formed in 1962 and
started production in 1964. Originally Chrysler
Over the first half AL's revenue was 33% owned 60% of the company and the remaining
higher at Rs23.1bn and net profit increased by shares were owned equally by iftiler,
86% to Rs1.39bn. The first-half profit figure Ruensad & Tatko. In 1978 Chrysler sold its
includes a non-recurring gain of Rs302m from shares to the other three shareholders. In 1991
the sale of Ductron Castings to Ennore the company began producing Hino trucks
Foundries Ltd, which was booked in the first under licence, alongside the De Soto and Fargo.
quarter.
The company was renamed Askam Kamyon AS
in January 2002 following the merger of
Daimler-Benz and Chrysler.
The shares of Tatko and Ruensad were

acquired by iftiler in May, 2003.
Askam Kamyon employed 447 people at the

end of 2004, up from 385 a year earlier.
Revenue in 2004 was 92m, up from 41m in
2003.
- 126 -
The company's plant at Gebze can produce Total production in 2005 of 12,500 units was
9,000 vehicles annually but its average 2.5% below the previous year.
production over the past five years has been
1,400upa.
CHINA FAW (CHINA)
During 2001 the economic crisis in Turkey First Automobile Works is China's largest
meant that the company produced only 649 vehicle producer. It was founded in 1953 and
vehicles in total (2000: 6,382) and in 2002 produced the first Jiefang truck in 1956
output fell to 226 vehicles. It produced 1,769 followed by the first Hongqi car in 1958.
units in 2003, 1,878 in 2004 and 2,439 in 2005.
The 2005 output comprised: FAW has 27 wholly owned subsidiaries and
0 trucks of 3.5-12t (2004: 15); controlling interest in 20 partially owned
2,046 trucks above 12t (2004: 1,482); subsidiaries. It has some 35 plants under its
380 pickups (2004: 366) direct control, and equity links with more than
13 minibuses (2004: 15). 200 other firms. The FAW member companies
have partnerships with various western
producers in different vehicle sectors e.g. with
BMC (TURKEY) GM for pickups and VW for passenger cars.
Originally founded in 1964 in partnership with
British Motors Corporation, BMC Sanayi Ve FAW's truck activities centre on four plants at:
Ticaret AS is now owned by the Cukurova Jie Fang, Changchun, Xinjiang and Sichuan.
Holding group. These plants produce medium and heavy
trucks.
BMC used to be the largest maker of heavy
trucks in Turkey but has been overtaken by FAW produced 198,000 trucks in 2004. The
Mercedes-Benz Turkey in recent years. It has a trucks mostly have Mitsubishi cabs and Hino
plant at Pinarbasi, near Izmir which produces engines though in 2005 it also began using
trucks, vans pickups, buses and mini/midi- Deutz engines.
buses. The company states that it has the
In July 2004 FAW launched the Aowei heavy
capacity to produce 10,000 trucks, 10,000 LCVs,
duty truck, equipped with an engine developed
1,000 midi/minibuses and 500 buses annually. It
by FAW. In the following six months two more
can also produce 22,000 engines annually.
new models, the Hanwei and Dawei were
At the end of 2004 BMC had 2,592 employees, launched.
up from 2,047 the previous year.
Towards the end of 2005 it emerged that Volvo
BMC launched the Professional range (Pro 617, has closed its engine joint venture with FAW
822 and 827) at the Hannover show in 1996, and CNHTC because of operating losses. The
using a cab designed by Pininfarina and joint venture was set up in 2004 and the project
Cummins engines, manufactured under licence had targeted annual production of 50,000
by BMC. The company exports to over 50 other engines by 2010.
markets and has license agreements for kit
assembly in Ghana, Kenya, Malaysia, Nigeria, Financial data
South Africa, Tanzania and Zimbabwe. FAW's results have been added to the database
for the first time in this edition. However, the
In 2005 BMC produced: available data is limited.
4,410 (2004: 4,164) pickups;
6,431 (7,078) trucks of 12t-plus GVW;
972 (713) mini/midi-buses;
687 (864) buses
- 127 -
CNHDTC (CHINA) CNHTC and Shandong Shifeng have established

The China National Heavy Duty Truck a 30/70 joint venture to produce special
Corporation is a group of 34 wholly-owned vehicles. The venture was aiming for capacity
subsidiaries and 6 majority-owned subsidiaries. of 20,000upa by 2005, and when the whole
It produces trucks and buses under a variety of project is finished in 2008, the capacity will be
partnership or licensing agreements, the 50,000upa. According to government forecasts,
principal ones being: demand for special-use vehicles will rise 15%
annually to 340,000upa by 2005 from 167,600
Jinan Automobile Manufacturing Plant - units in 2000.
originally producing heavy trucks based on
Skoda and Roman designs it now has an Xingtai Motor Vehicle Plant - in 1986 Xingtai
agreement with Steyr for the production of began assembling rebadged Tatra 815 trucks.
heavy trucks and engines. Transmissions are
produced under licence from ZF.
DAEWOO (SOUTH KOREA)
Shaanxi Automobile Manufacturing Plant - In October 2002 most of the assets of Daewoo
producing military trucks based on Steyr Motor Company were taken over by GM
designs. Daewoo Auto & Technology, a new joint
venture company in which GM holds a 42.1%
Sichuan Automobile Manufacturing Plant - stake, Daewoo Motors creditors hold 33% and
producing the Steyr S29 since the beginning of GM affiliates Suzuki and Shanghai Automotive
1992. Industry hold 14.9% and 10% respectively.
Changzheng Automobile Manufacturing Plant - Daewoo Motor was incorporated in 1972 but
produces the CZ3280, 28t GVW. did not produce vehicles in any significant
volumes until the 1980s. In 1978, the company
Nanyang Automobile Manufacturing Plant - formed a 50:50 joint venture with GM, a
produces trucks and tractors. relationship which was terminated in 1992 as
Daewoo became frustrated at the export
Shandong Automobile - In June 2003, a $200m
restrictions imposed on it by the agreement.
joint venture between CNHTC and Volvo was
Nevertheless, this relationship provided
put into operation some nine years after
Daewoo with GM platforms for its Nexia and
negotiations first began. Both companies hold a
Espero models, which provided the basis for
50% stake in the venture, named Jinan Huawo
much of the companys subsequent growth.
Truck Co Ltd, for 30 years.
That growth was over-ambitious and funded by
The plant, based in the eastern province of
high levels of debt. When the Asian economic
Shandong, began production in 2004 and
crises hit in 1997/98 the weaknesses of both
planned to make 2,500 trucks a year by 2005,
Daewoo Motor and its parent company were
and 10,000 trucks by 2008. It produces Volvo's
exposed and creditors forced a restructuring of
FL6, FM9 and FM12 trucks.
the company. A lengthy process of negotiation
finally resulted in the GM takeover outlined
However, during the first nine months of 2005
above.
the plant only produced 97 units and towards
the end of the year it was reported that Volvo is
to end its participation in the venture.
It was also reported that Volvo has closed its

engine joint venture with FAW and CNHTC
because of operating losses (see (FAW).
- 128 -
The deal with GM did not include Daewoo In October 1999 Dina started export sales of its
Commercial Vehicle which, in Korea, Class 6 and 7 heavy-duty trucks to the North
comprises a truck plant in Kunsan (capacity: American market. The company signed a 10-
20,000upa) and a bus assembly line in Pusan year contract with Western Star for the
with a capacity of 6,000upa. In South Korea delivery of 9,000 trucks over the following
Daewoo produced 2,972 trucks above 5t in three years. However, when DaimlerChrysler
2003. took over Western Star in 2000, it cancelled
this contract. Dina subsequently defaulted on
During 2004 Daewoo Commercial Vehicle was interest payments on its remaining debt and in
bought by Tata. Please see the Tata discussion the early part of 2001 its shares were suspended
for further details. on both the Mexican and New York stock
exchanges.
DINA (MEXICO) Dina is hoping to recover $123m in damages

Dina Camiones was the heavy truck branch of from Western Star, for what it claims was a
the Mexican state-owned Diesel Nacional. The violation of the terms of the contract between
group was established in 1951 and privatised in the two firms. The claim has not yet been
1989. 81.3% of the capital is held by the group settled but during 2003 Dina has been able to
Consorcio G and 7.4% by Navistar. Within persuade holders of $130m worth of debentures
Grupo Dina is also included Dina Autobuses. to waive their debenture rights in return for
Dina used to receive technical assistance from contingent value rights in the proceeds (if any)
Navistar but the agreement expired in 1998. from the following three events:
a participation in any net cash proceeds
In 2000 the company produced 2,209 vehicles, from the sale of Grupo Dina's 11.33% stake
down from 2,452 units the previous year. in the equity of MCII Holdings;
a participation in any net cash proceeds
Dina was at its strongest in the 1970s and '80s, received upon the sale of certain fixed
when competition in Mexico was virtually non- assets of Grupo Dina;
existent. In the 1990s the Mexican heavy a participation in any net cash proceeds
vehicle market was opened to foreign received in respect of certain arbitration
competition. To compete with new rivals, Dina proceedings with Western Star Trucks
took the company public in 1993 and began Holdings Ltd.
trading on the Mexican and New York stock
exchanges and took on big debts. In a bid to In the meantime the company has more or less
expand and become internationally competitive gone into hibernation. It has closed its plants
in 1994 Dina acquired Motor Coach Industries and laid off workers, the idea being to leave in
International, the largest busmaker in the place a sufficient structure to be revived when
United States and Canada, which eventually truck demand picks up again. The company has
represented 80 percent of Dina's revenues. talked of remaining in this state of hibernation
for several years if necessary. It sounds
However, Mexico's economic crisis of 1994- excessively optimistic to believe that operations
1995 had a severe impact on Dina. Demand fell can simply be resumed at a time of the
and the devaluation of the peso made it difficult company's choosing. Dealers, suppliers and
to pay-dollar denominated debt. In 1999 Dina workers would all have to be found and truck
had to sell most of Motor Coach when it buyers would be rightly wary of committing to
entered a complete financial restructuring to a brand with such a poor track record.
try to pay reduce debts of $700m. After the
restructuring, Dina ended up with $164 million
in debt in a convertible bond due in 2004.
- 129 -
It seems likely that Dina will disappear as an Together, Nissan and Dongfeng aim to create a
independent company, but there may be scope globally competitive commercial vehicle and
for another truckmaker to purchase and passenger car manufacturer with a target of
develop the brand name in the future. 550,000 unit sales by 2006.
In September 2003 Dongfeng announced plans

DONGFENG (CHINA) for a Rmb120m plant in the Yangtze Delta area
Dongfeng, one of China's top three automotive to make light trucks and minibuses. Dongfeng
companies, was established in 1969 by the Automobile, based in the central province of
Chinese government. It produced 177,000 Wuhan, will invest Rmb100m into the plant
trucks in 2004. and will hold an 83.33% stake. The remaining
stake will be held by Dongfeng Motor, which
Under the Dongfeng marque (the Wind of the has a 70% interest in Dongfeng Automobile.
Orient) the company produces the EQ140, EG
153, EQ 240, EQ245 and other models, offering The alliance with Nissan Motor has also
over 60 variants with payloads from 2.5t to 8t. spawned a couple of projects with Nissan
The plant at Shiyan provides kits to other Diesel. Please see the ND discussion for more
plants at Chongqing, Guangzhou, Guizhou, details.
Hangzhou, Hanyang, Liuzhou, Urumqi and
Yunnan. Since 1996 Cummins engines have
FORD (US)
been built under licence at a joint venture plant
at Xiangfan. Ford is a significant player in the North
American truck market, though slightly less so
In 1990 production started at a new plant at following the sale of its heavy truck operations
Xiangfan in a joint venture with Nissan Diesel to Freightliner. This sale, prompted by Ford's
for heavy truck production based on Nissan relatively low volumes of heavy trucks at
Diesel cabs and transmissions and Cummins around 15,000upa, means that it is no longer
engines. The vehicles are badged EQ153 in present in Class 8 and has a reduced share in
China and Aeolus for export market. Dongfeng Class 7.
also has a joint venture with Hino for bus
production. In 1998 Ford's US sales of Class 7 trucks more
than halved to 10,900 and its share did likewise.
Special vehicles are produced at Hunan. At In 1999 sales fell by a further 33% and Ford's
Wuhan 12-14t trucks are made along with a share dropped to 5.5% from 9.3%. Sales fell
light truck, the WH120 with a 1t payload. again in 2000, 2001 and 2002 though they
Medium weight trucks are produced at Liuzhou picked up slightly in the three years to 2005.
and Yunnan. Light trucks and pickups are Thus the bulk of Ford's truck sales are now
produced at Zhengzhou. more concentrated than ever in Class 6 and
below (details of sales by manufacturer and by
In September 2002 Nissan Motor and Dongfeng weight class in the US are shown in Appendix
agreed a comprehensive strategic partnership. 3).
Each own a 50% stake in a new company
which came into being in July 2003. It Ford designates all its light/medium trucks F-
incorporates Dongfeng's buses, trucks and Series. In North America they are produced at
commercial vehicles, in addition to a full range Louisville, Kentucky (F-250, F-350, F-450 and
of Nissan passenger vehicles. Through the F-550) and Cuautitlan in Mexico (F-150, F-250,
venture, Dongfeng and Nissan will jointly F-350, F-800). Light F-Series pickups are also
establish the first Sino-foreign full-line truck, produced at other plants. For the purposes of
light commercial vehicle and passenger car this report the 'proper' trucks start at the F-450,
manufacturer. with a GVW of 6.4t.
- 130 -
In 1998 Ford awarded Navistar a major contract In 1998 Hyundai successfully bid for Kia and
to supply V-6 and V-8 diesel engines for with Kia came its truck-making subsidiary, Asia
installation in Ford trucks. The V-6 contract Motors.
was subsequently cancelled by Ford, but the V-
8 contract is continuing. On the truck side of the business HMC is the
largest producer in Korea, with sales of 52,000
In February 2001 the two firms announced HCVs in 2005 in 2003 and an estimated 42,900
outline plans for a joint venture to build trucks. in 2004.
The JV, subsequently named Blue Diamond
Truck Company, began building medium HMC reported a 1.4% rise in unit sales for 2005
commercial trucks (Ford F-650, F-750) on a to 1,701,000 units while revenue, affected by
common chassis at Navistar's plant in Escobedo, the strengthening Korean won, declined a
Mexico in December 2002. fraction of a point to 27,384bn won.
Profit was adversely affected by increased costs

