8 | INTERVIEW
One-to-One with Henrik Henriksson, Executive Vice-President, Head of Sales & Marketing, Scania by Gianenrico Griffini, Chairman, International Truck of the Year. GG. In your role as Head of Sales & Marketing you have a broad portfolio. Discuss. HH. Starting with sales and marketing and that includes the four main business areas which is trucks, bus and coach, parts and service and engines and now lately we have also established a fi fth business area which is linked to connectivity which is fleet management services. Basically it’s all the information that we have started to collect creating products and services to sell to our customers or our customers’ customers. Then there is the global responsibility, selling to our distributors around the world, it could be fully owned like Italy or they could be private companies like in Indonesia or in Ireland for example. We are also responsible for the product portfolio, so we are putting demands on R&D on what products we need tomorrow, 6 years from now, even 10 years from now. We are also putting demand on our production of how much we are going to produce 3 months from now and 6 months from now. So, basically that is the responsibility together with my colleagues and Executive Board, we manage Scania going forward. I’ve had this job now for one year and before that I was head of one other business area, trucks. GG. How is the market situation in Europe and describe what’s happening here please? HH. I think we are seeing now a pre-buy, as you probably have noticed, of Euro 5 before we come into the year end and that has started quite late. In some parts of Europe, in Germany, Austria, Switzerland and Scandinavia there was some certain pre buy that started earlier but the majority of Europe actually got going during August/September. We see now that there is a fight to get Euro 5 vehicles and we have to maximise the production as much as we can before the year-end to cater for this volume. Of course, this means that the market looks quite good in Europe, it looks better than it has done before but at the same time I think the whole industry knows what’s going to happen quarter 1 and what’s going to happen Quarter 2 next year. That is the challenge at the moment to balance the quick increase and then look a little bit further ahead and see what’s happening in the beginning of next year. We believe that the underlying growth in Europe will come back and it’s the age of the fleet that concerns me. Since 1981 it has never been this old in Europe so there is a need to renew. Somehow this process has to get started and we expect that to continue during next year. The 1st Quarter of 2014 will be tough and probably so into Quarter 2 as well. FLEETTRANSPORT | DEC 13/JAN 14
GG.
What of demand of Euro 6?
HH. There is good interest for Euro 6 which is coming up now and when you get the interest from the customers to invest on the Euro 6 side, we are well positioned. We have been out early, launched more than 2 years ago – putting vehicles on the road with customers and that has paid off in that we now have a full range of vehicles ready for 1st January to when Euro 6 is legal. That gives us a very good confidence, it feels like we have had our run-in period, we have had the possibility to see the type of engines that are coming out now is the second generation – they are Euro 6 2.0 as we call them. I would say that this year, roughly around one third of our sales in Europe will be Euro 6. GG. Do you see markets across Europe picking up? HH. Yes the financial crisis in Europe has hit the Southern region harder and to a certain extent selected countries like Poland, part of Scandinavia but not all countries. UK and partly Germany have come up to quite a good level. So there you can say that the recovery has already happened but we are expecting of course that both Italy, Spain and to a certain extent also France will come back and since it’s been so many years now with lower economical activities that it will be a very steep curve to return. At the same time during these tough times of course a lot of our customers have suffered and there has been a consolidation in the industry so there are companies that have gone under and others that have stepped forward, so I think that once we come out of this crisis the players that are present will be very strong players because they are coming out from very tough times – I think their possibility to grow faster than average will be there, once it comes it will go quick. GG. Scania recently said that it has a potential to sell over 120,000 trucks by 2020 and that the focus will be on the service business. Can you explain in some detail this vision of the future? HH. We have had a vision at Scania that in the next economical peak we would reach 150,000 but since the economical situation in the world is so unsecure, we have been moving that peak every year. So what we decided to do is put a firm date
and we need to put targets for that date and that is why now it is 2020 strategy and that we have a hard target towards that year. Basically it is a ‘bottoms up’ strategy where we have had discussions with markets, talking about the potential, what should be our position in different segments, in different applications with different customers and we have consolidated that up to a certain volume. It is not something that has been decided from Head Office that this is a good number – it comes from analysis. Basically what we see and what we have learned the last 6–7 years is that to generalise, we looked at the market before as one, now we have learned to sort of divide it into different applications and segments and industries and by doing that we get a much better understanding of our potential. It’s just the segmentation of the market but doing that we also got a better understanding of the customers’ business and there we now see that where can we grow and still retain a good profitability. There we can see that these are the segments and industries where we should focus more and these are where we should focus less and then we look at what is our potential in earnings when it comes to profitability, not only when we sell the vehicle but also what is the potential of earning profit on the service time of the vehicles and that is often quite different, in some industries that could be quite tough. They want to get to sell the vehicle and there is hard pressure on margins but when it comes to the service business it’s much better. It is based on this knowledge about the market that we have been able to find a way of being more aggressive into the market and seeing that here we need to take more market share, here we need to take more rolling fleet because we know that it will generate more profit on the service side. A good example of that could be waste management, another one could be mining, it could be forestry – timber transport so by knowing more specific about the industries which I would say that 7-8 years ago we didn’t really know and that we know today. That’s why we can focus. The strategy in short is all about being more aggressive into the market, in selected industries and segments and applications and finance that by having a better penetration on the service side so that we take more market share on the service and we do that in the right business - that is the essence on the new strategy. GG. You stated also that this revenue generated by service could account for up to 30%? That is huge. HH. Yes it is, we are currently somewhere around 22% maybe and we need to come up somewhere between 25%–30%. We need to do that when we at the same time are growing a vehicle port from 600,000 vehicles up to close to 800,000 – 900,000, that is a very big challenge. However, today if we look at Europe we have too much free capacity. If you look at a workshop there is more capacity, we could increase the opening hours, we can increase putting in more stock and more people, we need network that is under-utilised in the whole of Europe. Then if we look outside Europe there is huge potential in emerging markets to increase our market share – there the customers are less mature than they are in Europe and there we have to get them to use our services and get them to appreciate the value of doing that.
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