FRANKFURT - Investors love Mannesmann AG's decision to separate its automotive and other industrial operations from its highly-rated telecoms business.
The share price closed at euro 153 on October 7, up from euro 142 before the strategy was announced on September 22. Mannesmann's price rose by euro 10.25 on the day of the announcement.
Analysts say Robert Bosch is also considering divesting its mobile phone business, and pressure is on Siemens to float off its automotive division. That despite Siemens Automotive Chief Executive Franz Wressnigg's spirited argument at the Frankfurt auto show that the group is committed to the automotive sector.
The question for Mannesmann now is whether the automotive and industrial group makes sense as a standalone business, or whether separating from telecoms operations is a prelude to further dismemberment. The two automotive businesses, Sachs and VDO, have no obvious synergies with Mannesmann's steel tube or machinery businesses, or indeed with each other.
Mannesmann Sachs saw revenue fall in the first half of the year in a buoyant market as it faced static volumes and continuing price pressures in its traditional core businesses, clutches and shock absorbers.
The unexpected departure of Sachs Chief Executive Harald Klotzbach just before the Frankfurt auto show, unconvincingly attributed to personal reasons by Mannes-mann, may be related to the pressures on him to improve performance. That may be best achieved by linking up with other companies in Sachs' mature business areas for further rationalization and cost cutting.
Mannesmann VDO, in contrast, enjoyed strong growth in the first half of the year, driven by its competencies in electronics and modules. VDO has built up a leading position in the fast-growing cockpit area. But there are doubts as to whether the group has the critical mass and breadth of expertise in all the relevant systems to lead in this sector long term, despite the acquisition of Philips Car Systems and its entertainment and navigation system businesses last year.
VDO would make a very attractive morsel for a bigger group with ambitions in the cockpit business, such as Valeo, Delphi or Visteon. All these groups have complementary strengths in air conditioning, another critical area for cockpit systems integration.