GM (US) for labour and materials and operating profit
dropped 30.1% to 1,384bn won while net
GM sold its US heavy truck operations to Volvo
profit, boosted by non-recurring gains, rose
in 1988, retaining a minority stake until 1997.
32.6% to 2,315bn won.
The company now has a limited presence in
light/medium trucks through its Chevrolet and
In mid-August 2004 DC sold its 10.5% share in
GMC brands, mainly the latter.
Hyundai Motor (HMC), raising more than
$900m in the sale. The new HMC shareholder
GMC offers C-Series, T-Series and W-Series
has not yet been revealed. In June 2000, DC
models. During 1999 it launched the WT5500,
paid about $430m for a 10% stake in the
a Class-5 delivery truck using an Isuzu cab and
company.
engine on a GMC chassis. Isuzu is marketing its
own version of this GM-produced model in
Although the two companies have said they
North America. As Isuzu now has global
will continue some joint ventures in the
responsibility for the development of GM's
passenger car sector, the planned joint
commercial vehicles and diesel engines more
production of CV engines in Korea has been
arrangements of this sort can be expected in
abandoned as has a plan for DC to take a 50%
future.
stake in HMC's commercial vehicle business.
Medium trucks are produced at GM's Flint
The announcement followed several months of
(Michigan) and Janesville (Wisconsin) and
increasing tension between the two firms. In
44,257 were produced in 2005.
our view the various disagreements between
the two were symptoms of HMC's rapid
HYUNDAI (KOREA) recovery after the Asian economic crisis. When
DC bought its stake in 2000 HMC was in a
Hyundai Motor Company (HMC) was much weaker state and very much the junior in
established as a subsidiary of the Hyundai the relationship. HMC now sees itself as a rival
Group in 1967. In 1968 it had an assembly to DC in many areas and wants to assert its
contract with Ford but soon began independence as it progresses towards its target
collaborating with Mitsubishi Motors to of being one of the top-5 carmakers in the
produce Hyundai-badged vehicles based on world by 2010.
Mitsubishi technology and components. The
company grew rapidly from producing 250,000
units in 1985 to 1.2m in 1997.
- 131 -
KAMAZ (RUSSIA) It also sold 39,925 engines and power units

(36,073 in 2004).
Kamskiy Avtomobilniy Zavod is based at
Naberezhnye Chelnye in the republic of
Kamaz has agreements with ZF, Deutz,
Tatarstan. The company began life as the
Cummins and ArvinMeritor for production
Kamaz Production Association in 1969 when
under licence of components.
the government passed a resolution on the
construction of a large complex of plants in the In January 2006 the company announced a new
republic of Tatarstan with the capacity to agreement with Cummins to establish joint
produce 150,000 trucks and 250,000 diesel venture production of the B series engine (120-
engines per year. The ground-breaking 175hp) for the Russian market.
ceremony of the new construction project took
place in December 1969 but it was not until Cummins Kama is a 50/50 joint venture with
1976 that the first truck rolled off the assembly US$20m of authorized capital. Production of B
line. Twelve years later, in October 1988, series engines will be located on Kamaz
Kamaz produced its millionth truck. premises in Naberezhnye Chelny, (Tatarstan).
The company was rescued from bankruptcy in In October 2003 Raba began assembly of Kamaz
1998 by the Tatarstan government, after 6520 dumper trucks at its plant in Hungary.
running up debts of US$1bn the previous year.
The European Bank for Reconstruction and In 2006 Kamaz plans to sell 34,000 trucks, of
Development (EBRD) also lent US$100m to the which 25,500 will be sold in the domestic
firm. That relationship turned sour as Kamaz market and 8,500 abroad.
continued to run up losses and defaulted on the
loan payments. Kamaz was restructured with Revenue is planned at 50.8bn rubles, up 14%
75% of the equity being split between the from the estimated 2005 result. Net profit is
federal and republican governments, but the forecast at 500m rubles (2005 estimate: 306m).
EBRD loans were still unpaid, prompting the
EBRD to sue.
NORINCO (CHINA)
It took over a year for Kamaz to agree a China North Industries Corporation was
restructuring plan with the EBRD. In May 2001 established in 1980 and combines
half the company's $141m debt was turned into manufacturing, trade and technology
equity and the other half is being repaid over a businesses. The automotive business comprises
period of twelve years. The EBRD received a five automobile plants producing light
6.5% stake in the firm. The two biggest commercial vehicles, buses and trucks.
shareholders are the Russian Property Ministry
with 34.01% and the land and property Truck production is carried out at:
relations ministry of Tatarstan with 11.47%.
Baotou Machinery Factory - assembling heavy
Kamaz produces passenger cars and trucks, Mercedes-Benz trucks (16-32t GVW). Capacity
having also produced buses until 1996. Truck is stated as 6,000upa and 1,200 people are
capacity is supposedly 150,000upa, but actual employed at the site. The trucks are available
production volumes have been a fraction of for a variety of tasks and were equipped with
that over the past five years. either a Mercedes-Benz engine or a locally built
Deutz unit.
In 2005 Kamaz sold 32,282 trucks, a 14.7% rise
from the 28,151 sold in 2004. The domestic Xinan Vehicle Factory - produces the Tiema
market took 23 651 units (21 835 in 2004) and SC2030, based on Mercedes-Benz model.
export markets 8,631 units (6,316).
- 132 -
Combined output for 2005 is estimated at 1,500 Otoyol began vehicle production in 1966 and
units. Daimler-Benz withdrew from this began producing Iveco vehicles under license
venture when the agreement expired in 2003. in 1989. It currently assembles trucks, pickups
and mini/midi-buses. It employed 972 people at
Norinco reported revenue of 62.9bn yuan in the end of 2004, down from 1,057 in 2003.
2004, up 26.4% from 2003. These figures
include non-automotive activity. Revenue in 2004 was 139m compared with
85m in 2003.
OTOSAN (TURKEY) The plant at Sakarya assembles Iveco tractors

Otomobil Sanayii Anomin Sirketi is the and rigids, all of which pre-date the Euro-
importer for Ford vehicles in Turkey. It is range. The plant's stated capacity is 12,500upa
owned 41% by the Turkish industrial group but over the past five years its average output
Vehbi Koc (see Otoyol also) and 41% by Ford. has been only about 3,800upa. During 2005
Until 1999 it assembled Ford cars LCVs and Otoyol produced:
trucks, but in 1999 car assembly was halted. 1,591 (2004: 1,792) trucks of 3.5-12t;
1 (14) rigid trucks greater than 12t;
At the end of 2004 Otosan had 7,671 2,042 (2,667) LCVs.
employees, up from 5,950 the previous year. Its
2004 revenue was 2.7bn compared with
1.4bn in 2003. RABA (HUNGARY)
Raba was formed in 1896 and privatised in
In January 2001 production of the Transit van 1992. It is now focused mostly on component
began at a new plant at Kocaeli, 105km east of production, making axles, and other parts. Until
Istanbul following investment of $650m, the 2002 it also had an engine division but this was
largest ever single investment in the Turkish sold at the end of the year.
automotive industry.
The company's three strategic businesses are
This was followed in 2002 by the launch of the now the Axle Business, the Components
Transit Connect, the successful light van. Business and the Specialist Vehicle Business.
In 2005 Otosan produced 234,000 Transits and The main owners of Raba are: the Municipal
Transit Connects vans and minibuses (2004: Council of the City of Gyr (11.13%), the
201,000). European Bank for Reconstruction and
Development (10.55%), DRB Hicom Group
Otosan also produces the Ford Cargo at its
(10.55%), Graboplast Rt (8.38%).
Inonu plant. A new version was launched in
September 2003 and 9,530 units were produced In November 2001 DaimlerChrysler and Raba
in 2005, up from 6,050 units in 2004 and 3,093 announced a joint venture for bus production.
units in 2003. Raba supplies a bus chassis, Ikarus supplies the
body and DC the engine. The vehicle is
assembled in Gyr, Hungary.
OTOYOL (TURKEY)
Iveco owns 27% of Otoyol Pazarlama AS (the In October 2003 Raba began assembly of Kamaz
distributor) and Otoyol Sanayi AS (the 6520 dumper trucks at its plant in Hungary.
industrial company). Most of the rest of the
equity is owned by the Turkish industrial group
Vehbi Koc (see Otosan also).
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ROMAN (ROMANIA) SISU (FINLAND)

Roman de Brasov produces trucks badged as Sisu Trucks is a branch of the Sisu Partek group
Dac or Roman. Dac models are medium weight whose main shareholders are the Finnish
at 9.4t GVW. Roman models extend from 12t to government (30.4%), Valmet (10.5%), Abo
26t. Akademi (8.6%) and the Sampo group (7.6%).
Sisu trucks are made for heavy and tough
The Dac trucks use Renault engines and the transportation duties such as logging, quarrying
Roman models use engines from MAN or and the transport of extra-heavy loads - in
Perkins. excess of 100t.
Production capacity is stated by the company as The main factory is located in Karjaa, Finland
15,000upa but production has fallen from 3,622 and most sales are in the domestic market with
in 1996, to 1,658 in 1997, 1,076 in 1998, 868 in the Baltic states and western Russia being the
1999, 759 in 2000, 333 in 2001 and 451 in 2002. traditional export markets. In January 1997 RVI
In 2003 and 2004 output is estimated at about and Sisu made an agreement under which RVI
500 units. would supply Premium cabs and other
components to Sisu and the two formed a joint
venture company to distribute Sisu and RVI
SAMSUNG (SOUTH KOREA)
models. At the end of 2000 this joint venture
Samsung Commercial Vehicles (SCV) is a was unwound; Sisu acquired RVI's 50% stake
subsidiary of the Samsung chaebol, the second- and has become RVI's importer in Finland.
biggest of the South Korean conglomerates with
interests in electronics, machinery, Sisu's annual output is normally between 400
engineering, chemicals and other industry and 800 units. It was 450 units in 2004.
sectors.
In 2006 the company is to introduce two new
SCV is a separate entity to Samsung Motors - models using Renault cabs. Engines are either
the car manufacturing operation in which Caterpillar or Renault units.
Renault now has a majority stake.
SCV was established in 1992 to produce heavy TATRA (CZECH REPUBLIC)

trucks using Nissan Diesel designs and Tatras history can be traced back to 1850 when
technology. Its plant in Seongseo has capacity it began producing carriages. It produced the
for 6,000upa heavy trucks and 50,000upa light first passenger car in central Europe in 1897
trucks. and produced its first truck in 1898. Over the
years the company produced cars and trucks
Its first year of production was 1994, when it but in the post-war years the truck side of the
turned out 1,100 vehicles. SCV produced 3,400 business grew in importance, boosted by orders
vehicles in 1995, 2,800 in 1996, 3,000 in 1997, for military vehicles. Car production was
994 in 1998, 9,901 in 1999 and 15,943 (of which terminated in 1998.
15,064 were LCVs) in 2000.
Tatra was taken over by Skoda Plzen in 1996.
In December 2000 SCV filed for bankruptcy. Skoda Plzen had financial difficulties and the
The company had accumulated losses of Czech state took a controlling interest. In
W450.2bn and was unsuccessful in its search December 2001 the American firm SDC
for a foreign buyer. International acquired 91.6% of Tatra for
US$32m. SDC subsequently sold a stake of
During 2004 there were reports that Nissan
40.6% to Terex Corporation, a strategic
Diesel was interested in buying the firm but
shareholder of SDC.
ND denied the reports.
- 134 -
SDC and Tatra plan to utilize Terex's extensive TM produces cars, LCVs, trucks and buses. It is
global network for Tatra's distribution. Terex the largest truckmaker in India, making about
has a worldwide network of dealers in over 66% of all the country's medium to heavy
1000 locations in more than 60 countries. SDC trucks. It has 4 manufacturing plants at 3
and Tatra also expect to introduce Terex locations in India:
products in countries where Tatra has been a Jamshedpur (Bihar) producing special
prevalent supplier, such as Russia, India, and vehicles;
China. Pimpri and Chinchwad in Pune
(Maharashtra) producing cars, light
Tatra trucks have a good reputation for commercials and trucks;
robustness and reliability in harsh East Lucknow (Uttar Pradesh) producing light
European climates. The trucks are offered with commercials.
engines from Deutz or Detroit Diesel. Output of
Tatra trucks in the Czech Republic during 2005 In addition to the above, TM has acquired land
was 1,497 units, down from 1,654 in 2004. at Dharwad (Karnataka) to build a fifth plant.
Tatra has a 50:50 joint venture in India with The principal joint ventures and alliances are:
Tata. Tatra Udyog assembles heavy-duty
Tata Cummins Ltd - a 50:50 venture with
commercial vehicles and has plans to compete
Cummins Engine Company Inc., USA, for
against Volvo at the premium end of the Indian
manufacturing diesel engines;
HCV market, by launching a new 30-tonne
Mercedes Benz India Ltd - a 49:51 joint
model.
venture with Daimler-Benz for the
manufacture of 'E-Class' Mercedes-Benz
During 2004 the company announced another
passenger cars;
Indian joint venture, this time with Bharat
Tata Holset Limited - a 50:50 Joint Venture
Earth Movers Ltd to set up a manufacturing
between Holset Engineering Company
plant to produce off-road trucks. The JV will
U.K. and Tatas to manufacture
largely cater to the Indian defence forces by
turbochargers for diesel engines
manufacturing 200-300 off-road vehicles every
manufactured by Tata Cummins Limited
year.
and other OEMs.
Tatra Udyog - a 50:50 joint venture with
TATA MOTORS (INDIA) Tatra, (see Tatra discussion).
Tata Motors (TM) is a subsidiary of the Tata TM is a well-established player in the truck
group, the largest industrial concerns in India industry but a relative newcomer in the car
with annual revenue of around US$12bn. Telco industry, having launched its first model, the
was formed in 1945 with Daimler-Benz as a Indica, nearly five years ago. Initial quality
14% stakeholder and supplier of technology. problems with this model cost the company
The agreement with Daimler-Benz expired in both directly, in the form of a high level of
1969 but the links between the two companies warranty claims and indirectly through its
have been maintained and DC still has a 7% damaged reputation. However, it seems to have
stake in TM. overcome these problems.
The Tata family raised their stake in TM by

2.7% between March 31, 2000, and June 30,
2001. As at December 31st 2005, Tata Sons hold
22.4% and other Tata firms 11.9%.
- 135 -
During 2004 Tata acquired Daewoo TEMSA (TURKEY)

