The History of Scania

Volkswagen Aktiengesellschaft paved the way for the strategic restructuring and expansion of its truck business in April 2000 when it acquired 18.7 percent of the shares and 34 percent of the voting rights in Scania AB. The two companies were linked by a long-standing partnership. Scania had been Volkswagen’s main importer in Sweden since 1948. And that was not the only consideration favouring a tie-up with the internationally renowned brand. Scania was one of the top truck manufacturers in Europe, and was regarded as the most profitable brand in the industry. Innovative, and a leader in the development of economical, low-emission engines, the company’s product range included heavy trucks of 16 tonnes capacity and more, buses and coaches, as well as ship engines and industrial motors.

In 2007 Volkswagen increased its share of the voting rights to 37.4 percent, becoming the second major shareholder in Scania alongside the Wallenberg family of Swedish industrialists. An agreement with the Wallenbergs to acquire their Scania shares – held through Investor AB and various charitable foundations – was reached in March 2008. With the approval of the European Commission, in July 2008 Volkswagen Aktiengesellschaft increased its share of the voting rights to around 69 percent and integrated Scania as the ninth independently operating brand within the Volkswagen Group.

VABIS-WERK IN SÖDERTÄLJE — VABIS PLANT IN SÖDERTÄLJE

Scania’s creation had in fact originally also stemmed from the merger of two businesses, both of whom were among the pioneers of Swedish truck-making. The older of the two, Vagnfabriks-Aktiebolaget i Södertelge (Vabis), founded on December 11, 1891 in Södertälje, initially built wagons for the expanding rail network. In 1897, the “Vagnfabrik” (wagon factory) began making vehicles and engines, and presented its first truck at the Stockholm Automobile Exhibition of 1903. Declining demand and falling prices in the railway wagon business on the one hand and the capital invested to build a new factory on the other meant that the business made a loss for a number of years. More commercial success was enjoyed by the other predecessor business, the existing Malmö-based subsidiary of Maskinfabriksaktiebolaget Scania, which in 1902/03 launched an initial series of five vehicles onto the market under the model name Scania Type A. Instead of making costly new components, Scania’s vehicle production used components from other manufacturers, including from Germany, and its business was prospering. While in 1910 Scania was sounding out the possibilities for expanding its production, the Vabis parent company in Södertälje had decided to dispose of its capitalintensive automotive division.

The groundwork for financial consolidation was laid in December 1921 with the founding of a new company which adopted the name and assets of the old one. Two key strategic decisions changed the corporate profile: By 1927, vehicle production had been consolidated in Södertälje, and in 1929 car production was discontinued. The main driver of the upturn through the 1920s was the advancement of passenger and freight transport. A bulk order from the Stockholm transport corporation initiated the bus era at Scania-Vabis, and from 1923 to 1929 the company built and sold some 350 buses. Bus production, together with engine-building, also dominated the company’s development over the next decade, and in 1932 more buses than trucks were produced for the first time. The key factor in this trend was the “Bulldog bus” launched the previous year, which had its engine and driver’s cockpit integrated into the passenger compartment, and was to become the dominant bus model in Sweden.

Growth in the truck business was less strong. Scania-Vabis was unable to compete on the market for lighter standard trucks, as it did not have the machinery and technical expertise to build a mass production resource. So the company concentrated on making heavy trucks between 1.5 and 4 tonnes, and in 1925 achieved a breakthrough in the segment with a “high-speed” truck capable of reaching 40 kilometres per hour – double the top speed of the existing model range. Scania-Vabis also made a name for itself as a maker of special-purpose vehicles with hydraulic tippers and automatic sand spreaders. The company sold 179 trucks in 1931.

MOTORENMONTAGE IN SÖDERTÄLJE — ENGINE ASSEMBLY IN SÖDERTÄLJE

Even at that time, the successes in truck-building were linked closely to the innovations being made in engine development, which led to the opening of a new business field. A first six-cylinder petrol engine in 1923 established a new product line in industrial and marine engines. A few years later, Scania-Vabis launched an engine range which could run on different fuels and created the basis for the later modular construction method. Scania-Vabis made its biggest leap in engine development with the so-called Hesselmann engine. Built under licence starting in 1932, it became the starting point for the design of an in-house diesel engine. The compact six-cylinder pre-chamber diesel engine with a 7.7 litre capacity and developing 120 horsepower, capable of running on petrol, raw oil or diesel oil, was fitted in the company’s buses and trucks from 1936 onwards, and was also sold to other Swedish and international manufacturers. Most Scania-Vabis vehicles were still one-offs. Only as production began to rise during the mid1930s was extensive rationalisation instigated, entailing the introduction of new tools and working methods. In its engine business, from 1939/40 the company progressed to building standardised units with largely identical components. At the same time, it expanded production capacities by building two factories. The Second World War focused operations on the production of military vehicles. By 1943, they were taking up all the company’s capacity, and by 1945 the workforce had increased to around 1,000.

