Daimler Trucks North America (DTNA) on Wednesday said it would drop the Sterling Trucks brand to focus on a two-brand strategy and consolidate its manufacturing plants to boost annual earnings by an expected US$900m by 2011. It estimated the restructuring would cost $600m.
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The move would “adjust and strengthen company operations in response to continuing depressed demand across the industry and structural changes in the company’s core markets,” the company said in a statement.
“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 Daimler Trucks head Andreas Renschler.
“We are confident that this forward-looking strategy for DTNA is the right measure to address the challenges in the North American market.”
The Sterling Trucks brand will be discontinued next March while new additions to the Freightliner and Western Star lines will fill market segments previously covered exclusively by Sterling models.
This will result in the end of truck manufacture at the St Thomas, Ontario, plant, also next March, coinciding with the end of an existing agreement with the Canadian Auto Workers members employed there.
The plant currently makes Sterling’s medium and heavy-duty trucks.
DTNA will also close its Portland, Oregon, truck plant in June 2010 when current labour contracts expire. Western Star commercial production will be shifted to the company’s Santiago, Mexico plant, while production of Freightliner military vehicles will be moved to one of the company’s facilities in the Carolinas by mid-year 2010.
The start of production at DTNA’s new Saltillo, Mexico plant will occur as planned in February 2009. This factory will produce Freightliner’s new flagship Cascadia model.
DTNA said expects annual earnings improvements of $900m by 2011. EBIT effects total $600m: about $350m against the fourth quarter of 2008 (including about $300m primarily for employee and dealer separation), $150m in 2009 plus expenses of $100m in 2010 and 2011.
An estimated 2,300 workers in the St Thomas and Portland plants will be affected by mid-2010, including 720 workers at St Thomas plant to be laid off next month, as previously announced in July.
The company also plans to reduce its salaried workforce by approximately 1,200 positions, with over half directly related to Sterling. A voluntary separation programme will be offered, among other measures.