Commercial Vehicle Company Limited
Termomekanik Sanayi VE Ticaret AS is a
(DWCV) for a total price of W120.6bn. The
subsidiary of the Sabanci group. It is the
price includes the perpetual, exclusive and
distributor for Mitsubishi vehicles in Turkey
royalty-free use of the Daewoo trademark in
and assembles Mitsubishi-based trucks buses
the Korean and overseas markets. This
and midi-buses under licence. It also assembles
acquisition is expected to accelerate the
a bus on a Volvo chassis and Mitsubishi-based
introduction of commercial vehicles with
pickups and midi-buses.
higher power to weight ratios in India and
international markets. The Company will also It began producing vehicles in 1987 and the
provide support to DWCV in strengthening its factory at Adana has a stated capacity of 1,000
position in the Korean market with the buses, 2,000 midi buses and 7,500 light trucks.
introduction of medium commercial vehicles
and the facilitation of increased exports from Temsa employed 1,207 people at the end of
DWCV. 2004, up from 843 a year earlier but still below
the 2000 figure of 1,526 people.
The following year it acquired a 21% stake in
Spanish coachbuilder, Hispano Carrocera SA, Revenue in 2004 was 229m compared with
Spain (Hispano) with an option to purchase $102m in 2003.
100% equity at its discretion.
The trucks are based on Mitsubishi's Canter and
Year to March 2005 fall in the 3.5t-12t GVW range. In 2005 Temsa
TM reported a 32% revenue increase to assembled 2,880 trucks, up from the 2,709
Rs196.7bn for the year to March 2005, boosted produced in 2004.
by a sales increase of 27% to 399,566 units of
Total production in 2005, including LCVs and
which CVs accounted for 209,591 units and
buses was 8,161 units up from 6,316 in 2004 but
medium/heavy CVs for about 130,000 units.
still below the peak output of 10,312 vehicles
The Company improved its overall market produced in 1998.
share in the Commercial Vehicle segment to
59.7% from 58.5% in the previous year.
URALAZ (RUSSIA)
Pre-tax profit was 28% higher at e Rs18.5bn, a Uralaz produces a variety of medium to heavy
slower rate of increase due to the increase in trucks badged as Ural. In 1992 the company
the cost of steel and other materials. struck a deal with Iveco under which Uralaz
would assemble Iveco heavy trucks, adapted for
Interim results service in arctic conditions. This was followed
TM reported a 15% increase in second-quarter in 1994 by a joint venture company to build
revenue for its 2005/06 financial year but its arctic vehicles and heavy trucks. Iveco, Uralaz
operating margin slipped to 12.05% from 12.5% and Gazprom were equal partners in the
a year earlier as higher input costs were only venture which began production in 1997 but
partly offset by efficiency gains. The company Gazprom announced its plan to withdraw from
said it expected to maintain margins at 12- the venture at the beginning of 2002.
12.5% for the rest of the year.
Uralaz was put into receivership in September
Financial data 1998 and in 2001 it was announced that
Rosavtoprom would take a controlling stake in
TM's results have been added to the database
the firm. Rosavtoprom is a holding company
for the first time in this edition.
controlled by Sibirsky Aluminium (see Gaz
discussion).
- 136 -
At the beginning of the nineties Uralaz output Second, the strategic rationale for the move is
was 14-16,000upa. Volumes fell steadily for far from clear. The performance of VW's car
most of the nineties reaching 2,489 units in operations remains below its publicly stated
1998. In 2005 the company produced 6,826 targets and while this remains the case the
trucks and 527 buses. company would surely do better to concentrate
its managerial and financial resources on its
In March 2004 Uralaz announced it had core business rather than be distracted by a
selected Haldia in West Bengal, India as a new business about which it knows relatively little.
base for manufacturing. A joint venture
company has been established under the name While there is often much to be said for
of Ural India Ltd between Torgovyi Dom refusing to follow the latest management
Autoural of Russia, West Bengal Industrial fashion, we believe VW would do well to
Development Corporation (WBIDC) and UIL. follow the examples of Ford, GM, Renault,
Saab-Scania and Volvo. These companies have
The Haldia project will assemble and recognised that there are few synergy benefits
manufacture high capacity (10-45t) medium in maintaining a presence in both car and truck
and heavy duty (230-440hp) trucks. Output is sectors and unless both operations are of
expected to start in 2006 and sales are targeted sufficient size to compete successfully on a
at 7,000 units in the first year. the vehicles will global basis, then better to concentrate on one
be marketed under the Ural brand. or the other.
VW has said in the past that it wanted a

VW (BRAZIL) presence in the truck sector to offer a cyclical
In March 2000 VW finally realised its ambition counter-balance to its car business. This is a
to develop its heavy truck operations when it weak argument, as the demand for cars and
bought a stake in Scania, following the trucks has followed fairly similar patterns in
European Commission's blocking of Volvo's North America and Europe over the past ten
takeover. VW bought 37.4m Scania A shares, years or so, which we find unsurprising. The
representing 18.7% of the company's capital only noticeable difference is that the demand
and 34% of the voting rights. The price of for trucks shows more volatility, again
SKr370 per share (SKr13.8bn in total) was unsurprising.
higher than the SKr280 that VW offered to buy
Scania in 1999 and higher than the average Looked at another way, over the last decade in
SKr266 per share paid by Volvo which holds which Volvo cars and trucks were part of the
30.6% of the voting rights and 45.5% of the same company, the profits of the two division
capital. were nearly always been heading in the same
direction, albeit at different speeds.
The move went someway to satisfying VW's
oft-stated desire to develop a presence in the Bernd Pischetsrieder, VW's new chairman, has
truck industry although this publication not appeared keen on keeping the stake in
questions the wisdom of the move for at least Scania, acquired by his predecessor, Ferdinand
two reasons. Pich. A sale to Hino is suggested as a one way
of achieving a quick exit. If there is any
First, VW paid top dollar for its stake at a time substance to these rumours then we would
of peak demand in the world's major truck welcome it, having always been critical of the
markets. investment in Scania.
However, it looks as though VW is content to

maintain the status quo, remaining as a major
shareholder in Scania, neither increasing its
stake nor divesting it.
- 137 -
VW's own truck operations are mainly based in Zil increased output almost 11% in 2003 to
Brazil where it now produces trucks in the 13,274 from 11,963 in 2002. It sold 13,114
GVW range 7t-40t. Production in 2005 was vehicles during the year compared with 12,228
32,709 trucks and 5,674 buses. The vehicles are in 2002. The increase was largely due to more
built at VW's Resende plant, near Rio de sales of small trucks.
Janeiro.
Zil reported net losses of about 1bn rubles in
In 2004 a new truck and bus assembly plant in 2003, down from 1.95bn in 2002. The net loss
Puebla city, Mexico began production. It reduced due to increased production, the
produced 99 vehicles in 2004 and an estimated implementation of spending efficiency
850 units in 2005. VW invested about $12m in programs and loan portfolio restructuring. In
the new plant which uses the same modular addition, some non-core non-production assets
construction system used in the Brazilian truck were sold.
and bus plant in Resende. The Mexican plant is
supplied with Brazilian manufactured SKD kits In the first half of 2004 Zil reduced its net loss
of the truck and bus models. The new truck and by 16.7% to 545.9m rubles.
bus division of Volkswagen Mexico has 60
workers. More recent information was unavailable at the
time of writing.
ZIL (RUSSIA)
Zavod Imeni Likacheva is probably best known
for its stolid limousines, often used to ferry
Russian dignitaries. However, it produces more
trucks than cars though not profitably. Russia's
economic difficulties have led to Zil making a
loss in each of the past seven years. In 1993 and
1994 deals were struck with Caterpillar and
Kenworth respectively for production under
licence of engine and trucks, but these projects
were deferred due to Zil's financial problems.
The company was privatised in 1993 but when

it ran into difficulties the City of Moscow took
a controlling stake of 59% in 1996.
In mid-1999 Zil and RVI signed a

memorandum of understanding which
envisaged Renault medium and heavy trucks
being assembled by Zil. The outline plan was
for Zil to assemble up to 2,000 Renault trucks
annually and 50,000-60,000 engines. However,
the discussions have made little progress, the
sale of RVI to Volvo being a major disruptive
factor.
The company is looking at the possibility of

shipping vehicle kits for assembly in China. It
had talks with Chinese companies during
August 2004.
- 138 -
APPENDIX 1: METHODOLOGY & EXCHANGE RATES

A conversion to US dollars or any other currency
SPREADSHEET STRUCTURE is straightforward and a set of exchange rates
The financial statistics are presented on a versus the US dollar is provided in the Excel file.
spreadsheet, as shown in Figure 77and Figure 78.
The statistics are presented in native currency
and euros.
Figure 77: Spreadsheet structure
Alliance Group Entity Yr to Data Unit 1983 1984 2002 2003
BMW BMW BMW Group Dec-31 Revenue m 5,260.0 5,999.3 42,411.0 41,525.0
BMW BMW BMW Group Dec-31 Cost Of Sales m 32,754.0 32,090.0
BMW BMW BMW Group Dec-31 Gross Profit m 9,657.0 9,435.0
BMW BMW BMW Group Dec-31 Materials m 21,955.0 20,905.0
BMW BMW BMW Group Dec-31 Labour m 6,588.0 7,066.0
BMW BMW BMW Group Dec-31 Depreciation m 322.8 319.0 2,143.0 2,370.0
BMW BMW BMW Group Dec-31 Other Operating Expense m 4,609.5 5,385.8 8,220.0 7,831.0
BMW BMW BMW Group Dec-31 Other Operating Income m 62.1 103.2
BMW BMW BMW Group Dec-31 Total Operating Expense m 4,870.2 5,601.6 38,906.0 38,172.0
BMW BMW BMW Group Dec-31 Operating Prof it / (Loss) m 389.8 397.7 3,505.0 3,353.0
BMW BMW BMW Group Dec-31 Interest Income m 42.7 69.3 710.0 530.0
BMW BMW BMW Group Dec-31 Interest Expense m 37.4 36.2 922.0 811.0
BMW BMW BMW Group Dec-31 Other Income / (Expense) m 8.4 34.0 4.0 133.0
BMW BMW BMW Group Dec-31 Profit / (Loss) Bef ore Tax m 403.4 464.7 3,297.0 3,205.0
BMW BMW BMW Group Dec-31 (Tax) / Tax Credit m (274.8) (319.9) (1,277.0) (1,258.0)
BMW BMW BMW Group Dec-31 Other Items m
BMW BMW BMW Group Dec-31 Net Prof it / (Loss) m 128.6 144.8 2,020.0 1,947.0
BMW BMW BMW Group Dec-31 Cash Flow m 7,250.0 7,871.0
BMW BMW BMW Group Dec-31 R&D m 263.0 300.0 2,133.0 2,146.0
BMW BMW BMW Group Dec-31 Capital Investment m 440.4 384.3 4,042.0 4,245.0
BMW BMW BMW Group Dec-31 A utomobile revenue m 33,445.0 33,424.0
BMW BMW BMW Group Dec-31 Raw Materials m 106.1 112.1 547.0 569.0
BMW BMW BMW Group Dec-31 Work In Progress m 70.0 56.7 773.0 827.0
BMW BMW BMW Group Dec-31 Finished Goods m 211.0 184.5 3,877.0 4,297.0
BMW BMW BMW Group Dec-31 Total Inventory m 387.1 353.4 5,197.0 5,693.0
BMW BMW BMW Group Dec-31 Trade Debtors m 86.8 90.3 1,818.0 2,257.0
BMW BMW BMW Group Dec-31 Cash m 135.7 339.6 2,333.0 1,659.0
BMW BMW BMW Group Dec-31 Other Current A ssets m 832.0 1,031.2 26,654.0 30,991.0
BMW BMW BMW Group Dec-31 Total Current A ssets m 1,441.5 1,814.5 36,002.0 40,600.0
BMW BMW BMW Group Dec-31 Tangible A ssets m 1,005.9 1,000.8 8,578.0 9,708.0
BMW BMW BMW Group Dec-31 Other Non-Current m 106.6 99.6 10,931.0 11,167.0
BMW BMW BMW Group Dec-31 Total Non-Current A ssets m 1,112.5 1,100.5 19,509.0 20,875.0
BMW BMW BMW Group Dec-31 Total A ssets m 2,554.0 2,915.0 55,511.0 61,475.0
BMW BMW BMW Group Dec-31 Trade Creditors m 289.4 331.1 3,069.0 3,143.0
BMW BMW BMW Group Dec-31 Other Current Liabilities m 265.4 249.6 15,131.0 15,807.0
BMW BMW BMW Group Dec-31 Total Current Liabilities m 554.7 580.7 18,200.0 18,950.0
BMW BMW BMW Group Dec-31 Provisions / Other m 930.6 1,183.6 9,822.0 12,099.0
BMW BMW BMW Group Dec-31 Long Term Debt m 265.4 249.6 13,618.0 14,276.0
BMW BMW BMW Group Dec-31 Shareholders Equity m 803.3 901.2 13,871.0 16,150.0
BMW BMW BMW Group Dec-31 Total Liabilities m 2,554.0 2,915.0 55,511.0 61,475.0
BMW BMW BMW Group Dec-31 A verage Employees 000s 48.8 51.0 98.5 102.1
BMW BMW BMW Group Dec-31 Production 000s 421.0 432.0 1,090.3 1,118.9
BMW BMW BMW Group Dec-31 Sales 000s 422.5 434.3 1,057.3 1,104.9
- 139 -
Figure 78: Spreadsheet structure
Alliance Group Entity Yr to Data Unit 1983 1984 2002 2003
BMW BMW BMW Group Dec-31 Revenue change % 14.1% 10.3% (2.1)%
BMW BMW BMW Group Dec-31 Revenue Per Unit Sold 12,450 13,815 40,111 37,582
BMW BMW BMW Group Dec-31 A uto. Revenue / Unit Sold 31,631 30,250
BMW BMW BMW Group Dec-31 Revenue / Employee 107,760 117,531 430,665 406,805
BMW BMW BMW Group Dec-31 Revenue / Cap. Employed X : 1 2.6 2.6 1.1 1.0
BMW BMW BMW Group Dec-31 Production / Employee units 8.6 8.5 11.1 11.0
BMW BMW BMW Group Dec-31 Material / Unit Produced 20,137 18,683
BMW BMW BMW Group Dec-31 Material / Op. Exp. % 56.4% 54.8%
BMW BMW BMW Group Dec-31 Labour / Unit Produced 6,043 6,315
BMW BMW BMW Group Dec-31 Labour / Total Op. Exp. % 16.9% 18.5%
BMW BMW BMW Group Dec-31 Op. Prof it change % (1) 1 (0)
BMW BMW BMW Group Dec-31 Op. Prof it / Unit Sold 923 916 3,315 3,035
BMW BMW BMW Group Dec-31 Op. Prof it / Revenue % 7.4% 6.6% 8.3% 8.1%
BMW BMW BMW Group Dec-31 Op. Prof it Per Employee 7,985 7,790 35,592 32,848
BMW BMW BMW Group Dec-31 Op. Prof it / Cap. Employed % 19.5% 17.0% 9.4% 7.9%
BMW BMW BMW Group Dec-31 PBT / Unit Sold 955 1,070 3,118 2,901
BMW BMW BMW Group Dec-31 PBT / Revenue % 7.7% 7.7% 7.8% 7.7%
BMW BMW BMW Group Dec-31 PBT / Employee 8,265 9,103 33,480 31,398
BMW BMW BMW Group Dec-31 PBT / Capital Employed % 20.2% 19.9% 8.8% 7.5%
BMW BMW BMW Group Dec-31 Tax / PBT % 68.1% 68.8% 38.7% 39.3%
BMW BMW BMW Group Dec-31 Net Prof it / Unit Sold 304 333 1,910 1,762
BMW BMW BMW Group Dec-31 Net Prof it / Revenue % 2.4% 2.4% 4.8% 4.7%
BMW BMW BMW Group Dec-31 V alue A dded mils 441 501 10,807 11,082
BMW BMW BMW Group Dec-31 A verage Inventory Level Days 86.4 99.4
BMW BMW BMW Group Dec-31 R&D / Revenue % 5.0% 5.0% 5.0% 5.2%
BMW BMW BMW Group Dec-31 Capex / Revenue % 8.4% 6.4% 9.5% 10.2%
BMW BMW BMW Group Dec-31 Capex / Cash Flow % 55.8% 53.9%
BMW BMW BMW Group Dec-31 A verage Debtor Turnover Days 6.0 5.5 15.6 19.8
BMW BMW BMW Group Dec-31 A verage Creditor Turnover Days 51.0 54.9
BMW BMW BMW Group Dec-31 C. A ssets / C.Liabilities X:1 2.6 3.1 2.0 2.1
BMW BMW BMW Group Dec-31 Interest Cover X:1 10.4 11.0 3.8 4.1
BMW BMW BMW Group Dec-31 Liquidity (A cid Ratio) X:1 1.9 2.5 1.7 1.8
BMW BMW BMW Group Dec-31 Equity / Total A ssets % 31.5% 30.9% 25.0% 26.3%
Materials: Cost of all materials (production and

