Volkswagen's trucks division mulls over IPO, expansion

By Staff Writer

Feb 09, 2016 09:22 AM EST

The Heavy Truck division of Volkswagen AG is studying different options for pushing business growth. The trucks division is activity considering initial public offer (IPO) and acquisition route to achieve higher growth rate, while the parent company is in the process of restructuring. 

Trucks division's Chief Andreas Renschler is keen on expanding in the US and Chinese markets. The trucks division is considering these markets are very important for the expansion plan. The latest strategy being under exploration may through new challenges to the global automobile players including Daimler AG and Volvo AB. 

Bloomberg reports that the expansion plan of the trucks division for the US market may include acquisition as well. The Volkswagen's trucks division expansion plan would also challenge smaller players in the emerging markets. Truck models are varied in different regional markets. However, Renschler didn't reveal the specific details about the IPO, expansion and acquisition plans.

Volkswagen's stock fell 2.3 percent in Frankfurt market. Since the emission-scandal broke out on 18 September 2015, Volkswagen's market capitalization fell by Euro 22 billion. North America is not yet explored for Volkswagen. Volvo and Daimler enjoy major market share in the US. 

Volkswagen needs to raise billions of Euros to repay damage fines and recall expenses after admitting the emission results rigging. However, Volkswagen may not need to sell its trucks division to raise funds. The operating results from Volkswagen group are good. So there may not be any sale, as reported by The Star.

Renschler said: "We're keeping all options open on our way to becoming a global champion. We want to be industry leaders in terms of profitability, customer-oriented innovations and global presence, not necessarily in terms of sales volume."

Now, there's more leeway for brands to take their own decisions related to vehicles and business operations. Analysts welcome the IPO proposal from the trucks division. 

Arndt Ellinghorst, a London-based analyst with Evercore ISI, has estimated the combined value of Volkswagen's truck assets at Euro 20 billion ($22.3 billion). Ellinghorst said: "Shareholders would certainly welcome an IPO of VW's trucks business as the company would start lifting value after decades of empire building and address investor skepticism regarding conglomerates comprising passenger cars and commercial vehicles."

The trucks division is keeping all options open for overseas expansion, a possible takeover and IPO. Analysts also support the IPO plans of Volkswagen as it can take advantage of decades-old brand building. The VW's truck division foresees North American market as long-term prospect, as reported by International Business Times. 

Meanwhile, Volkswagen has expanded diesel emission compensation program in the US market. As part of this, the automobile major is offering $500 in cash and $500 in credits at dealerships. Tens of thousands of owners of 2009-16 diesel VW Touareg SUVs are getting the financial compensation. Volkswagen is reeling under pressure following the emission-result rigging scam.

However, the trucks division is not involved directly as the scandal impact is totally on the parent company. The emission-scandal has resulted in major rejig at top brass of Volkswagen. This process also has given 12 brands of Volkswagen to make vehicles on their own choice. 

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