MOTORENMONTAGE IM WERK ZWOLLE — ENGINE ASSEMBLY AT THE ZWOLLE PLANT

The business was boosted not only by the technical advances but also by the operational innovations introduced in 1949: The “conference method” involved all designers in product development decision-making, the “component philosophy” promoted the standardisation of products, while group working on the assembly lines improved productivity. It was on this basis that Scania-Vabis grew into an export-oriented business. It opened up 17 new export markets during the 1950s alone. International business became the driver of growth. By 1959, vehicle production had increased to 4,881, more than half of which were exported. The most profit on the company’s home market during this period, however, came from sales of the Volkswagen saloon. They acted as a catalyst in growing the dealer network, and generated much of the financial resources for the strong expansion of the business during the 1960s. The subsidiary in Brazil founded in 1957 built Scania-Vabis’s first production facility outside of Sweden in 1962. In 1964, assembly began at the new plant at Zwolle in the Netherlands. The factory at Meppel – likewise in the Netherlands – and the Swedish plants at Oskarshamn and Katrineholm were added by way of acquisition in 1966/67. Scania-Vabis also created the foundations for further growth by expanding the mother plant in Södertälje and constructing new factories in Sweden.

V8-TURBODIESEL-MOTOR — V8 TURBO-DIESEL ENGINE

KABINENFERTIGUNG IN OSKARSHAMN — CAB PRODUCTION IN OSKARSHAMN

The company’s turbo engines provided it with its key competitive edge. “More power, fewer revs” was the designers’ watchword in attempts to achieve higher efficiency while at the same time cutting fuel consumption and emissions and reducing running noise. Competition with Volvo boosted the pace of research and development progress, which culminated in the 350 horsepower V8 turbo-diesel launched in 1969 – the most powerful truck engine on the European market at the time. Another key area of Scania-Vabis’s development focus was on constructional design improvements, and in 1968 the company launched a new generation of front-wheel drive trucks
The tipping cab was more spacious and easier to get into, and the truck’s handling was improved.

Having merged with Saab to form Saab-Scania AB in 1969, from 1972 until the two companies parted ways in 1995 Scania was run as an independent business unit of the Group’s Automotive division. The first decade under the new corporate umbrella was marked by international growth and the development of a modular product range. Factory capacities in the Netherlands and Brazil were expanded. In early 1976, Scania opened a facility in Tucumán in northern Argentina to make gearboxes, among other products. Brazil was Scania’s biggest selling market in 1977. From 1979 to 1981, the brand sold as many as 4,000 vehicles a year in Iraq. By 1979, exports accounted for almost 90 percent of total sales.

Scania launched its new truck range in 1980. Not just the engines, gearboxes and axles, but also the frames and cabs, had been developed as a modular system. For the trucks weighing between 16 and 36 tonnes there were three engines, three classes of chassis and four cab models, enabling them to be tailored exactly to customers’ transport needs. The attractive design came from Giorgio Giugiaro, and was complemented by outstanding ergonomic qualities which set ground-breaking new standards in terms of safety and comfort for the driver. Scania’s customisable range of trucks was complemented by special maintenance programmes, developed jointly with its f leet customers, which helped avoid off-the-road times due to breakdowns.

The modular concept speeded up new developments and reduced manufacturing costs. Additionally, Scania’s “Series 2” provided just the right response to the transport industry’s rising demands in terms of the vehicles’ operational reliability and economy. More cost savings for customers were brought by the turbo-compound engine launched in 1991, which utilised the energy in the exhaust gases by way of a “power-recovery turbine”. This boosted power while cutting fuel consumption, which was reduced even further by the aerodynamic Streamline cabs. With its new generation of trucks, Scania increased vehicle sales between 1980 and 1989 from 26,566 to 35,602 units, including 3,884 buses and coaches.

The modular component kit system is still today the foundation stone of the company’s success. Scania established the second key precondition for increasing profitability and growth during the 1990s by building up a global production system of specialised and logistically interlinked plants. Scania focused its European component production primarily in Sweden: Cab production was relocated from Meppel in the Netherlands to Oskarshamn, while engine and axle production – including the research and development function – was moved from Zwolle to Södertälje and Falun. In return, Dutch subsidiary Scania Nederland B.V. expanded the capacity of the Zwolle plant. It has been the central location for final assembly of trucks since 1989. As labour-intensive body assembly was hampering economies of scale, in 1991/92 a new assembly plant was built at Angers in France. Scania subsequently restructured its production facilities in Latin America based on the same model. The restructuring provided major growth momentum. Sales increased during the 1990s from around 35,000 vehicles to 50,000. Having parted from Saab in 1995 and been renamed Scania AB, the company was listed on the Stockholm Stock Market in 1996.

WERK IN SÖDERTÄLJE — PLANT IN SÖDERTÄLJE

The new Volkswagen Group brand is proving to be a good investment not merely by virtue of its innovative strength. Scania’s approximately 73,800 truck and bus sales in 2008 were almost on a par with the previous year’s record level. Demand collapsed in the wake of the financial crisis in 2009. Sales declined to 43,443 units, as a result of which production and costs had to be adjusted by reductions in working hours, employee training, and postponement of capital investments. International markets have been f luctuating ever since. In 2011, sales grew by 84.4 percent to 80,108 units, but then fell back again by 16 percent to 67,000 in 2012. Deliveries of 82,208 units in 2014 were slightly down against the previous year's level. The company employed 35,925 people.

Scania is recognised as being highly profitable, and in 2014 generated sales revenues of 10.3 billion euro and an operating profit of 955 million euro. Its commercial success is founded on innovative products such as the V8 truck series launched in 2010 which, with power output of up to 730 hp and maximum torque of 3,500 Nm, is the most powerful in the world. The Euro 6-compliant generation of engines launched in 2011 combines technical solutions for cutting emissions with supreme fuel efficiency. With the integration of Scania, the Volkswagen Group has refocused its heavy commercial vehicles business. The jewel in the crown of Swedish industry can look forward to a brilliant future.