Volkswagen cannot afford to make another truck stop just yet. The German automotive group is considering making a bid next year for Paccar, according to Wolfgang Bernhard, who runs rival Daimler’s truck unit. It’s not the first time Volkswagen has been linked to the $23-billion (U.S.) American truck maker. But Mr. Bernhard, who cited “serious, multiple sources,” has given the rumour more gas.
He made the rather bold comments to analysts at a meeting on Thursday, according to Max Warburton at Bernstein Research. In principle at least, a deal would fit Volkswagen chief executive officer Martin Winterkorn’s global trucking ambitions. Paccar boasts a 27-per-cent share of the North American market, where the German automotive group remains a minnow.
Volkswagen promptly issued a denial, with a company spokesman dubbing it “complete rubbish.” If that’s the case, it’s a huge relief for shareholders, as hitching the maker of Kenworth, Peterbilt and DAF trucks to its wagon would be both a financial and a managerial stretch.
Mr. Winterkorn would probably need to offer at least a 30-per-cent premium to secure Paccar. Based on Thursday’s closing price, that would value the target at around $30-billion (U.S.). True, at the end of the first quarter Volkswagen was sitting on a net cash pile of €17-billion ($24.6-billion Canadian). But if that drops below €10-billion, the auto maker risks getting downgraded, which will push up costs and stunt its ability to offer attractive financing deals to car buyers.
The company could raise money by selling equity, of course. But executives angered shareholders when it sold €2-billion worth of stock earlier this year to finance the much smaller €6.7-billion acquisition of Scania. Shares fell on the news.
The Swedish truck maker isn’t its only recent acquisition in the industry, either. In 2012 it acquired full control over German rival MAN. These two deals have turned Volkswagen into the world’s third-largest global heavy trucks manufacturer. But the company faces a big task, and several years, integrating them. Bolting on a transatlantic partner would not only set back the process, it would also risk overloading executives. For now, waiting before driving westward looks like a smart idea.
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