VW car and van man takes on MAN

Nine weeks into his job as MD of MAN Truck and Bus UK, Simon Elliott spoke to Steve Hobson about his plans for 2015.

After 40 years in the truck industry, the last 20 with MAN, CEO Des Evans announced his retirement due to ill health in summer 2014, just before receiving the Motor Transport Service to Industry Award.

Taking over from one of the best known characters in the UK truck business will be a tough job, Elliott knows.

“People say to me I've got big boots to fill,” he says. “Yes, I have. But mine need to be pointing in a different direction.”

Having come from running the Volkswagen Group (VW cars and vans, Audi, Skoda and Seat) in Ireland to manage MAN - which like Scania is owned by VW – Elliott says selling light and heavy commercial vehicles is the very similar – but different.

“It's very different to what I'm used to but the principals are the same,” he says. “If you look after customers well and keep your dealers motivated, then you've got a halfway chance of being successful. With our Euro-6 trucks I believe we've got a really good opportunity to change up a gear now.”

Apart from the product ranges, the biggest difference between VW and MAN is their sales strategy and the relationship between the importer, the dealer network and the customer.

“There are no similarities because obviously with light commercial vehicles, with Volkswagen, with Audi, with all of the other brands I'm used to, the salesmen were obviously the responsibility of the dealer,” Elliott says. “Whereas the salesman here, they're all MAN people. I am a fan of dealer salesmen working for the dealer. Then we can put pressure on dealers rather than the dealers putting pressure on us. If I'm being really selfish, I think there's a change in psychology when it works like that.”

Direct sales

While Elliott is not saying at this stage he will end direct sales, it is possible.

“Direct sales from MAN historically has been successful, but it's something that we have to review,” he says. “It has to be viable and there has to be a business plan. How we go to market in the future is going to be the 64 million dollar question.”

Elliott is keenly aware that any change in approach must work for his dealers as well as the importer.

“There has to be a positive business plan for MAN, but for me, more importantly, there has to be a positive business plan for the dealers,” he says. “There's no point reloading the cost of the salesman, the cost of stock and cost of buybacks on a group of people who maybe in the last few years haven't been as profitable as they would have liked.”

One issue fleet operators often raise when it comes to buying trucks from some OEMs is confusion about who are they are dealing with – the importer or the dealer – especially if there is a problem with the vehicles. But Elliott believes there is no such lack of clarity with MAN.

“I think operators believe that when they're buying a truck they're buying it from MAN. If they've got relationships in terms of service they tend to know where to go. I think in the future, customers like intercontinental and national key accounts, and rental companies, because of their scale, will be better served by us.

“For me, the smaller operators who have a relationship with their dealer probably would be better served by local retail salesman as opposed to necessarily having to be lost within the bigger world of MAN.”

Dealers

The quality of a local dealer will often be a key deciding factor when buying a truck, and ensuring a consistent standard of service across the UK can be difficult for an OEM to manage.

“I think you're always going to have the good, the bad and the ugly,” Elliott admits. “Given our standards and our commitment to the way we pay bonuses to dealers, there's no reason why our standards shouldn't be consistent across the network.

“That having been said, it's an area that we've got to focus on to get ourselves leading the pack in terms of customer care. I believe there's a number of levers that we need to pull and that's one of them. I'm not saying that we're not good at it today. I'm just saying I think that gives us an opportunity to start to run a bit faster and lead the pack. Customer care is key within the strategies we are developing right now.”

While MAN is 100% direct sales, a quarter of its network of 70 dealers are also owned by the OEM. In contrast, all but a handful of VW Commercials’ 100 van centres are independent franchises. Which model does Elliot prefer?

“That's a very good question,” he says. “I think that manufacturers should stick with what they're good at, which is wholesaling and distributing, and let the experts in retail look after the interaction with the customer. Having said that, that's in the car and light commercial vehicle world. Trucks are a little bit different. Again, we're reviewing how we go to market. We need a strategic view in terms of what our network looks like. Our dealers are generally profitable and you don't fix something that isn't broken.

“But over the years the MAN branches that are wholly-owned by us actually are amongst the best in the MAN network. Whilst we're always reviewing it and it's one of the areas that I've got to look at, right now I'm not seeing that there's too much broken within our own network.

“We don't want any more right now. We haven't got any strategy to go out and acquire any more dealers in key locations but neither have we got any plans right at this moment in time to move any off.”

Market share

Elliott expects to end 2014 with a 10.5% share of the UK market, down slightly on 2013’s 11.2%.

“Are we happy with that? No,” he says. “Are we going to buy a bigger market share? No. For obvious reasons including protecting residual values and being responsible for customers' investments.

“We need to up the pace little bit now with our Euro-6s, which we can do. Our share of the Euro-6 market needs to be better, and 2015 will allow us to do that with the offers we've got from MAN Finance, and the price strategies that we've got. I'm very confident.”

Elliott has agreed market share targets with the factory in Munich rather than a sales volume or revenue target.

“The only thing we argue about then is the size of the forecast future market,” he says. “It's difficult to forecast what's going to happen in a month, let alone what's going to happen five years out. For example for 2015, we have forecast the market, we have forecast a market share and we have a volume plan that we now try to break into smaller pieces so we know roughly what we're going to do each month.

“I think the market will be around 35,000 in 2015. There will be an increase because there's clearly some pent up demand. Our current order take is stronger than it's been any time during the year.

“One of the reasons is we've now got mobilised sales people. They know what direction we're going in. We believe we will achieve our target as well. But I'm not telling you what it is.”

Finance

MAN Finance is also helping the OEM shift some of its used vehicle stock without damaging resale values.