GLOSSARY OF FINANCIAL STATISTICS non-production) and purchased services. This
Revenue: Sales revenue, excluding the effect of figure is adjusted to reflect the change in
any increase/(decrease) in inventories. inventory levels where identified, that is, the cost
of materials used equals the cost of materials
Cost of Sales: Direct manufacturing costs, for bought plus the increase/(decrease) in inventory
example, production material, direct labour and levels.
manufacturing overheads. If this figure is not
supplied by the manufacturer, it cannot usually Labour: Total payroll costs (including taxes and
be derived from other data in the accounts. other social payments) for all employees.
Gross Profit: Revenue minus Cost of Sales.
- 140 -
Depreciation: As reported. The accounting Interest Income/ Expense: Interest received from
conventions covering the depreciation of assets company held securities and interest payable on
vary between countries and can have a significant bank overdrafts and other loans. Some companies
impact on reported profitability. As depreciation report only a net figure, that is, net interest
charges are nominal, that is, they do not require income or net interest expense. Whereas the
cash to be paid or physically set aside, it is clearly operating profits of a company are an indication
in a companys interest to show as high a of its efficiency at manufacturing and selling
depreciation charge as possible, thereby reducing goods, the interest income/expense are a pointer
its reported profit and attracting a lower tax towards the financial structure of a company and
charge. For this reason, most countries have strict its state of indebtedness. The Interest Expense
limits on the amount of depreciation that can be line item is greatly affected by credit operations,
allowed against fixed assets. of which interest expense is the major part. Thus,
when Ford Group began showing its credit
Other Operating Expense/Income: As supplied in operations on a consolidated basis in 1987,
accounts. Can include gains/losses on foreign interest expense is shown to rise from 491m the
exchange transactions, etc. Other Operating previous year, to 4,215m in 1987. Where
Expense also includes selling and administrative possible, data is shown excluding credit
expense and is used as a balancing line when operations.
other line items (for example, Material Expense)
are not separately identified. Other Income/(Expense): As reported, usually
composed of provisions for extraordinary items
Total Operating Expense: Materials plus Labour (for example, restructuring) and other pre-tax
plus Depreciation plus Other Operating Expense gains or losses (for example, gains/losses from the
minus Other Operating Income. sale of equity in other companies).
Operating Profit/(Loss): Revenue minus Total Profit/(Loss) Before Tax (PBT): Operating Profit
Operating Expense. The significance of operating /(Loss) plus Interest Income minus Interest
profits can be diluted by the effect of credit Expense plus Other Income/(Expense).
operations, the major expense of which is
payment of interest (see interest expense below). (Tax)/Tax Credit: As reported.
As financial expense is not included in the
operating profit calculations, the revenue from Other Items: Mostly reflects the interests of other
credit operations can boost the operating profit (minority) shareholders in the net income of
disproportionately. It is partly for this reason that consolidated subsidiaries.
Automotive Operations are shown separately,
wherever possible. Some companies show the Net Profit/(Loss): PBT plus Tax/Tax Credit plus
interest expense associated with credit operations other items.
as part of operating expenses, which substantially
Cash Flow (Internal): The objective is to show the
addresses the above problem.
net cash from operating activities over the course
of the year as measured by the reported net
income plus those items included in the income
statement that do not involve the movement of
cash plus the changes in working capital. As the
reporting standards vary, it is not always possible
to show this information fully; such instances are
noted.
- 141 -
Research & Development: R&D expense is shown Trade Creditors: Notes and accounts payable.
as reported and usually reflects the cost of labour Where possible, this is restricted to trade
and materials in the R&D division. The data are creditors to yield valid data for inventory and
not always included in the financial statements. creditor turnover ratios.
Capital Investment: Investment in land, plant and Other Current Liabilities: Current portion of
machinery, that is, excluding financial long-term debt and other liabilities payable
investments, if possible. within one year.
Automotive Revenue: (where shown) Some Total Current Liabilities: Trade Creditors plus
annual reports provide an analysis of sales Other Current Liabilities.
revenue by sector (for example, automotive,
financial and other). Where available and Provisions/Other: As reported, for example,
significant, this is shown to indicate the accrued pension obligations.
importance of vehicle sales alone. Where greater
information is provided upon automotive Long-Term Debt: As reported.
operations, a separate analysis sheet is provided.
Shareholders Equity: As reported. Minority
GAAP Net Profits: Volvo shows the effect on its interests in consolidated subsidiaries are added in.
statement of income if it were conducted with
Total Liabilities: Total Current Liabilities plus
the US Generally Accepted Accounting
Provisions/Other plus Long-Term Debt plus
Principles.
Shareholders Equity.
Total Inventory: Raw Materials plus Work in
Average Employees: Some companies report the
Progress plus Finished Goods. Some companies
average weekly number of employees during the
group Raw Materials and Work In Progress
financial year, but most report year-end figures
together.
only. In the latter case, average employee
Trade Debtors: Notes and accounts receivable less numbers are approximated by taking the average
allowance for doubtful debts. of the figure at the start of the year (that is, prior
year-end) and the figure at the end of the year.
Cash: Cash and cash equivalents, excludes
marketable securities.
Other Current Assets: As reported.
Total Current Assets: Total Inventory plus

Debtors plus Cash plus Other Current Assets.
Tangible Assets: Property, plant and equipment.
Other Non-Current: As reported, for example,

investments in non-consolidated subsidiaries.
Total Non-Current Assets: Tangible Assets plus

Other Non-Current.
Total Assets: Total Current Assets plus Total Non-

Current Assets.
- 142 -
Production/Sales: Ideally, Sales for the purpose Production Per Employee: Average number of
of this exercise would refer to wholesale units, units produced per employee. This is another
that is, manufacturer sales to dealers and national ratio that indicates manufacturing efficiency
sales companies. In practice, reporting varies, and/or integration levels. The issues of
with some manufacturers disclosing wholesale integration levels and comparing like with like is
units, some retail and some new registrations. a major impediment to comparisons between
Where production data has been supplied, but companies using this type of ratio, but the trends
not sales data, the sales are assumed to be over time within a company are a useful
identical to production and vice-versa. The indication of increasing or declining efficiency.
substitute numbers are identified by italics. Some
manufacturers report a sales or production figure Material Per Unit Produced: Unit material costs
that includes the output by non-consolidated are extremely tightly monitored by the
subsidiaries or affiliates. Where possible, these manufacturers and every effort is made to
additional units are excluded, as they would minimise them. However, rising material costs
distort many of the performance ratios. are not necessarily a bad sign as it may indicate a
Production refers only to built-up units; most higher proportion of large cars (improving model
manufacturers also produce kits for assembly mix) and/or more prestigious small cars
elsewhere. Such units will only be reflected in (improving series mix). In addition, many
the production statistics if the subsequent incremental costs are imposed on the
assembly is carried out by consolidated manufacturers by legislative requirements (for
subsidiaries. example, catalytic converters, airbags, side impact
restraint, etc.).
PERFORMANCE RATIOS Material/Total Operating Expense: The

expression of material costs as a percentage of
Revenue Per Unit Sold: Revenue divided by Sales
total operating expenses is one measure of a
(000s), that is, the average unit revenue.
companys integration structure. As automation
Automotive Revenue Per Unit Sold: (where increases and the trend towards System Supply
shown) Automotive Revenue divided by Sales continues, it is to be expected that this percentage
(000s). will increase. The demand for better equipped
cars and the legislative demands mentioned above
Revenue Per Employee: Revenue divided by will also support this trend.
Average Employees. Generally speaking, the
Japanese manufacturers achieve the highest Labour Per Unit Produced & Labour/Total
ratios, which could theoretically be attributable Operating Expense: The corollary to the points
either to greater efficiency or lower levels of raised above is that the relative importance of
integration. The latter would be apparent in labour (in cost terms) will diminish, although this
higher unit material costs. effect should be partly offset by an increased
average labour cost as average skills levels are
Revenue/Capital Employed: Capital employed is a raised.
measure of the funds available to a business and is
defined as Total Assets minus Current Liabilities. Operating Profit Per Unit, Operating
It could, axiomatically, also be defined as Profit/Revenue & Operating Profit Per Employee:
Shareholders Equity plus Long-Term Debt plus As previously mentioned, interpretation of
Provisions. This ratio, sometimes referred to as operating profit figures needs careful reference to
the Asset Turnover is an indication of a the entity under consideration and the impact of
companys sales growth in relation to its asset non-automotive businesses. Operating
base, that is, have sales improved from the Profit/Revenue is also referred to as the operating
existing asset base or have falling sales been margin or return on sales.
matched by a reduction in assets?
- 143 -
Operating Profit/Capital Employed: Indicates Average Creditor Turnover: Trade Creditors

how profitably the companys assets are being divided by Material multiplied by 365 days. The
made to work, before considering the effect of longer that a company can delay paying its
the companys financial structure. Clearly, if the creditors, the lower the amount of working
rate of return is lower than the cost of the capital capital it has to fund from elsewhere.
employed, the company is uneconomic. Traditionally, the vehicle manufacturers have
been keen to exploit this free source of funds and
Profit Before Tax (PBT) Per Unit, PBT/Turnover, invoice payment schedules have been very
PBT Per Employee & PBT/Capital Employed: The lengthy. However, there is, in some quarters, a
PBT figures enable a better comparison between recognition that this type of exploitation may be
companies, as the contribution made by non- counter-productive in the longer term if it means
automotive sectors will be fairly represented. either driving suppliers out of business or forcing
them to include an allowance for slow payment
Value Added: Calculated as Labour plus Interest in their piece costs. This recognition has been
Expense plus PBT. This captures the principal encouraged by governmental bodies and
elements of a companys impact on the economy, employers organisations, some of which have
although for some entities it is possible that items drawn up Codes of Practice for invoice payment.
subsumed within Other Operating Expense or See Fiat notes regarding altered calculation for
Other Income/(Expense) are omitted. In these their figures.
cases, the Value Added figure will be marginally
understated. Current Assets/Current Liabilities: The working
capital ratio or current ratio is an indication of
Average Inventory Level: Total Inventory divided the companys exposure to risk. While a high
by Materials multiplied by 365 days. Indicates ratio shows a company to have plenty of cover for
how many days supply of material the company its liabilities, it is also indicative of idle assets,
has at any one time. Lean production techniques that is, inventory, debtors and cash are not
and just-in-time deliveries are putting downward earning any money for the company. A few years
pressure on these ratios. ago, a working capital ratio of 2:1 was considered
ideal, but more recently a lower figure has
R&D/Revenue: There has been a general trend
become accepted in many industries.
for R&D spending to increase as product
lifecycles have shortened and niche markets Interest Cover: Operating Profit divided by
proliferated. Interest Expense shows how adequately a
company is able to meet its financial charges. The
Capital Investment/Revenue: Capital spending is
usual caveats regarding credit operations apply.
cyclical, typically building to a peak just before a
Some definitions are more generous and add
new model launch, as facilities and tooling are
Interest Income to the Operating Profit figure,
constructed and purchased for the new model.
but the purpose of the ratio in this context is to
show the capacity of the business to generate the
Average Debtor Turnover: Trade Debtors divided
funds to sustain itself.
by Revenue multiplied by 365 days yields the
average number of days customers take to pay
their invoices. Clearly, it is in the companys
interests to minimise this figure.
- 144 -
Liquidity (Acid Ratio): Current Assets minus EXCHANGE RATES

Inventory, divided by Current Liabilities. This is
The rates of exchange used are average year rates
similar to the working capital ratio, but the value
as shown in Figure 79. The effect of the changing
of the inventory is discounted. Again, the
rates of exchange of the major currencies is
acceptable level varies with the perceived risk of
illustrated in Figure 80.
the industry or company but as a general guide a
1:1 ratio was used a few years ago and that has Taking in turn, the euro, the yen and the US
now reduced to around 0.8:1. As with most of the dollar as the domestic currency, each chart plots
ratios, it is the performance over time that is the the changing value of export earnings
best guide to whether a company is improving or denominated in the other two currencies.
deteriorating.
No adjustment has been made for either general
Equity/Total Assets: the proportion of assets price inflation or that specific to automobiles.
funded from the capital supplied by shareholders. Thus, the top chart indicates that for a German
manufacturer exporting to Japan, goods that
earned 100 in 1983 would be earning 154 in
2005.
Figure 79: Exchange rates - units of currency per euro
Units Of Currency Per Euro

Ye ar 1980 1985 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Euro 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
D-Mark 2.524 2.226 2.052 1.874 1.910 1.964 1.969 1.936 1.956 1.956 1.956 1.956 1.956 1.956
French Franc 5.869 6.795 6.914 6.525 6.493 6.613 6.601 6.560 6.560 6.560 6.560 6.560 6.560 6.560
Spanish P eset a 99.70 129.14 129.41 163.00 160.75 165.89 167.18 166.39 166.39 166.39 166.39 166.39 166.39 166.39
It alian Lire (1,000) 1.189 1.448 1.522 2.130 1.959 1.929 1.936 1.936 1.936 1.936 0.194 0.194 0.194 0.194
Japanese Yen (1,000) 0.300 0.187 0.152 0.121 0.123 0.138 0.137 0.146 0.122 0.100 0.110 0.121 0.133 0.133
Net herlands guilder 2.511 2.312 2.099 2.139 2.211 2.149 2.204 2.204 2.204 2.204 2.204 2.204 2.204
Swedish Krone 5.881 6.521 7.521 9.332 8.515 8.651 8.916 8.861 8.450 9.253 9.161 9.124 9.124 9.282
UK P ound 0.598 0.589 0.714 0.829 0.814 0.692 0.676 0.663 0.607 0.622 0.629 0.692 0.679 0.684
US Dollar 1.392 0.763 1.273 1.308 1.270 1.134 1.121 1.077 0.925 0.895 0.946 1.131 1.244 1.244
Korean W on (1,000) 0.664 0.901 1.015 1.073 1.513 1.566 1.278 1.046 1.156 1.176 1.347 1.423 1.274
Canadian dollar 1.795 1.731 1.569 1.665 1.524 1.370 1.387 1.484 1.582 1.617 1.509
Chinese Yuan 8.829 8.829 8.829 8.829 7.658 7.424 7.839 9.382 10.168 9.986
Indian Rupee 41.810 44.268 40.979 46.122 45.832 41.362 42.182 45.723 52.533 56.128 54.670
- 145 -
Figure 80: Value of export earnings in foreign currency
Euro value of export earnings
250
Y en US$
200
154
150
100
50 72
0
83
85
87
89
91
93
95
97
99
2001
2003
2005
Y en value of export earnings
120
Eur US$
100
80 65
60
6
40
46
20
0
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
2000
2001
2002
2003
2004
2005
US$ value of export earnings

300
250
Eur Y en
216
200
150 140
100
50
0
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
2000
2001
2002
2003
2004
2005
- 146 -
APPENDIX 2: WESTERN EUROPE MARKET DATA

