Falling firmly into the category of things that we did not see coming is the news of the mooted combining of the Daimler Trucks-controlled (it holds some 89% of the stock) Mitsubishi Fuso Truck and Bus Corporation (MFTBC) with Hino Motors, the truck OEM controlled by Toyota Motors.
This idea—at present it exists merely in the form of a legally non-binding MoU—would see the businesses of MFTBC and Hino bundled together under a holding company, the shares of which would then be listed in Tokyo. Daimler Truck and Toyota would hold an equal percentage of the new company along with other shareholders but these details, along with the scope of the business are yet to be finalised. The deal is predicated upon a number of things—regulatory approval and valuation agreement come to mind immediately but not exclusively—and the timeframe for it to close is at present put at 4Q 2024.
There’s some immediate financial sense to this. Daimler Truck Group (DTG) aims to improve EBIT from the 2019 low of 5.8% to 10% by 2025 and so costs clearly need to be addressed. The scale and synergy arguments that are the basis for this deal will go some way to achieve this. Its most recent results (1Q 2023) report MTFBC gross margin at 18.7%—pretty much in line with the DTNA and Mercedes-Benz segments but an EBIT margin severely lagging at 4.6% (compared with 11.6% and 8.5% respectively). Scaling and cost synergies should—nothing is certain here—go some way to addressing this shortfall.
For Toyota the more immediate benefit is the containment of a significant liability. Hino has already put its hands up to long-term and systematic data falsification pertaining to engine emissions. While an external investigating committee failed to find “sufficient evidence to support a finding of direct involvement by management” the reality here is one of an organisation that now lacks credibility. Toyota President Akio Toyoda opined thus: “The misconduct committed by Hino is a betrayal of the trust of stakeholders including customers and is extremely regrettable.”
Hino—which has never seemed to fit entirely comfortably within the Toyota family—is now clearly marked for exile
By the usually measured standards of Japanese corporate edict this is a fairly brutal condemnation and Hino—which has never seemed to fit entirely comfortably within the Toyota family—is now clearly marked for exile. No doubt the details of quite how DTG will be insulated from any future action taken against Hino will be of significant interest to all concerned here but it should also be remembered that current DTG senior management have some experience of dealing with Japanese automaker malfeasance; its acquisition of the MTFBC stake in 2004 was followed almost immediately by a scandal involving defective Fuso truck hubs and fatal wheel loss.
There’s more to come here but an initial evaluation has to be one that sees this as both an opportunistic and strategically coherent move on the part of DTG. Decarbonisation is going to come but it will only arrive at a significant cost and so this pursuit of scale makes a lot of sense. Consolidation candidates amongst the legacy OEMs are now few and far between and the fact that Hino’s dirty linen is—we would assume—now entirely out in the open gives the Stuttgart-based OEM the upper hand when it comes to future negotiation.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Oliver Dixon is Senior Analyst—M/HD Truck, Construction and Agricultural Equipment, at Guidehouse
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