View from City Road: DAF's plight may help others

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The Independent Online
FAILURE to come up with a financial restructuring plan for DAF, the beleaguered Anglo-Dutch truck maker, may be bad news for the banks but could hold a glimmer of a silver lining for some UK companies.

DAF's demise underlines the point that while a sagging European car market is capturing the headlines the experience of the truck makers is just as bad if not worse.

The British truck market, around 15 per cent of the European total, has been been a nightmare. It fell by more than 30 per cent in both 1990 and 1991 and still did not manage to stabilise last year. This has been the undoing of DAF.

Meanwhile, European markets began to tumble as the unification boom in Germany subsided. Volume could have fallen by 10 per cent overall in 1992 and Nomura estimates that a further 8 per cent drop is likely this year despite a UK recovery.

British component suppliers, such as GKN and Lucas, will be steeling themselves for further reduced orders from customers supplying Continental markets.

Fortunately, exposure to DAF in the UK is pretty small. Industry sources say that component suppliers have not been falling over themselves to process orders given the company's well-publicised problems.

Conceivably, any loss of DAF capacity could introduce stronger rivals for the British market, preferably Volvo or Saab, which outsource components, whereas Mercedes and MAN manufacture in-house.

There is renewed hope, too, for ERF (Holdings), the UK independent, which has been losing money for the past 30 months. Its shares popped up 10p to 205p yesterday, valuing it at pounds 20m.