Figure 81: New truck & bus registrations, Austria
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 395 447 395 409 320 450 432 395
B 2-Axle Rigid 6.01 - 10t 525 549 478 461 463 675 654 527
C 2-Axle Rigid 10.01 - 15.9t 697 751 691 594 650 882 776 689
Truck s be low 16t 1,617 1,747 1,564 1,464 1,433 2,007 1,862 1,611
Change (%) 2.1 8.0 -10.5 -6.4 -2.1 40.1 -7.2 -13.5
D 2-Axle rigid 16t + 1,188 1,345 1,205 900 1,190 1,872 1,852 1,460
E 3 & 4 Axle Rigid 2,210 2,213 1,950 1,713 2,113 2,495 2,639 2,271
F Artic's 4,231 4,132 4,023 3,495 3,998 4,742 4,181 4,217
Truck s above 16t 7,629 7,690 7,178 6,108 7,301 9,109 8,672 7,948
Change (%) 8.8 0.8 -6.7 -14.9 19.5 24.8 -4.8 -8.3
Total truck s 9,246 9,437 8,742 7,572 8,734 11,116 10,534 9,559
Change (%) 7.6 2.1 -7.4 -13.4 15.3 27.3 -5.2 -9.3
G Buses 693 698 516 651 672 794 554 578
Total CV s 9,939 10,135 9,258 8,223 9,406 11,910 11,088 10,137
Change (%) 10.0 2.0 -8.7 -11.2 14.4 26.6 -6.9 -8.6
Road f reight (bn tonne-km) 12.3 27.5 28.5 29.5 29.7 30.2 30.8 31.5
Percentage change 123.9 3.6 3.5 0.8 1.6 1.9 2.3
GDP grow th (%) 2.8 3.0 1.0 1.2 0.8 2.0 1.9 2.3
Real interest rates (%) 2.4 1.7 1.6 1.4 1.0 -0.1 -0.5 0.6
Consumer price grow th (%) 0.6 2.3 2.7 1.8 1.3 2.1 2.5 1.9
Unemployment (%) 6.7 5.8 6.1 6.9 7.0 7.1 7.2 7.3
This reflects the restructuring of the economy

AUSTRIA since Austrias membership of the EU and the
opportunities for the expansion of general trade
New registrations
and road haulage arising from economic growth
Sales of vehicles over 3.5t were up by 27% in in neighbouring countries which were formerly
2004 sharing in the strong recovery in capital part of the eastern bloc and are now new
and construction investment. members of the EU.
Demand for trucks was 27% higher at 11,100 With growth picking up to 2.3% in 2006,
units, taking the market significantly past the unemployment may begin to fall,
previous peak of 9,400 units in 2000. The level notwithstanding strong labour supply growth,
of demand was boosted by investment while the impact of higher oil prices on
subsidies. inflation is likely to fade.
The 16t-plus sector increased by 25% to 9,109 Some 83% of all goods carried on Austrias
trucks, while the sub-16t sector rose by 40% to roads are carried for distances of less than 8km,
2,006 units. while just 1.5%. The average journey length for
trips within Austria is 51km, a figure that
The 16t-plus sector now accounts for some 82%
hasnt altered over the last ten years.
of demand for trucks over 3.5t against less than
70% 10 years ago.
- 147 -
Figure 82: New truck market shares, Austria (%)
M anufacture r Group 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
DaimlerChrysler 38.1 36.6 35.4 34.3 33.2 30.5 26.7 26.1
Iveco 13.3 16.0 13.8 17.9 15.6 10.7 15.5 16.7
MA N 31.4 29.2 27.6 27.7 29.0 20.7 23.8 24.2
Paccar 2.1 1.5 3.8 2.9 4.0 1.6 3.4 3.2
RV I 1.3 3.2 4.5 3.3 5.7 3.6 3.0 5.4
Scania 1.2 1.2 1.2 0.5 1.5 0.8 0.0 0.0
V olvo 3.4 4.0 3.3 2.4 3.2 2.6 2.9 3.3
Other 9.2 8.3 10.4 11.0 7.8 29.5 24.7 21.1
Total 3.51-15.9t 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 5.6 6.2 4.8 6.5 5.6 7.1 6.9 6.9
MA N 35.9 35.0 40.6 42.3 39.4 39.2 40.7 40.4
Paccar 9.0 8.0 9.0 8.1 10.5 9.7 8.9 9.8
RV I 3.5 2.8 2.6 3.3 3.3 3.1 3.0 3.0
Scania 14.6 15.2 14.9 11.8 12.5 11.6 12.9 12.8
V olvo 13.4 16.4 12.3 13.8 13.5 12.7 9.9 10.8
Other 0.9 0.9 1.0 0.7 1.0 2.3 1.8 1.5
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares In the 16t-plus sector MAN's dominance has

slightly fallen but it is expected to account for
In the sub-16t sector DC has established a firm
around 40% of the market in the forecast
lead over MAN as MAN does not compete in
period.
the 3.5-6t segment. Together the two firms
account for some 50-60% of the market, with
MANs recovery was based on a strong
Iveco, whose share has fluctuated erratically in
performance by the TG-A heavy range, but
recent years in third place.
dipped below 40% in 2003. DC broke new
ground in 1997 with 20%, but subsequently
DC should maintain its leading position during
slipped steadily back to join Volvo and Scania
the forecast period although MAN is expected
at 13-15%. Paccar has made steady gains in
to recover from the sharp drop it experienced
recent years and is expected to take more than
in 2004. It needs to be remembered that in such
10% of the market consistently in the latter
a small market (1,600-1,700 units per year) the
part of the forecast period.
sale of an extra 100 units can improve market
share by 6-7.0pts.
- 148 -
Figure 83: New truck & bus registrations, Belgium & Luxembourg
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 953 968 1,243 1,271 963 958 1,031 1,011
B 2-Axle Rigid 6.01 - 10t 1,028 922 901 848 743 847 892 861
C 2-Axle Rigid 10.01 - 15.9t 1,588 1,471 1,634 922 835 1,069 1,100 1,052
Truck s be low 16t 3,569 3,361 3,778 3,041 2,541 2,874 3,023 2,924
Change (%) 25.4 -5.8 12.4 -19.5 -16.4 13.1 5.2 -3.3
D 2-Axle rigid 16t + 1,727 1,654 1,259 1,341 1,357 1,345 1,588 1,599
E 3 & 4 Axle Rigid 1,880 1,819 1,925 1,345 1,400 1,216 1,602 1,681
F Artic's 6,102 6,202 6,379 5,137 5,484 5,785 6,519 6,342
Truck s above 16t 9,709 9,675 9,563 7,823 8,241 8,346 9,709 9,622
Change (%) 10.8 -0.4 -1.2 -18.2 5.3 1.3 16.3 -0.9
Total truck s 13,278 13,036 13,341 10,864 10,782 11,220 12,732 12,546
Change (%) 14.4 -1.8 2.3 -18.6 -0.8 4.1 13.5 -1.5
G Buses 885 1,246 1,098 1,162 1,010 1,024 1,198 1,121
Total CV s 14,163 14,282 14,439 12,026 11,792 12,244 13,930 13,667
Change (%) 13.4 0.8 1.1 -16.7 -1.9 3.8 13.8 -1.9
Percentage change -56.7 152.9 3.9 0.2 1.3 2.5 1.3 2.3
GDP grow th (%) 2.7 3.7 0.8 0.9 1.3 2.7 1.3 2.3
Real interest rates (%) 1.6 1.3 1.9 1.6 0.8 0.1 -0.3 0.6
Unemployment (%) 8.8 6.9 6.7 7.3 8.0 7.8 7.9 7.7
Despite a pick up in employment growth in

BELGIUM & LUXEMBOURG 2006, the unemployment rate should only ease
back to around 8%.
New registrations
Sales of vehicles over 3.5t increased by 3.8% to Headline inflation is likely to fall to 1.6% as the
12,200 units in 2004 bringing to an end a two effects of higher energy prices pass, converging
year period of decline. with the underlying rate.
Demand for trucks rose by 4% to 11,200 units, According to the OECD additional
still some 16% below the 2001 peak of 13,300 consolidation measures will be required to keep
units. In the sub-16t sector sales rebounded the budget in balance. In view of the economic
from a 16% fall in 2003, rising by 13% to nearly costs of the already high tax burden, these
2,900 units, still substantially lower than the should focus on expenditure restraint. Subsidies
peak of 4,200 units recorded in 1990. for early retirement should be progressively
phased out to increase the employment rate for
The 16t-plus sector began its recovery in 2003 older workers.
with a rise of 5.3% and in 2004 the recovery
slowed to 1.3%, taking sales to 8,300 units - still In 2006 the market is expected to decline
short of the 1991 peak of 9,700 units. slightly after the strong growth of 2005.
Further declines are expected in 2008 and 2009.
Economic growth is projected to rise to 2.3% in
2006 as domestic demand and exports The 16t-plus sector is expected to lead the
strengthen. increase in 2005, accounting for over 76% of
total truck sales compared with 65% in 1989.
- 149 -
Figure 84: New truck market shares, Belgium & Luxembourg (%)
Iveco 15.9 15.4 13.4 14.2 16.7 20.5 21.6 19.5
MA N 8.8 10.3 9.3 6.7 8.3 7.3 7.7 8.5
Paccar 7.1 7.1 7.6 6.9 6.3 8.1 6.7 6.7
RV I 5.0 6.6 7.1 16.0 11.8 9.3 9.1 9.3
V olvo 9.2 11.0 9.3 7.8 6.9 6.9 7.2 7.7
Other 13.1 13.8 17.9 20.4 12.9 10.5 11.0 11.4
Total 3.51-15.9t 100.0 100.0 100.0 100.0 99.9 99.9 100.0 100.0
Iveco 5.2 4.4 3.6 3.5 3.4 4.5 4.3 4.3
MA N 12.0 13.1 15.7 14.8 13.6 15.6 14.9 15.5
Paccar 16.7 16.0 18.2 20.1 19.9 19.2 19.1 19.4
RV I 8.3 7.8 7.6 8.2 8.1 8.6 8.1 7.7
Scania 18.9 17.6 17.0 15.2 15.0 15.1 15.9 16.0
V olvo 22.6 24.2 22.4 21.3 25.2 24.0 22.4 21.8
Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares In the 16t-plus sector Volvo had a 24% share in

2004, having been market leader since 1994,
The sub-16t sector is dominated by DC with a
helped by its production in Belgium.
37% share over the past two years. We expect
this share to decline over the forecast period.
This is Paccars strongest market - in terms of
market share - after the UK and the
Iveco with a 3.8pts rise to 20.5% in 2004 is
Netherlands, and it has improved its share in
comfortably ahead of Volvo and MAN, and
recent years to claim second place. MAN
should remain at a high level with the new
performed strongly in 2004 and saw its share
Eurocargo range.
increase by 2.0pts to 15.6% to take third place.
This is one of Volvos strongest sub-16t
One time leader DC is now pushed into fifth
markets, in terms of market share, along with
place by Scania. The combined Volvo-RVI
the Netherlands and Scandinavia, while both
presence of over 30% looks very strong.
Paccar and RVI are also relatively strong here.
- 150 -
Figure 85: New truck & bus registrations, France
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 1,638 1,861 2,089 1,889 1,573 898 1,591 1,649
B 2-Axle Rigid 6.01 - 10t 3,337 3,523 3,621 3,411 2,725 2,773 3,012 3,476
C 2-Axle Rigid 10.01 - 15.9t 6,389 6,743 7,263 7,055 5,774 5,809 6,023 6,362
Truck s be low 16t 11,364 12,127 12,973 12,355 10,072 9,480 10,626 11,487
Change (%) 10.7 6.7 7.0 -4.8 -18.5 -5.9 12.1 8.1
D 2-Axle rigid 16t + 10,831 10,894 10,386 9,245 8,017 7,855 8,410 9,072
E 3 & 4 Axle Rigid 5,326 6,830 7,438 6,851 6,246 6,343 6,307 6,127
F Artic's 27,537 29,410 28,403 24,460 22,497 24,350 27,048 27,864
Truck s above 16t 43,694 47,134 46,227 40,556 36,760 38,548 41,765 43,063
Change (%) 13.8 7.9 -1.9 -12.3 -9.4 4.9 8.3 3.1
Total truck s 55,058 59,261 59,200 52,911 46,832 48,028 52,391 54,550
Change (%) 13.1 7.6 -0.1 -10.6 -11.5 2.6 9.1 4.1
G Buses 4,255 4,317 4,614 4,449 4,090 3,927 4,432 4,359
Total CV s 59,313 63,578 63,814 57,360 50,922 51,955 56,823 58,909
Change (%) 12.7 7.2 0.4 -10.1 -11.2 2.0 9.4 3.7
GDP grow th (%) 3.2 4.2 2.1 1.3 0.9 2.1 1.5 2.0
Real interest rates (%) 2.2 2.4 2.7 1.2 0.2 -0.2 -0.1 0.6
Unemployment (%) 11.2 9.5 8.7 9.1 9.8 10.0 9.7 9.6
The market has seen a significant shift in

FRANCE demand towards the heavy sector which has
accounted for 78% of new truck demand during
New registrations
the last three years compared with 68% during
Following four years of strong growth to a 2000 1988-90. The tractor segment comprised 63% of
peak of 59,261 units, the downturn which total heavy truck demand during 2004, a slight
began in the French truck market during the increase over the previous three years.
last quarter of 2001 gained momentum during
2002 and 2003 dropping by 10.6% and 11.5% Over the three years to 2004 the total number
respectively. The decline was most severe in of new trucks sold in France was 147,800 units,
the second half of 2003 when new registrations some 25,700 units less than during the three
fell by 14% following a 7% drop in the first half years to 2001.
of the year.
The increasing demand for tractors is reflected
Although these declines sound substantial, over in the structure of the French truck parc. At the
the three years to 2003 the total number of new end of 2003 there were 214,000 tractors in
trucks sold in France was 158,900 units, just circulation within France, an increase of 34%
3,500 units less than during the three years to from the 160,000 registered in 1990. During the
2000. same period the number of 5t-plus rigid trucks
dropped by 8.8% to 342,000 units.
In France 48,000 new trucks were registered
during 2004, a 2.6% rise, bringing to an end The recovery in truck demand accelerated
three years of decline. The increase was wholly during 2005 and is expected to continue rising
attributable to the 16t-plus sector with a rise of in 2006 and 2007. The forecast reflects an
4.9% to 38,500 units, mainly due to an 8% expected improvement in the economy and the
increase in the tractor segment. assumption that some deferred truck purchases
will be implemented as confidence picks up.
- 151 -
Figure 86: New truck market shares, France (%)
Iveco 20.8 22.5 21.9 22.3 21.4 22.1 22.6 23.5
MA N 4.4 4.2 4.2 4.4 5.0 4.6 5.8 6.1
Paccar 1.4 1.6 1.6 2.1 2.7 2.7 2.5 1.9
RV I 36.8 35.7 38.6 41.4 43.0 42.4 41.1 38.3
Scania 0.2 0.3 0.1 0.0 0.0 0.0 0.0 0.0
V olvo 4.5 4.2 4.6 2.8 2.4 2.9 2.8 3.1
Other 7.2 7.2 6.9 5.9 6.3 6.2 5.2 4.9
Total 3.51-15.9t 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 8.4 9.3 8.6 8.8 8.7 9.5 9.1 9.4
MA N 6.0 6.4 7.2 6.2 7.0 6.0 8.0 8.5
Paccar 8.5 8.9 11.3 12.0 12.8 12.1 11.9 12.1
RV I 36.2 35.4 35.4 38.0 35.8 35.9 33.8 32.5
Scania 10.7 10.5 9.3 9.5 10.2 10.5 11.1 11.4
V olvo 13.3 13.2 12.0 10.2 11.5 11.6 11.4 11.0
Other 0.7 0.9 0.8 1.2 0.6 0.6 0.5 0.5
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares We expect RVIs share to have fallen in 2005

and that it will not exceed the 2003 peak during
RVI dominates the French market in both
the next few years when the main gainers are
sectors. In 2004 the company lost share in the
expected to be MAN and Paccar.
light/medium sector by 0.6pts to 42.4% having
hit a 5-year peak of 43.0% in 2003. The rise
In the heavy sector the biggest gainers in 2005
principally reflects the success of the Midlum,
are expected to have been MAN and Scania.
launched in February 2000.
- 152 -
Figure 87: New truck & bus registrations, Germany
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 16,426 15,317 14,629 13,148 12,333 12,090 12,788 13,996
B 2-Axle Rigid 6.01 - 10t 29,272 27,111 23,150 18,945 17,007 18,747 20,008 21,212
C 2-Axle Rigid 10.01 - 15.9t 8,562 8,822 7,758 6,965 7,554 8,408 9,282 8,310
Truck s be low 16t 54,260 51,250 45,537 39,058 36,894 39,245 42,078 43,518
Change (%) 9.3 -5.5 -11.1 -14.2 -5.5 6.4 7.2 3.4
D 2-Axle rigid 16t + 10,683 10,132 8,389 6,650 6,386 7,003 7,116 8,201
E 3 & 4 Axle Rigid 19,624 20,216 17,202 13,356 14,525 16,569 17,223 18,478
F Artic's 28,085 27,662 25,661 23,621 25,414 30,434 31,868 34,223
Truck s above 16t 58,392 58,010 51,252 43,627 46,325 54,006 56,207 60,902
Change (%) 16.3 -0.7 -11.6 -14.9 6.2 16.6 4.1 8.4
Total truck s 112,652 109,260 96,789 82,685 83,219 93,251 98,285 104,420
Change (%) 12.8 -3.0 -11.4 -14.6 0.6 12.1 5.4 6.2
G Buses 5,687 5,025 5,150 5,063 4,842 4,527 4,847 4,920
Total CV s 118,339 114,285 101,939 87,748 88,061 97,778 103,132 109,340
Change (%) 12.6 -3.4 -10.8 -13.9 0.4 11.0 5.5 6.0
Percentage change -29.4 52.6 1.9 -1.0 -0.1 2.4 1.0 1.2
GDP grow th (%) 1.5 3.0 0.8 0.2 -0.1 1.6 1.0 1.2
Unemployment (%) 9.7 9.1 9.0 9.5 10.3 10.4 10.7 10.5
Over the three years to 2004 the total number

