Europeans Find Us Market Tough To Colonise

Wednesday's disappointing interim figures from Volvo's truck division, following last week's surprise replacement of Per Lindquist as chief executive of Volvo GM Heavy Truck, the US unit, confirmed the pain is not over.

By market share, the efforts of Volvo, Renault and Mercedes-Benz to build a US presence look impressive. Together, the three European companies control more than 36 per cent of the US market for medium and heavy weight trucks, and a commanding 50 per cent for heavy (more than 15 tonnes) Class 8 vehicles.

However, their success in generating sales has seldom translated into profits.

European truckmakers have racked up millions of dollars in losses in their attempts to build a presence since first buying into the US in the early 1980s.

 

Their fortunes have been affected partly by factors beyond their control. To some extent, the Europeans were handicapped from the outset. To gain market share, they had to expand by acquisition. But the companies available, such as Mack (Renault), GM-White (Volvo), or Freightliner (Mercedes-Benz) were only for sale because of their poor performance. Renault, for example, paid less and less for each incremental shareholding it bought in Mack. Freightliner, now one of the most successful US truckmakers, was a burden to Mercedes-Benz for many years.

The Europeans' performance has also been affected by the notorious volatility of the US heavy truck market, an important indicator of economic growth. When confidence is high, the market surges: when the economy looks set to shrink, orders evaporate.

In the past five years, sales of Class 8 trucks have see-sawed from a low of 119,000 units in 1992 to a peak of 201,000 last year. Such volatility plays havoc with planning and budgeting. It requires sophisticated, flexible production techniques that can respond quickly to upturns, without losing control of overheads. Within the overall picture, the Class 8 market is particularly volatile. Sales of heavy trucks are commonly divided into a number of segments.

The relative resilience of demand for premium sleeper vehicles