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Scania has unleashed a caustic, detailed rejection of the takeover bid from MAN. Chief executive Leif Östling gave a presentation to share analysts in a style that had all the under-statement of a Swedish caricature - but fired several well-aimed exocets at MAN. Östling started mildly enough: the bid was too low and over-estimated short-term synergies as outlined. "The structure and the way the bid was done didn't appeal to the people sitting on the Scania board," he added.

Growing

Analysts keen to see further consolidation were told that they under-estimate the truck sector. The European market is stable and growing, thanks to growth in central Europe and in Russia, where Scania's sales are doubling annually and domestic manufacturers falling away. "China and Asia are interesting but not so interesting as new Europe," he said. Similarly, Scania is more interested in going East than to North America.

Östling said that Scania can near-double production progressively to 130-140,000 in 2015 "within the existing structure and with limited extra capital investment...There will be more of a problem with supply than with demand over the next six-seven years". Cabs and engines are bottlenecks at present, he said. Then the comparisons started. Östling said that Scania already makes six trucks per year per employee to MAN's four "there is an efficiency gap between the two companies of 30%," he said.

Confirmed

"MAN has too many production sites in Germany, which Hakan Samuelsson [MAN group chief executive and formerly Östling's number two at Scania] has confirmed to me. It has to close three to four of those plants and shed 5,000 jobs," he said. MAN could achieve the E500m in savings it says it could make through synergies after buying Scania, simply by taking out 5,000 of its current workforce. "It doesn't need to do more [than that]. It is one thing to know it has to be done and quite another to do it," he emphasised - "really to drive through a very hard re-structuring". Östling said he has told Samuelsson: "You haven't done your homework, which is to streamline your own organisation."

Scania, which is reducing employees who make axles and gearboxes from 1,800 to 1,000 had been forced to put collaboration with MAN in these areas on ice because MAN was "too costly to take in". Östling slated the German corporate governance culture under which MAN has to work. Where the Swedes are "very straightforward and direct Germany is much more bureaucratic, very political, not straightforward". The idea of becoming an "EU" rather than German company, of which MAN has made much, is irrelevant the same political structure that exists at MAN would remain, he said. Governance culture is "probably the biggest problem in corporate Germany," he said.

Financially, Östling showed Scania way ahead of MAN, with EBIT margins of around 12%. In the global truck industry, only Paccar can match Scania and the best of the rest are well behind at 6-8%. MAN is shown behind Volvo and ahead of Mercedes-Benz. Scania's EBIT will be in the 12-15% band going forward, he predicted. He rejected a popular belief that Scania's profitability is based on high prices it is "80% of our cost structure", he said. Growth will continue at 10%, with 8 to 9% spent in capital investment including 4% in R&D - a figure that hasn't changed in 20 years. Scania has technology already in place for Euro 6 [the emissions level expected in 2012]. "The whole technology is there already - we just have to plug it in when it becomes mandatory in the market." The technology has been developed with Cummins "and partly with Hino", he says. [Scania has previously stated that it intended to do without SCR at Euro 6.]

Engineers

Competitors would like to have access to the combustion and fuel injection technology of Scania and Cummins, who together have more than 3,000 engineers working in this area, Östling stressed. MAN does not have the fuel injection technology for Euro 6, he says. MAN would like to access the Scania/Cummins technology but has been told: "You might do that - but later, not now." Trust among engineers doesn't just happen, whether companies have merged or not. It took the engineers at Cummins and Scania four years before they trusted one another, he said. Östling was cautious when asked how Scania's existing partners would react to MAN. It would open the book for new negotiation, he said. "They will not answer a hypothetical question - I have my view [on their reaction] but that is not relevant."

A striking graph on customer benchmarks put Scania slightly ahead of Volvo in providing both "high" customer value and image, with MAN well behind in the "medium" band for both. The base source is Scania's research, MT is told. [Interestingly, Daf appears as fractionally higher customer value even than Scania, although with only a "medium" image. Mercedes-Benz is shown "high" for image and "medium" for value Renault and then Iveco bring up the rear, marked "low" on both counts.] Selling trucks, Scania has 30% share of the asset financing of its products to MAN's 10%, Östling said. Merchant banks overestimate the potential for short-term savings through combined sourcing, he said.

He warned of the risk of falling market share - and the cost of retaining customers and continuing to invest in the brand - as customers seek to exploit uncertainty and to convert customers. "Customers are not stupid. They are very keen transporters and very skilled purchasers they want competition." Merged companies tend to focus too much on cost, rather than the dynamics of the market, he said.

Investors

Östling said companies are looking 15 years ahead, not to shorter-term cash boosts and he warned investors against being swayed by a comparison of the two chief executives - he, who is nearing retirement, and the younger Samuelsson. "Look at the industrial logic, not the person or persons sitting at the top of the company." Östling summed up his view with these words: "Consolidation is an opportunity, not a necessity." His comments fell far short of dismissing collaboration in future. Indeed, Scania has said it could achieve greater savings than those outlined by MAN, were it in charge.

'Leyland killed Daf'

Östling said Paccar has done "a fantastic job with Daf" since buying the company ten years ago. But Östling, stressing how takeovers can go horribly wrong, said: "The acquisition of Leyland (in the late 1980s) killed Daf. I told Aart van der Padt (Daf's chairman) he was making a terrible mistake he said he had to do it because Daf wouldn't survive, otherwise. I said he should let Leyland die on its own."

No comment

Leif Östling declined to give a view on several questions from analysts:

• Reports that Scania has been thinking of a counter-bid for MAN for some while.
• The price at which he would sell his own shares.
• What is the position of Volkswagen, Scania's largest shareholder, which seems to shift frequently. Östling did, however, permit himself a broad Swedish smile when saying he would refrain from adding to press speculation on VW. It was the only big grin in almost an hour's presentation and questions.