GERMANY of trucks sold in Germany was 259,000 units,
some 60,000 fewer than during the three years
New registrations
to 2001.
2004 was the second year of recovery after a 3-
year decline. The rise of 11% was the highest Hesitant economic performance led to
among the Top-5 markets but at 98,000 units estimated growth in truck demand during 2005
the HCV market remains well below the 1991 being around 5%.
reunification-boom peak of 132,000 units.
Further growth in truck demand expected in
The sub-16t sector increased for the 1st time in 2006-08 in cyclical upswing taking the 16t-plus
4 years. At 39,000 units the sector remains sector past its 1991 peak of 59,100 units.
some 43% below the 1991 peak of 67,000
vehicles.
The 16t-plus sector rose by 17% to 54,000 units,

led by growth in the road tractor segment.
Demand was close to 1991 peak of 59,000 units.
- 153 -
Figure 88: New truck market shares, Germany (%)
Iveco 21.5 22.5 24.5 29.2 26.3 26.6 26.7 26.8
MA N 16.8 18.9 17.8 13.9 15.8 15.7 16.5 16.9
Paccar 0.7 0.9 1.1 1.4 1.5 1.5 1.6 2.0
RV I 0.7 1.4 1.8 1.4 1.6 1.8 2.6 2.5
Scania 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
V olvo 1.2 0.9 0.8 0.6 0.7 0.5 0.3 0.4
Other 10.1 9.2 9.4 9.9 10.7 8.3 7.1 7.3
Total 3.51-15.9t 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 5.1 4.8 5.4 7.4 6.7 6.7 6.4 7.3
MA N 27.0 29.8 28.8 26.1 27.6 27.8 28.6 28.7
Paccar 4.8 5.2 6.6 6.5 6.4 8.0 8.1 7.2
RV I 2.1 1.9 1.8 2.1 2.1 1.7 2.3 2.5
Scania 9.5 10.0 8.3 8.4 7.4 7.0 7.4 8.1
V olvo 7.4 8.2 7.8 9.3 9.2 8.5 7.3 7.6
Other 2.0 1.8 1.8 1.8 2.1 1.8 2.1 1.7
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares Most of these gains came at the expense of

'Other' manufacturers.
In the light/medium sector market leader DC
gained 2.3pts in market share during 2004,
In the heavy sector DC's share dipped by 0.2pts
following four years of decline.
to 38.4% in 2004 and is expected to weaken
further during the forecast period.
Iveco also gained share, with a rise of 0.3pts and
RVI's share rose by 0.2pts.
The chief gainers in 2005 are expected to have
been MAN, RVI and Scania.
- 154 -
Figure 89: New truck & bus registrations, Italy
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 4,135 5,389 3,846 3,970 5,446 5,501 6,088 4,947
B 2-Axle Rigid 6.01 - 10t 3,758 4,420 4,870 5,684 4,070 4,523 4,174 4,284
C 2-Axle Rigid 10.01 - 15.9t 4,833 5,312 5,006 5,711 3,762 3,844 3,435 4,329
Truck s be low 16t 12,726 15,121 13,722 15,365 13,278 13,868 13,697 13,560
Change (%) 15.8 18.8 -9.3 12.0 -13.6 4.4 -1.2 -1.0
D 2-Axle rigid 16t + 3,887 3,150 2,934 3,186 2,199 2,476 2,696 3,578
E 3 & 4 Axle Rigid 10,039 11,389 12,183 13,624 10,091 10,533 10,654 10,336
F Artic's 10,216 12,292 12,397 12,184 9,885 12,005 12,262 12,412
Truck s above 16t 24,142 26,831 27,514 28,994 22,175 25,014 25,612 26,326
Change (%) 37.3 11.1 2.5 5.4 -23.5 12.8 2.4 2.8
Total truck s 36,868 41,952 41,236 44,359 35,453 38,882 39,309 39,886
Change (%) 29.0 13.8 -1.7 7.6 -20.1 9.7 1.1 1.5
G Buses 3,913 3,847 4,734 3,681 3,255 3,710 4,174 4,284
Total CV s 40,781 45,799 45,970 48,040 38,708 42,592 43,483 44,170
Change (%) 28.4 12.3 0.4 4.5 -19.4 10.0 2.1 1.6
Percentage change -30.9 21.8 0.8 3.3 0.3 1.7 -0.2 1.2
GDP grow th (%) 1.6 2.9 1.8 0.4 0.3 1.2 -0.2 1.2
Real interest rates (%) 1.3 1.5 1.6 0.7 -0.4 -0.2 -0.1 0.3
Unemployment (%) 11.4 10.6 9.5 9.0 8.7 8.3 8.3 8.2
Domestic demand, once sustained by strong

ITALY employment growth and low real interest rates,
has been slowing.
New registrations
In Italy new truck registrations rose by 9.7% to Activity is estimated to have strengthened
38,900 units in 2004 following a 20% fall in towards end-2005, reflecting a renewed upturn
2003. in world trade, improving labour productivity,
and tax cuts.
The market remains below its 2002 peak of
44,400 units which was reached with the help The OECD comments that structural reforms
of the Tremonti Bis law which encouraged are needed to address the underlying causes of
businesses to invest in capital equipment. poor competitiveness:
Demand in the 16t-plus sector rose by 13% to Wage bargaining should be adapted to better
25,000 units and the tractor segment reflect productivity developments.
outperformed the multi-axle rigid segment for Sheltered sectors should be made subject to
the first time since 2001. more effective competition to reduce
downstream costs and inflation pressures.
Over the three years to 2004 the total number Debt reduction should be quickened to make
of new trucks sold in Italy was 118,700 units, room for lower taxes and higher human and
little changed from the 120,100 units sold physical capital investments.
during the three years to 2001.
The expected weak performance of the Italian
After recovering throughout most of 2004, the economy over the forecast period is expected to
economy fell into recession early in 2005. High lead to the truck market underperforming the
unit labour cost growth, coupled with euro W. European average.
appreciation and strengthening global
competition in Italys areas of specialisation,
have entailed large losses of market shares.
- 155 -
Figure 90: New truck market shares, Italy (%)
Iveco 61.0 62.8 57.6 59.7 51.7 50.9 49.3 48.2
MA N 3.6 3.1 2.4 1.7 1.5 1.5 2.2 2.4
Paccar 1.6 1.7 1.9 2.6 1.9 1.8 1.4 1.8
RV I 6.6 8.4 10.7 9.3 6.8 7.8 7.9 9.1
V olvo 2.5 2.1 3.1 2.4 1.4 1.2 1.2 1.4
Other 8.7 8.8 10.6 10.5 9.0 8.3 7.8 7.5
Total 3.51-15.9t 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 39.1 39.4 36.3 37.1 37.6 38.1 37.5 37.5
MA N 6.4 6.5 8.4 8.4 7.9 8.3 9.1 8.8
Paccar 5.9 5.5 6.4 6.9 8.2 7.7 8.4 8.6
RV I 8.9 8.8 9.3 10.3 9.2 8.8 8.0 8.3
Scania 12.0 13.0 13.0 12.3 12.3 12.5 13.8 13.6
V olvo 12.1 10.9 10.6 9.7 11.1 10.6 11.1 10.5
Other 0.3 0.3 0.4 0.6 0.4 0.3 0.5 0.5
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares During 2004 Iveco's share of the light/medium

sector fell by 0.8pts to 50.9%. Further declines
Ivecos dominance of the Italian truck market
are expected. The trend over the forecast period
has weakened considerably over the past
is expected to remain downward.
decade, similarly to Fiat Auto's declining share
of the car market. In 1988 Iveco held 83.1%
In the heavy sector Iveco gained 0.5pts in 2004
and 58% of the Italian light truck and heavy
helped by its new models. Volvo lost 0.5pts to
truck sectors respectively. These shares have
10.6%, and Paccar lost 0.5pts to 7.7%.
declined fairly progressively to those shown
above. The combined share of the Volvo and RVI
brands at 19.4% made it the second largest
We perceive this decline as an inevitable
player in Italy's heavy truck sector during 2004.
consequence of the globalisation of the
industry; other truckmakers have applied
considerable resources to increasing their
presence in Italy and their gains are bound to
be at the expense of the dominant marque. New
product activity by Iveco is expected to slow
the rate of market share loss rather than reverse
it in the long term.
- 156 -
Figure 91: New truck & bus registrations, Netherlands
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 745 751 657 554 836 656 631 557
B 2-Axle Rigid 6.01 - 10t 1,124 1,135 1,136 954 684 679 719 797
C 2-Axle Rigid 10.01 - 15.9t 1,058 1,157 1,045 895 843 845 851 888
Truck s be low 16t 2,927 3,043 2,838 2,403 2,363 2,180 2,201 2,242
Change (%) -6.6 4.0 -6.7 -15.3 -1.7 -7.7 1.0 1.9
D 2-Axle rigid 16t + 3,112 2,743 2,582 3,150 2,849 1,725 2,011 2,197
E 3 & 4 Axle Rigid 2,971 3,161 2,878 2,620 2,008 1,997 2,158 2,347
F Artic's 8,240 8,489 8,590 6,011 5,950 7,925 7,412 7,492
Truck s above 16t 14,323 14,393 14,050 11,781 10,807 11,647 11,581 12,036
Change (%) -4.6 0.5 -2.4 -16.1 -8.3 7.8 -0.6 3.9
Total truck s 17,250 17,436 16,888 14,184 13,170 13,827 13,782 14,278
Change (%) -4.9 1.1 -3.1 -16.0 -7.1 5.0 -0.3 3.6
G Buses 583 907 835 671 851 894 895 767
Total CV s 17,833 18,343 17,723 14,855 14,021 14,721 14,677 15,045
Change (%) -4.5 2.9 -3.4 -16.2 -5.6 5.0 -0.3 2.5
Percentage change -29.7 31.9 -1.4 -2.6 -0.9 1.9 0.4 1.0
GDP grow th (%) 3.7 3.3 1.3 0.6 -0.9 1.2 0.4 1.0
Real interest rates (%) 0.8 1.4 0.2 -0.1 0.2 0.8 0.5 1.4
Unemployment (%) 3.2 2.6 2.0 2.3 3.5 5.0 6.3 6.1
Economic growth turned negative at the end of

NETHERLANDS 2004 and early 2005, interrupting the short and
weak recovery that was underway. This
New registrations
slowdown reflected deteriorating net exports
Following three years of decline, truck and bus following the appreciation of the euro and
demand in the Netherlands rose by 5.0% to depressed domestic demand.
14,700 units in 2004.
The OECD comments that the government
The increase was attributable to the heavy should complement the reforms stimulating
sector which registered a rise of 7.8% to 11,600 labour supply with measures to reduce poverty
units. This level of demand remained well traps in order to enhance employment
below the sector peak of 15,000 units recorded prospects for low-skilled workers.
in 1998. The 2004 increase was wholly due to
the tractor segment which rose by 33%. Netherlands based operators have a strong
position in international road transport and are
The sub-16t sector fell by 7.7% to 2,200 units, well placed to benefit from the continuing
barely half the peak level of 4,200 units restructuring in Europe's haulage industry.
recorded in 1988. They are also ideally located to benefit from the
ending of restrictions on cabotage, particularly
In recent years both the sub-16t and the 16t-
in the large German market.
plus truck sectors have tended to move in the
same direction but with a shift in demand in
favour of heavier units. In 1990 the 16t-plus
sector already accounted for nearly 73% of the
truck market and by 2004 this had grown to
84%.
- 157 -
Figure 92: New truck market shares, Netherlands (%)
Iveco 8.6 10.0 15.0 10.8 8.1 12.2 14.2 13.6
MA N 2.7 4.0 4.2 2.8 2.1 4.2 3.6 3.8
Paccar 4.3 3.6 4.5 2.8 4.6 4.0 4.4 5.2
RV I 9.8 9.6 9.0 10.1 10.0 9.9 9.3 9.6
V olvo 6.1 4.9 4.4 3.0 4.0 4.2 4.4 4.7
Other 58.8 57.8 51.7 55.2 53.9 48.2 44.6 44.5
Total 3.51-15.9t 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 7.1 6.6 8.4 6.8 4.8 3.5 5.1 7.5
MA N 7.1 8.0 11.2 8.7 10.3 11.1 10.4 9.7
Paccar 14.1 11.3 17.7 12.3 17.6 22.4 17.3 16.4
RV I 18.6 21.2 18.2 19.6 21.4 19.7 18.8 18.2
Scania 16.7 17.3 12.9 15.5 13.1 10.7 14.6 15.9
V olvo 23.3 20.4 17.1 19.9 21.3 20.0 18.6 16.7
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares Paccar is dominant with over 30% of the sector.