“We've got a phenomenal rate through MAN Finance to transfer some of our TopUsed vehicles onto MAN Finance's balance sheet, but they're rented out to a third party,” says Elliott. “The vehicles are out being used, they're out using parts, but they're not dumped into the market, which for me is critical. We could sell all of our TopUsed trucks tomorrow, but what would that do for the long-term health of the business?

“We're looking at moving them into MAN Finance, they then move them out into a contract, a used contract hire, a used rental, whatever, and that's keeping them under control. We'll get them back, but when we get them back it'll be a year down the line and by then most TopUsed stock will have gone.”

Interestingly, there is a north-south split in the form of ownership of new vehicles.

“In the north about 25% are on hire purchase and 5% go on to rental,” says Elliott. “In the south, there is a slightly higher percentage on contract hire and slightly less on hire purchase.”

The demise of operator maintenance due to the arrival of Euro-6 may have been greatly exaggerated, but there is a trend towards OEM R&M packages, and 80% of new MAN trucks are now sold with some form of R&M contract.

Rental

MAN has a substantial truck rental operation, which helped it smooth the transition from Euro-5 to Euro-6, and provides a revenue stream from used trucks while they are awaiting sale. But Elliott doesn’t want to see MAN become a rental company that also sells trucks.

“I think we've got to manage our rentals much more carefully than we have historically,” he says. “We need to set a volume and stick to it. There are opportunities for us I think to look at our own rental portfolio and talk to people more professionally than we have done in the past.”

The term ‘rental’ is now much more vague than in the past, and can be used to describe hire periods of anything from one day to five year. This flexibility often appeals to hauliers who may only have short term contracts and do not want to commit to contract hire or purchase.

“More customers and especially the smaller operators are looking at their cash flow,” says Elliott. “The flexibility of having a rental opportunity for six months or a year if they get a contract is better than maybe taking a contract hire out for two or three years. There are certain operators who are operating on a shorter term basis who would go to a rental company and there's no reasons why in the future we couldn't develop a product to do the same.

“I think we need to mix our colours if I'm honest. As an example from the car world, having a whole raft of silver Polos is more difficult to sell than having red, yellow, white and blue ones. I'd like to see a bit more of a mix in terms of our offering on rental so we're not getting the same vehicles back.”

Customer focus

Elliott is adamant that the company will get closer to its customers in 2015. “We've forgotten how to communicate with our existing customer base and that's something that we're going to focus on quite a lot in 2015,” he says. “We won’t be going to the CV Show but will include visits to the factory to show customers our state of the art production facilities.

“We just needed to take a long, hard look and work out how could we engage with our customers better and more cost effectively. I think that anybody who's not doing that these days is not being responsible to their own business.

“We might go into golf, we might go into other hospitality type events. Things where we can get closer to our customers and rebuild the reputation and really just get to know them, get to know what they require and best understand how we can help them in their world today.”

Such is Elliott’s confidence in MAN’s Euro-6 range he wants to get more potential customers behind the wheel to try one for themselves.

“One of the first questions I asked was ‘how many demonstrators do we have’ and it wasn't enough. In fact it was an embarrassingly small number and I couldn't believe it, coming from the car world, where the demonstrator is king,” he says. “The more bums on seats you can get, the more cars you're going to sell.

“I don't think we've done that enough of that with our Euro-6 product. Everybody who drives it thinks it’s magnificent. It does drive different to our competitors, so we will be making a big investment in more demonstration vehicles next year and giving more people the ability to drive our products. It's absolutely critical.”

A bigger demo fleet should certainly help with one of Elliott’s key ambitions, which is to do improve smaller retail truck sales as well as the central big fleet deals.

“We need to do better in retail and we need to do better in supporting our dealers locally,” he says. “It's too easy to go and sell 200 trucks to one particular channel. It's expensive and they may not go to our dealers as often. There are more opportunities to sell the vehicles to local users who will use the workshop, will have an R&M contract, may have telematics and will use our parts. The whole thing is breeding more investment for the future.”

Proud

Elliott is very proud of MAN's Euro-6 range, believing it measures up against the best on offer from its rival German and Swedish rivals.

“I'm very excited about our Euro-6 tractor units,” says Elliott. “For a car guy to get excited about a range of trucks is an interesting twist. Even people who have been the biggest cynics are getting excited about our Euro-6 offer. Now it's about the reliability being proven. We're very confident and we're going to base our residual values on that to prove it.

“Right now, if everything was on an even playing field, we are as good if not better than the competition. We've obviously got history that we need to sort out but historically our market share has been higher. We need to pick that back up now and I am very confident that we are going to do that.”

Compared with some of its competitors, notably Mercedes-Benz, MAN was late in launching its Euro-6 offer, preferring to sell as many Euro-5s as possible before the cut-off date. Although Elliott wasn’t in charge at the time, does he think this was a mistake?

“Possibly, but it’s like everything Volkswagen do,” he says. “They weren't first out with an electric car, but the one they bring out will be the best. I think it's proven that the Euro-6 MAN is the same.

“Yes, we probably could have brought one out a bit quicker, but would it have been tried, tested and ready. We believe what we've brought to the market, even if it's a little bit late, is right up there. We've got a product that people should try and they'll be extremely impressed.”

Appointing someone with no experience in heavy trucks to run MAN was a bold move by VW that many in the industry are watching with interest.

“The car world is very different,” Elliott admits. “My learning curve has been vertical. For me it's working out, we've now got a strategy here.

“We've go at really amazing bunch of committed people here. A lot of people have been here a long time. We just need to slightly change emphasis. We've got to do things differently now than we've done historically but I genuinely believe that we've got the right product, we've got the right commitment in the network, and I genuinely think that the horizon is a much more positive one.”