Volkswagen AG’s trucks unit Traton SE was little changed in its Frankfurt trading debut Friday, after completing Europe’s second-largest initial public offering this year.
The shares opened unchanged at 27 euros, which was the bottom of Traton’s pricing range of as much as 33 euros. VW raised 1.55 billion euros ($1.8 billion) from the transaction, which values the business at 13.5 billion euros.
A listing of the truckmaker is a sea change in Wolfsburg, Germany-based VW’s effort to streamline a sprawling empire after decades in expansionary mode. Over the years, VW added Porsche, Bentley luxury cars, Ducati motorcycles and heavy truck brands. In the age of electric and self-driving vehicles, the cumbersome structures that have grown around a network of well over 100 factories are slowing decision-making and risk the company falling behind.
VW’s byzantine governance with a powerful labor council and complex ownership structure has stood in the way of bigger changes in recent years. A plan to sell Ducati derailed in 2017 on internal resistance on the disposal, marking Traton IPO as a milestone for Chief Executive Officer Herbert Diess and trucks head Andreas Renschler.
The industrial giant plans to transform Traton from a largely regional manufacturer focusing on Europe into a global challenger to market leaders Daimler AG and Volvo AB.
Traton’s stock will be tracked by investors as a peer to Sweden’s Volvo, the only standalone commercial vehicle manufacturer in Europe that competes with a similar product range. Led by former Scania chief Martin Lundstedt, Volvo set the bar high with a successful restructuring that boosted returns within three years. At VW, the MAN truck unit has made only tepid progress in recent years on lifting profit margins.
The European market for trucks is expected to soften during the second half of the year, Jefferies analyst Graham Phillips said in a note this week, noting Volvo’s decision to reduce a summer production shift. Heavy-truck registrations in May were “stronger than expected,” helped by one-off effects like pre-buying ahead of a digital tachograph requirement that took effect this month.
VW’s Diess, in the job for just over a year, is renewing the push to lift the company’s poor valuation by becoming less centralized. Lifting the valuation will be key “currency” in the industry’s phase of consolidation and partnerships in the shift to electric and self-driving cars, he said a recent top management meeting. The company trades at a price to earnings multiple of 6.4 times, compared with Germany’s Dax Index at 16.2.
VW is a behemoth that sprawls across 122 factories worldwide with some 650,000 employees. The company has started to review strategic options including a possible sale of other non-auto businesses, including transmissions maker Renk AG and MAN Energy Solutions, which produces large diesel engines for ships and turbines. It’s also open to sell more Traton shares.
VW could use Traton’s IPO proceeds to expand the division’s footprint in North America, the truck industry’s largest profit pool, that’s currently limited to a 16.8% stake in U.S. peer Navistar International Corp. In China, it holds a stake Sinotruk Hong Kong Ltd., while Daimler and Volvo both have local production ventures.