Scania and Volvo are in close contention for
Three manufacturers shared around 70% of the
second place sharing a further 38%. DC
sector in 2004. DC's lead was extended by
remains some way behind on 11%.
3.5pts to 30.5%. Second-place Iveco also made a
useful gain of 1.3pts to 22.2%.
Market shares in this sector have been
relatively stable since 2001, when Paccar had
As with other minor markets it needs to be
an exceptionally good year gaining over 4.0pts.
remembered that in such a small market (2,000
This is a weak market for both RVI and Iveco.
units per year) the sale of an extra 100 units can
We are not expecting any substantial changes
improve market share by 5.0pts.
in shares over the forecast period.
- 158 -
Figure 93: New truck & bus registrations, Portugal
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 505 467 559 336 292 320 321 369
B 2-Axle Rigid 6.01 - 10t 1,543 1,531 1,221 1,128 859 799 748 840
C 2-Axle Rigid 10.01 - 15.9t 638 623 576 332 302 392 379 409
Truck s be low 16t 2,686 2,621 2,356 1,796 1,453 1,511 1,448 1,618
Change (%) 16.7 -2.4 -10.1 -23.8 -19.1 4.0 -4.2 11.7
D 2-Axle rigid 16t + 818 778 628 481 420 385 524 579
E 3 & 4 Axle Rigid 1,082 1,322 1,234 715 403 572 582 664
F Artic's 2,580 2,819 2,614 1,945 1,646 2,443 2,286 2,315
Truck s above 16t 4,480 4,919 4,476 3,141 2,469 3,400 3,392 3,558
Change (%) 28.6 9.8 -9.0 -29.8 -21.4 37.7 -0.2 4.9
Total truck s 7,166 7,540 6,832 4,937 3,922 4,911 4,840 5,176
Change (%) 23.8 5.2 -9.4 -27.7 -20.6 25.2 -1.4 6.9
G Buses 557 811 740 499 372 409 502 499
Total CV s 7,723 8,351 7,572 5,436 4,294 5,320 5,342 5,675
Change (%) 19.5 8.1 -9.3 -28.2 -21.0 23.9 0.4 6.2
Percentage change 6.2 0.5 1.4 1.4 -1.1 2.4 1.0 1.9
GDP grow th (%) 3.4 3.6 1.7 0.4 -1.1 1.0 1.0 1.9
Real interest rates (%) 0.7 1.1 0.1 -0.4 -1.0 -0.4 -0.2 0.4
Unemployment (%) 4.4 4.0 4.1 5.0 6.3 6.7 7.0 7.0
New registrations in the light/medium sector

PORTUGAL rose by 4% to 1,500 units in 2004 following
falls of 19% and 24% in 2003 and 2002
New registrations
respectively. Demand in this sector remains
The Portuguese truck market dropped sharply substantially lower than the 1989 peak of 6,200
in 2003, falling by 21% to 3,900 units. This units.
followed declines of 28% in 2002 and 9% in
2001. Such volatility is not uncommon in a Portugal is a major importer of vehicles older
market where demand has swung between a than 15 years. Trucks and buses are the most
peak of 11,100 units and a low of 3,600 units popular imports. Almost 80% of trucks that
over the past twenty years. were exported from neighbouring EU member-
states to Portugal in 2001 were models from the
In 2004 the market bounced back with a 25% era 1979 to 1988. Consequently the Portuguese
rise to 4,900 units as the economy returned to truck parc is one of the oldest in Europe, with
positive growth after a recession in 2003. an average age in 1998 estimated at 10 years.
In the three years to 2004 some 13,700 trucks The road haulage industry in Portugal is fairly
were sold in the country compared with 21,500 fragmented. The country's road haulage
in the 1999-2001 period. However, in a sign of industry association (ANTRAM) states that
the maturing and internationalisation of the some 48% of its 6,000 members are small family
Portuguese road haulage industry, the heavy operations with one or two trucks.
sector has been larger than the light/medium
sector since 1996 and in 1998 exceeded its prior Demand is expected to recover in 2006 and
peak of 3,400 units. In 2004 the heavy sector 2007 before a cyclical decline begins in 2008.
accounted for 69% of total truck demand, above
the West European average of 67%.
- 159 -
Figure 94: New truck market shares, Portugal (%)
Iveco 8.6 10.0 15.0 10.8 8.1 12.2 14.2 13.6
MA N 2.7 4.0 4.2 2.8 2.1 4.2 3.6 3.8
Paccar 4.3 3.6 4.5 2.8 4.6 4.0 4.4 5.2
RV I 9.8 9.6 9.0 10.1 10.0 9.9 9.3 9.6
V olvo 6.1 4.9 4.4 3.0 4.0 4.2 4.4 4.7
Other 58.8 57.8 51.7 55.2 53.9 48.2 44.6 44.5
Total 3.51-15.9t 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 7.1 6.6 8.4 6.8 4.8 3.5 5.1 7.5
MA N 7.1 8.0 11.2 8.7 10.3 11.1 10.4 9.7
Paccar 14.1 11.3 17.7 12.3 17.6 22.4 17.3 16.4
RV I 18.6 21.2 18.2 19.6 21.4 19.7 18.8 18.2
Scania 16.7 17.3 12.9 15.5 13.1 10.7 14.6 15.9
V olvo 23.3 20.4 17.1 19.9 21.3 20.0 18.6 16.7
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares Volvo and Scania dominated the heavy truck

sector for a number of years but over the past
Japanese manufacturers have traditionally been
few years their leadership has been eroded and
the market leaders in the Portuguese light to
in 2000 RVI emerged as the best-selling brand,
medium truck sector, with both Mitsubishi and
a position it lost in 2002.
Toyota having local assembly facilities and
Nissan carrying out production in Spain.
In 2004 Paccar was the best-selling group.
However, this position is coming under
Again we would caution against reading too
increasing pressure from the European
much into percentage movements in such a
producers, especially DC, Iveco and RVI.
small market where the sale of an extra 50
trucks would increase a manufacturer's share of
the heavy sector by over 1.0pts.
- 160 -
Figure 95: New truck & bus registrations, Spain
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 7,726 4,354 5,624 4,444 4,518 5,058 4,773 4,917
B 2-Axle Rigid 6.01 - 10t 3,845 3,885 3,591 3,988 2,947 3,404 3,314 3,367
C 2-Axle Rigid 10.01 - 15.9t 2,931 2,843 3,024 2,360 1,713 2,050 2,784 2,791
Truck s be low 16t 14,502 11,082 12,239 10,792 9,178 10,512 10,871 11,075
Change (%) 24.0 -23.6 10.4 -11.8 -15.0 14.5 3.4 1.9
D 2-Axle rigid 16t + 10,389 8,184 10,016 8,034 7,183 8,094 8,440 8,594
E 3 & 4 Axle Rigid 2,378 2,902 3,039 2,804 3,460 3,759 3,182 3,234
F Artic's 12,394 15,676 14,099 16,004 16,276 18,010 18,958 18,562
Truck s above 16t 25,161 26,762 27,154 26,842 26,919 29,863 30,580 30,390
Change (%) 31.0 6.4 1.5 -1.1 0.3 10.9 2.4 -0.6
Total truck s 39,663 37,844 39,393 37,634 36,097 40,375 41,451 41,465
Change (%) 28.4 -4.6 4.1 -4.5 -4.1 11.9 2.7 0.0
G Buses 2,946 2,387 2,279 2,521 2,715 2,955 2,740 2,835
Total CV s 42,609 40,231 41,672 40,155 38,812 43,330 44,191 44,300
Change (%) 26.2 -5.6 3.6 -3.6 -3.3 11.6 2.0 0.2
GDP grow th (%) 4.1 4.1 2.8 2.7 2.9 3.1 3.2 3.0
Real interest rates (%) 0.6 1.0 0.7 -0.3 -0.7 -1.0 -1.1 -0.3
Unemployment (%) 15.9 14.1 13.0 14.1 14.0 13.9 13.2 12.5
The OECD comments that although the neutral

SPAIN fiscal stance is currently appropriate, a tighter
fiscal policy would be desirable in the medium
New registrations
run to reduce domestic demand pressures and
The Spanish HCV market performed strongly prepare for the fiscal consequences of
in 2004, rising by 12% to 43,300 units, a new population ageing.
peak.
Further pension reforms also need to be
The sub-16t sector rose by 14.5% to 10,500 considered. Continued efforts to improve
units, some 30% below the 1989 peak of 15,100 productivity growth and a reform of the wage
units. bargaining system would help to halt the
deterioration in competitiveness.
The 16t-plus sector rose by 11% to 29,900 units,
a rise of 10% from the prior peak in 2001. Growth in truck demand remained positive in
Sector demand is driven by strong export 2005. A strike by truck drivers in October won
growth, with many goods leaving the country concessions from government over fuel taxes.
by road.
Truck demand is expected to stabilise in 2006
Over the three years to 2004 the number of then enter a cyclical decline in 2007-08.
new trucks sold in Spain was 114,100 units,
slightly lower than the 116,900 units recorded
during the three years to 2001.
- 161 -
Figure 96: New truck market shares, Spain (%)
Iveco 33.1 30.6 26.0 16.9 24.7 23.2 24.3 24.5
MA N 7.4 9.0 8.2 6.4 2.5 4.8 5.9 6.2
Paccar 1.8 2.8 2.9 4.8 1.9 3.5 2.9 2.7
RV I 11.2 9.6 11.7 18.6 12.7 16.4 15.8 15.7
Scania 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0
V olvo 2.0 2.8 3.4 1.8 1.1 0.9 1.5 1.4
Other 17.6 22.3 16.7 24.7 22.7 18.0 18.4 18.2
Total 3.51-15.9t 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 19.6 17.9 17.8 20.3 17.4 18.7 19.1 17.9
MA N 11.6 11.8 12.6 11.0 14.0 13.3 13.6 13.5
Paccar 9.3 9.2 9.9 9.8 10.9 10.0 10.7 10.2
RV I 17.4 17.8 17.9 19.3 17.2 17.3 17.1 16.8
Scania 14.1 14.4 12.5 11.9 12.3 11.0 12.0 13.5
V olvo 12.1 12.7 13.7 12.8 13.8 14.8 13.3 13.1
Other 0.7 0.6 0.8 0.3 0.2 0.3 0.3 0.4
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares Competition is extremely close in the 16t-plus

sector with all seven groups holding shares
Shares in the sub-16t sector fluctuate
ranging between 10% and 20%. Iveco has
considerably. DC currently has clear leadership
yielded around 5pts to DC since 1996 and now
with over 30% of the market. Iveco holds
competes closely with RVI in the battle for
second place with over 20%, while since the
leadership.
introduction of the Midlum, RVI has improved
from the 2000 low point to establish itself
DC, Volvo, Scania and MAN are close
clearly in third place with 12-16%.
challengers with 10-15% each. This is RVIs
best major European market apart from France
Minor marques play a significant role with
and its share has been remarkably stable having
combined penetration of around 20%. DC and
established a high profile through local
Iveco are expected to retain their positions
production operations.
during the forecast period.
- 162 -
Figure 97: New truck & bus registrations, UK
Se gm e nt & GVW 1999 2000 2001 2002 2003 2004 2005(e ) 2006(f)
A 2-Axle Rigid 3.51 - 6t 2,829 3,395 4,227 4,417 4,936 5,013 5,678 5,044
B 2-Axle Rigid 6.01 - 10t 14,991 16,041 16,007 14,554 14,089 14,897 15,349 14,835
C 2-Axle Rigid 10.01 - 15.9t 2,546 2,404 2,563 2,587 2,589 2,419 2,621 2,492
Truck s be low 16t 20,366 21,840 22,797 21,558 21,614 22,329 23,648 22,371
Change (%) -8.8 7.2 4.4 -5.4 0.3 3.3 5.9 -5.4
D 2-Axle rigid 16t + 7,314 7,499 7,731 7,275 7,612 7,495 7,862 7,180
E 3 & 4 Axle Rigid 6,056 6,393 6,773 7,546 8,047 7,800 8,236 7,774
F Artic's 18,114 18,729 18,699 16,283 18,795 18,848 18,781 18,217
Truck s above 16t 31,484 32,621 33,203 31,104 34,454 34,143 34,879 33,171
Change (%) 2.8 3.6 1.8 -6.3 10.8 -0.9 2.2 -4.9
Total truck s 51,850 54,461 56,000 52,662 56,068 56,472 58,527 55,542
Change (%) -2.1 5.0 2.8 -6.0 6.5 0.7 3.6 -5.1
G Buses 4,489 4,093 3,440 3,686 3,860 3,644 3,868 3,798
Total CV s 56,339 58,554 59,440 56,348 59,928 60,116 62,395 59,340
Change (%) -1.5 3.9 1.5 -5.2 6.4 0.3 3.8 -4.9
Percentage change -6.6 6.0 -0.7 0.3 2.3 3.1 2.1 2.3
GDP grow th (%) 2.1 3.0 2.4 1.5 2.1 3.1 2.1 2.3
Unemployment (%) 4.3 5.5 5.1 5.2 5.0 4.7 4.7 4.8
Despite the recent pick-up in inflation,

UK weakening growth prospects suggest that
monetary tightening will not be required to
New registrations
maintain inflation close to the target.
UK truck demand rose by 0.7% to 56,500 units
in 2004, taking it to a 15-year peak but the UK Demand is expected to undergo a cyclical
remains one of the few markets not to have downturn in 2006-07, partly prompted by high
exceeded its late-1980s peak volumes in either fuel prices and higher interest rates.
the sub-16t or 16t-plus sectors.
Demand increased most strongly in the sub-16t

sector with a 3.3% rise to 22,300 units. The 16t-
plus sector saw a 0.9% fall to 34,100 units,
though the tractor segment rose by 2.8% to
18,800 units. The segment accounted for 47%
of all truck sales in 2004 compared with 26% in
1989.
- 163 -
Figure 98: New truck market shares, UK (%)
Iveco 31.3 30.3 29.8 30.3 28.1 29.8 26.3 29.9
MA N 8.6 10.3 10.2 7.4 9.8 9.3 7.8 9.3
Paccar 22.4 23.1 19.6 21.0 19.8 21.4 23.4 19.5
RV I 1.6 5.1 8.0 6.6 9.6 8.6 7.4 7.1
V olvo 2.9 2.3 1.7 1.5 1.2 0.9 0.9 1.2
Other 7.9 8.5 8.1 10.4 7.6 7.3 12.4 10.2
Total 3.51-15.9t 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Iveco 10.1 8.9 7.5 8.3 7.5 5.7 7.0 7.8
MA N 16.3 16.3 20.3 14.5 11.3 11.7 8.9 11.8
Paccar 18.9 18.4 19.9 24.6 24.4 25.0 27.5 25.1
RV I 6.5 6.5 7.1 3.6 4.0 4.8 3.9 4.0
Scania 17.9 20.7 15.6 16.3 19.4 17.3 16.2 17.3
V olvo 19.3 17.7 18.3 16.9 17.0 16.6 18.7 16.6
Other 1.4 1.5 1.4 1.7 2.4 2.6 2.4 2.1
Total 16t plus 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Market shares The purchase of ERF from Western Star

enabled MAN to take top position in 2001. This
Iveco, DC and Paccar take around 50% of the
was relinquished immediately in 2002 in the
sub-16t sector. Ivecos closure of its UK plant in
midst of radical restructuring at ERF.
early 1997 may have contributed to the
subsequent decline in its share but it remains
MAN is currently in fifth place with an 11.7%
the clear leader with around 30% of the
share. Scania, the previous leader, is in second
market.
place ahead of Volvo and DC.
MAN has made useful gains in recent years and
Despite the introduction of the Actros range
the imminent launch of the TG-L and TG-M
DC's share ran below the 10% level for five
are expected to enable the company to make
years prior to 2001. The company did much
further gains.
better in 2002 and 2003 helped by the
introduction of the Axor. In 2004 it made
The 16t-plus sector is an extremely competitive
further gains to 16.4% but this is expected to
market with four groups having held shares in
represent a peak over the forecast period.
the 15-25% range over the last 3 years.
- 164 -
APPENDIX 3: US MARKET DATA

