Daimler Trucks North America plans decisive response to changed economic environment
Focus on two brand strategy: discontinuation of Sterling Trucks brand
Consolidation of manufacturing plant network
Expected annual earnings improvements of $900 million by 2011
Estimated program costs of $600 million
Stuttgart/Portland – Oct. 14, 2008 - Daimler Trucks North America (DTNA) today announced a comprehensive plan to adjust and strengthen company operations in response to continuing depressed demand across the industry and structural changes in the company’s core markets.
“It is a principle of our ‘Global Excellence’ strategy to strive for benchmark profitability and to address structural market changes in a timely and consequent way,” said Andreas Renschler, Member of the Board of Management of the Daimler AG, responsible for Daimler Trucks. “We are confident that this forward-looking strategy for DTNA is the right measure to address the challenges in the North American market.”
“Plans based on an expectation of brief, sharp market events driven by regulatory change, followed by periods of reasonable growth, are out-of-step with the emerging realities of the latter part of this decade,” said Chris Patterson, President and CEO of Daimler Trucks North America. “We’ve examined every part of our organization in light of the changed economic environment.”
The measures to be implemented address three key areas of DTNA’s operations:
Focus on a two brand strategy: discontinuation of the Sterling Trucks product line
The Sterling Trucks brand will be discontinued effective in March 2009. Sterling models have substantial overlap with offerings in the Freightliner Trucks product line. Launched in 1998, Sterling has only achieved one-fourth of the Freightliner nameplate’s market penetration despite ongoing improvement initiatives and product launches.
Additions to the Freightliner and Western Star product ranges will be made to address market segments that have been served exclusively by Sterling offerings in the DTNA stable.
DTNA expects that the Sterling dealer network will continue to perform warranty repairs and maintenance services, supply replacement parts and provide technical support for Sterling Truck owners. Dealers will continue to accept orders until January 15, 2009. New truck sales will continue until present dealer stocks are depleted.
By concentrating the company’s considerable technical and marketing resources on a more focused model line-up, DTNA expects to drive an even more attractive program of innovation in safety, environmental impact and user productivity that will further strengthen the leadership position of Daimler Trucks in the North American commercial vehicle market.
Consolidation of manufacturing plant network and alignment of network capacity with market demand
As a result of the decision to discontinue the Sterling brand, the St. Thomas, Ontario, plant will cease truck manufacturing operations in March 2009, concurrent with the expiration of the existing agreement with the Canadian Auto Workers members employed there. The plant manufactures Sterling medium- and heavy-duty trucks.
DTNA will also close the Portland, Oregon, truck manufacturing plant in June 2010, when current labor contracts expire. Western Star commercial production will be assigned to the company’s Santiago, Mexico plant, while production of Freightliner-branded military vehicles will take place at one of the company’s manufacturing facilities in the Carolinas by mid-year 2010. A migrating supplier base and high logistics costs have had a major impact on the cost of production in this location.
The end of production at the 39 year-old Portland manufacturing plant will not affect the location or operation of the company’s headquarters in the same city. The company recently completed the relocation of sales, marketing and customer support functions to Fort Mill, South Carolina, leaving 2,200 employees engaged in administration, product development, procurement and information technology in the headquarters building on Portland’s Swan Island and neighboring satellite offices.
Start of production at DTNA’s new Saltillo, Mexico manufacturing plant will occur as planned in February 2009. The plant will produce Freightliner’s new flagship Cascadia model.
Additionally, due to the impact of recent increases in the cost of raw materials and the limited ability to pass those on to North American customers, a significant focus will be placed on identifying and expediting material optimization efforts in all DTNA manufacturing operations.
Expected annual earnings improvements of $900 million by 2011, with estimated program costs of $600 million
As a result of the measures cited above, DTNA expects to achieve annual earnings improvements of $900 million by 2011. The EBIT effects amount to $600 million in total: approximately $350 million against the fourth quarter of 2008 (including approximately $300 million, which are primarily related to employee and dealer separation), $150 million in 2009 as well as expenses of $100 million in 2010 and 2011 in total.
An estimated 2,300 workers in the St. Thomas and Portland plants will be affected by mid-2010, on timelines related to the plant closures noted above. This figure includes 720 workers at the St. Thomas plant to be laid off in November 2008 as already announced in July.
The company also plans to reduce its salaried workforce by approximately 1,200 positions, with over half directly related to the Sterling brand. A voluntary separation program will be available, as well as other measures to offer flexibility and choice to affected employees.
“We are very mindful of the effects these decisions will have on the lives of many of our employees and on our Sterling dealers’ businesses,” stated Patterson. “We are committed to taking measures to ease the transition for all those affected and to emphasize the support offered to those owning and operating Sterling Trucks in the wake of this announcement.”
About Daimler Trucks North America LLC
Daimler Trucks North America LLC, headquartered in Portland, Oregon, is the leading medium- and heavy-duty truck manufacturer in North America. Daimler Trucks North America produces and markets Class 3-8 vehicles and is a Daimler company, the world's leading commercial vehicle manufacturer.
This document contains forward-looking statements that reflect our current views about future events. The words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are used to identify forward-looking statements. These statements are subject to many risks and uncertainties, including an economic downturn or slow economic growth in important economic regions, especially in Europe or North America; the effects of the credit crisis which could result in a weaker demand for our products particularly in the U.S. but as well in the European market; changes in currency exchange rates and interest rates; the introduction of competing products and the possible lack of acceptance of our products or services; price increases in fuel, raw materials, and precious metals; disruption of production due to shortages of materials, labor strikes or supplier insolvencies; a decline in resale prices of used vehicles; the business outlook for Daimler Trucks, which may be affected if the U.S. and Japanese commercial vehicle markets experience a sustained weakness in demand for a longer period than expected; the effective implementation of cost reduction and efficiency optimization programs; the business outlook of Chrysler, in which we hold an equity interest, including its ability to successfully implement its restructuring plans; the business outlook of EADS, in which we hold an equity interest, including the financial effects of delays in and potentially lower volumes of future aircraft deliveries; changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and safety, the resolution of pending governmental investigations and the outcome of pending or threatened future legal proceedings; and other risks and uncertainties, some of which we describe under the heading “Risk Report” in Daimler’s most recent Annual Report and under the headings “Risk Factors” and “Legal Proceedings” in Daimler’s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. If any of these risks and uncertainties materialize, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our actual results may be materially different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made.