Figure 99: US truck sales by weight class
Clas s 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
4 69,149 76,984 56,526 44,090 49,423 47,417 52,037 42,289 45,429 53,421 88,211
5 4,324 7,368 9,262 25,173 30,353 29,125 24,362 24,003 28,980 36,259 46,278
6 23,187 20,809 18,111 32,086 48,135 51,209 42,435 45,095 51,040 69,847 60,154
7 109,898 101,087 113,689 117,128 130,983 122,614 91,650 69,328 66,789 75,263 88,858
8 207,419 178,752 178,551 209,386 262,415 211,507 139,614 146,031 141,964 203,197 252,792
Total 413,977 385,000 376,139 427,863 521,309 461,872 350,098 326,746 334,202 437,987 536,293
Figure 100: US weight classes
We ight
lbs kg
Clas s
1 0-6,000 0-2,722
2 6,001-10,000 2,723-4,535
3 10,001-14,000 4,536-6,350
4 14,001-16,000 6,351-7,257
5 16,001-19,500 7,258-8,845
6 19,501-26,000 8,846-11,793
7 26,001-33,000 11,794-14,969
8 33,001 + 14,970 +
In the US, demand for heavy (Class 8) trucks

BACKGROUND reached record levels in 1999 but began turning
The North America Free Trade Agreement down in 2000, falling by 19% over the whole
(Nafta) area is usually the world's largest market year.
for heavy trucks. The US typically accounts for
The downturn gathered pace during 2001 then
over 90% of demand in the region.
demand more or less stabilised at a low level for
The geographical size of North America and the two years before entering its current cyclical
low price of fuel results in a high demand for long upswing
distance trucks, the average length of haul being
With the upcoming 2007 emissions standards,
215km compared with an average of 92km in the
projected growth over the next three to five years
EU.
is expected to drop.
- 165 -
Figure 101: US truck sales by weight class & manufacturer
Group Clas s 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
DC Class 4 494 5,607 3,954 4,552 5,143 2,555 3,501 1,374 2,996 4,761 4,297
Ford Class 4 31,702 36,058 35,955 19,662 21,862 22,347 19,531 16,195 16,571 18,840 52,384
GM Class 4 30,141 29,722 9,698 10,121 12,324 11,721 16,118 12,190 12,173 13,096 14,631
Isuzu Class 4 4,952 4,048 4,751 6,960 7,653 7,784 10,201 10,205 9,979 12,401 12,144
Iveco Class 4 0 0 0 0 0 0 0 0 0 0 0
Mitsubishi Class 4 154 762 1,105 1,303 1,387 1,184 1,472 1,554 2,544 3,056 3,147
Navistar Class 4 0 0 0 0 0 0 0 0 0 0 588
Nissan Class 4 818 590 864 1,232 784 480 559 452 840 971 742
Toyota Class 4 128 108 199 260 270 375 309 319 326 296 278
Other Class 4 760 89 0 0 0 971 346 0 0 0 0
s ub-total 69,149 76,984 56,526 44,090 49,423 47,417 52,037 42,289 45,429 53,421 88,211
DC Class 5 133 654 669 1,134 1,214 1,286 862 754 511 556 740
Ford Class 5 0 18,858 22,323 20,665 18,336 16,960 17,854 21,330 22,010
GM Class 5 423 407 338 344 202 296 714 1,922 5,986 9,207 17,834
Isuzu Class 5 759 906 901 1,776 3,122 3,836 2,130 2,459 2,441 2,711 2,732
Iveco Class 5 0 0 0 0 0 0 0 0 0 0 0
Mitsubishi Class 5 1,015 943 958 1,122 1,259 1,100 849 824 1,130 1,226 1,150
Navistar Class 5 929 3,546 5,350 605 633 496 485 116 0 0 398
Nissan Class 5 553 602 724 917 1,188 998 630 648 681 828 861
Toyota Class 5 257 256 322 417 412 448 326 320 377 401 553
Other Class 5 255 54 0 0 0 0 30 0 0 0 0
s ub-total 4,324 7,368 9,262 25,173 30,353 29,125 24,362 24,003 28,980 36,259 46,278
DC Class 6 994 3,050 5,652 9,671 13,244 12,344 11,023 11,057 16,574 23,709 15,004
Ford Class 6 3,287 3,804 2,609 10,686 21,702 21,533 14,957 11,640 9,941 16,091 14,951
GM Class 6 11,157 7,647 5,005 5,571 6,964 9,912 3,552 2,563 2,845 3,626 4,218
Isuzu Class 6 684 696 904 635 1,640 1,336 63 32 23 42 163
Iveco Class 6 0 0 0 0 0 0 0 0 0 0 0
Mitsubishi Class 6 758 616 738 819 917 927 716 512 563 709 1,072
Navistar Class 6 1,831 2,295 1,490 2,384 1,371 2,497 10,587 17,612 19,277 23,405 20,865
Nissan Class 6 553 398 542 894 785 710 425 490 597 909 975
Toyota Class 6 435 345 483 584 684 879 669 830 1,012 1,356 2,906
V GT Class 6 1,074 857 688 842 828 616 320 359 208 0 0
Other Class 6 2,414 1,101 0 0 0 455 123 0 0 0 0
s ub-total 23,187 20,809 18,111 32,086 48,135 51,209 42,435 45,095 51,040 69,847 60,154
DC Class 7 6,206 8,484 9,811 18,811 28,181 30,080 25,731 20,681 22,120 23,058 31,612
Ford Class 7 32,825 24,668 26,019 10,858 7,306 3,523 2,628 1,988 2,105 4,277 5,604
GM Class 7 14,120 11,234 19,061 22,280 23,084 19,561 15,743 13,082 6,272 8,422 8,461
Isuzu Class 7 85 64 241 587 86 217 1,290 1,012 680 553 748
Mitsubishi Class 7 199 206 301 250 237 132 78 69 93 113 143
Navistar Class 7 49,012 49,690 55,109 61,243 67,633 64,218 41,575 26,789 28,404 28,873 33,044
Nissan Class 7 94 49 33 39 111 91 51 44 61 97 80
Paccar Class 7 1,111 1,192 2,082 2,180 3,463 4,000 4,076 5,097 6,544 9,515 8,613
Toyota Class 7 143 87 98 162 198 282 196 226 264 334 553
V GT Class 7 1,542 1,116 934 718 684 510 282 340 246 21 0
Other Class 7 4,561 4,297 0 0 0 0 0 0 0 0 0
s ub-total 109,898 101,087 113,689 117,128 130,983 122,614 91,650 69,328 66,789 75,263 88,858
DC Class 8 53,386 49,518 50,282 69,362 97,881 79,366 55,050 55,999 57,230 73,731 94,900
Ford Class 8 20,041 14,292 12,645 3,263 146 0 0 0 0 0 0
Navistar Class 8 36,500 30,463 34,404 38,583 41,648 34,417 21,895 23,992 22,405 38,242 46,093
Paccar Class 8 43,948 38,502 38,265 43,515 55,362 45,747 27,495 34,617 32,706 49,439 57,427
Scania Class 8 0 0 0 0 0 0 0 0 0 0 0
V GT Class 8 48,109 39,871 41,973 53,785 66,090 50,775 34,315 30,612 28,857 40,993 53,749
Other Class 8 5,435 6,106 982 878 1,288 1,202 859 811 766 792 623
s ub-total 207,419 178,752 178,551 209,386 262,415 211,507 139,614 146,031 141,964 203,197 252,792
Total 413,977 385,000 376,139 427,863 521,309 461,872 350,098 326,746 334,202 437,987 536,293
- 166 -
Figure 102: US manufacturer shares by weight class
Group Clas s 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
DC Class 4 0.7 7.3 7.0 10.3 10.4 5.4 6.7 3.2 6.6 8.9 4.9
Ford Class 4 45.8 46.8 63.6 44.6 44.2 47.1 37.5 38.3 36.5 35.3 59.4
GM Class 4 43.6 38.6 17.2 23.0 24.9 24.7 31.0 28.8 26.8 24.5 16.6
Isuzu Class 4 7.2 5.3 8.4 15.8 15.5 16.4 19.6 24.1 22.0 23.2 13.8
Iveco Class 4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Mitsubishi Class 4 0.2 1.0 2.0 3.0 2.8 2.5 2.8 3.7 5.6 5.7 3.6
Navistar Class 4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7
Nissan Class 4 1.2 0.8 1.5 2.8 1.6 1.0 1.1 1.1 1.8 1.8 0.8
Toyota Class 4 0.2 0.1 0.4 0.6 0.5 0.8 0.6 0.8 0.7 0.6 0.3
Other Class 4 1.1 0.1 0.0 0.0 0.0 2.0 0.7 0.0 0.0 0.0 0.0
s ub-total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
DC Class 5 3.1 8.9 7.2 4.5 4.0 4.4 3.5 3.1 1.8 1.5 1.6
Ford Class 5 0.0 0.0 0.0 74.9 73.5 71.0 75.3 70.7 61.6 58.8 47.6
GM Class 5 9.8 5.5 3.6 1.4 0.7 1.0 2.9 8.0 20.7 25.4 38.5
Isuzu Class 5 17.6 12.3 9.7 7.1 10.3 13.2 8.7 10.2 8.4 7.5 5.9
Iveco Class 5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Navistar Class 5 21.5 48.1 57.8 2.4 2.1 1.7 2.0 0.5 0.0 0.0 0.9
Nissan Class 5 12.8 8.2 7.8 3.6 3.9 3.4 2.6 2.7 2.3 2.3 1.9
Toyota Class 5 5.9 3.5 3.5 1.7 1.4 1.5 1.3 1.3 1.3 1.1 1.2
Other Class 5 5.9 0.7 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0
s ub-total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
DC Class 6 4.3 14.7 31.2 30.1 27.5 24.1 26.0 24.5 32.5 33.9 24.9
Ford Class 6 14.2 18.3 14.4 33.3 45.1 42.0 35.2 25.8 19.5 23.0 24.9
GM Class 6 48.1 36.7 27.6 17.4 14.5 19.4 8.4 5.7 5.6 5.2 7.0
Isuzu Class 6 2.9 3.3 5.0 2.0 3.4 2.6 0.1 0.1 0.0 0.1 0.3
Iveco Class 6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Navistar Class 6 7.9 11.0 8.2 7.4 2.8 4.9 24.9 39.1 37.8 33.5 34.7
Nissan Class 6 2.4 1.9 3.0 2.8 1.6 1.4 1.0 1.1 1.2 1.3 1.6
Toyota Class 6 1.9 1.7 2.7 1.8 1.4 1.7 1.6 1.8 2.0 1.9 4.8
VGT Class 6 4.6 4.1 3.8 2.6 1.7 1.2 0.8 0.8 0.4 0.0 0.0
Other Class 6 10.4 5.3 0.0 0.0 0.0 0.9 0.3 0.0 0.0 0.0 0.0
s ub-total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
DC Class 7 5.6 8.4 8.6 16.1 21.5 24.5 28.1 29.8 33.1 30.6 35.6
Ford Class 7 29.9 24.4 22.9 9.3 5.6 2.9 2.9 2.9 3.2 5.7 6.3
GM Class 7 12.8 11.1 16.8 19.0 17.6 16.0 17.2 18.9 9.4 11.2 9.5
Isuzu Class 7 0.1 0.1 0.2 0.5 0.1 0.2 1.4 1.5 1.0 0.7 0.8
Navistar Class 7 44.6 49.2 48.5 52.3 51.6 52.4 45.4 38.6 42.5 38.4 37.2
Nissan Class 7 0.1 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Paccar Class 7 1.0 1.2 1.8 1.9 2.6 3.3 4.4 7.4 9.8 12.6 9.7
Toyota Class 7 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.4 0.4 0.6
VGT Class 7 1.4 1.1 0.8 0.6 0.5 0.4 0.3 0.5 0.4 0.0 0.0
Other Class 7 4.2 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
s ub-total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
DC Class 8 25.7 27.7 28.2 33.1 37.3 37.5 39.4 38.3 40.3 36.3 37.5
Ford Class 8 9.7 8.0 7.1 1.6 0.1 0.0 0.0 0.0 0.0 0.0 0.0
Navistar Class 8 17.6 17.0 19.3 18.4 15.9 16.3 15.7 16.4 15.8 18.8 18.2
Paccar Class 8 21.2 21.5 21.4 20.8 21.1 21.6 19.7 23.7 23.0 24.3 22.7
Scania Class 8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
VGT Class 8 23.2 22.3 23.5 25.7 25.2 24.0 24.6 21.0 20.3 20.2 21.3
Other Class 8 2.6 3.4 0.5 0.4 0.5 0.6 0.6 0.6 0.5 0.4 0.2
s ub-total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

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The Worlds Truck Manufacturers

9th Edition (2006)

An AWResearcher publication published by Synesis Media

Maus welcomes the opportunity to assess your manufacturing requirements

Building partnerships with our customers as an investment for the future.

Telephone: +44 (0)20 7878 1039

ISBN 1 84083 140 5

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Reduced shift times means

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About this report

CHAPTER 1: THE GLOBAL TRUCK INDUSTRY

Figure 1: New truck sales worldwide by region, 1997-2005

Sources: Polk-Marketing Systems, OEMs and other, including estimates

2005 UNIT SALES & OPERATING PROFIT

Forecast The European industry's profit rose to a fresh

Y ear 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 0 5 ( e)

C hang e (%) (7)% (11)% 19 % 20 % (7)% 7% 16% 7% 9% (9 )% (2)% 1% 11% 6%

REVENUE The Japanese truck producers have never been

Figure 3: Revenue of the major truckmakers, 2004

Iveco Truck (e)

Isuzu med/heavy (e)

0 5,000 10,000 15,000 20,000 25,000

The light-medium trucks primarily sold by

Figure 4: Unit revenue of the major truckmakers, 2004

Iveco Truck (e)

Isuzu med/heavy (e)

0 20,000 40,000 60,000 80,000 100,000 120,000

-2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

(1) RVI reflects five years to 2000

-2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

A margin of 5% is probably the lowest target

Figure 7: Truck production by manufacturer, 2004

Nissan Diesel 39.5

Ashok Leyland 54.7

China FAW 188.0

0 50 100 150 200 250 300 350

INDUSTRY STRUCTURE Merger and acquisition activity is likely to put

CHAPTER 2: TRUCK DEMAND IN WESTERN EUROPE

The 2004 new registration figure was within

However, towards the end of the year a

Figure 8: Quarterly truck & bus reg's - western Europe

New Truck Registrations

Total CV s 404,588 412,135 399,740 363,133 351,193 377,762 400,177 403,501

The key message is that the W. European

UK Growth remained positive in 2005 with a rise

Figure 10: Truck & bus demand in western Europe (1982-2009)

New truck & bus reg's, W. Europe (1982-2010)

Figure 11: Shares of West European truck market (%)

M anufacture r Group 2001 2002 2003 2004 2005 2006

DaimlerChrysler 35.4 34.6 39.8 42.3 40.1 41.8

MANs share rose by 0.3pts to 15.1% in 2004,

Figure 12: The fundamentals of truck demand

Rail Road Other

Efficiency Gains / Losses

LONG TERM DEVELOPMENTS

Figure 13: Freight & GDP growth in western Europe (1970-2030)

Freight demand The aggregate freight transport figure tends to

Figure 14: EU freight by mode

Road Rail Other 11%

52% 60% 69% 74% 76% 77% 78%