Daimler to End Sterling Brand, Close Plants, Cut 3,500 Jobs
By Frederick Kiel, Staff Reporter
This story appears in the Oct. 20 print edition of Transport Topics.
Daimler AG, citing a “fundamental change” in the heavy-duty vehicle market, will drop its Sterling Trucks brand and cut North American production capacity 20% by closing two factories, including its one-time flagship plant in Portland, Ore., the company’s top executive said last week.
Andreas Renschler, chief of Daimler’s global truck group, said Oct. 14 that the recent economic turmoil convinced the company it needed to make adjustments to preserve its status as the world’s largest maker of commercial vehicles.
The closings will eliminate 3,500 employees.
“We expected a pre-buy in 2008 but the opposite occurred,” Renschler said in a teleconference with reporters from Stuttgart, Germany. “Incoming orders are on a downward trend. We are facing a fundamental change in market. The bull market will not return.”
Daimler Trucks North America, the German company’s subsidiary, makes Freightliner, Western Star and Sterling trucks.
Renschler said the global economy has become negative, hurting trucking. Up to now, falling U.S. sales had been balanced by strong business in other markets, including Eastern Europe, India and Latin America.
“The situation has turned from an American real-estate accident into a global financial pileup,” he said. “We expect a weak 2009, with 80% of our customers saying they would make no pre-buy in 2009 because of no freight demand to justify it.”
Previously, most truck makers had expected U.S. fleets to buy extra trucks before new federal emissions regulations take effect in 2010.
Renschler said that Daimler has decided to concentrate on a “two-brand strategy” to promote its remaining Freightliner and Western Star brands.
A Daimler statement said Sterling would be discontinued in March 2009. The company created the Sterling brand when it bought the heavy-duty truck division of Ford Motor Co. in 1997 and renamed it.
It said Sterling models “have substantial overlap” with Freightliner products and that “Sterling has only achieved one-fourth of the Freightliner nameplate’s market penetration.”
Sterling dealers said that Daimler had turned the Sterling brand mainly into a vocational supplier, although it recently had unveiled a new heavy-duty sleeper model for 2009.
Daimler said that its St. Thomas, Ontario, plant, which manufactures medium- and heavy-duty Sterlings, would cease operations in March, when Sterling’s contract with Canadian Auto Workers members employed there ends.
DTNA also said it will close the Portland manufacturing plant in June 2010, when labor contracts there expire. Portland has been Freightliner’s home since 1947 and the company’s Swan Island facility was its largest plant, turning out Freightliners and later, Western Stars.
Daimler will move production of Western Stars from Portland to Santiago, Mexico, and shift Freightliner-brand military vehicles to a factory in the Carolinas by mid-2010, the company said.
Closing the Ontario and Portland plants will cut 2,300 manufacturing jobs and 1,200 administrative positions, Daimler said.
The company said it would keep its administrative headquarters in Portland, with 2,200 employees engaged in administration, product development, procurement and information technology. It recently moved sales, marketing and customer support to Fort Mill, S.C.
DTNA will open its new Saltillo, Mexico, plant in February. The plant will produce Freightliner’s Cascadia model, which is also assembled in Cleveland, N.C.
Chris Patterson, DTNA’s chief executive officer, joined the teleconference from Germany.
Roger Nielsen, DTNA’s chief operating officer, told TT that Freightliner Class 8s will be reconfigured to meet three Sterling applications not currently covered: a car hauler; a model that runs on liquefied natural gas; and a set-forward axle model that allows expansion of the chassis.
Patterson said there was sufficient overlap with Freightliner’s medium-duty trucks that no new models would be needed to make up for the loss of Sterling.
Western Star makes only Class 8 trucks, many of them for severe service in the mining and construction industries.
“Western Star does not have the overlap that we’re seeing between Sterling and Freightliner,” Nielsen told TT, explaining why the larger-selling Sterling rather than Western Star was dropped.
Western Star “is a counter-cyclical product that sells well in times when over-the-road trucks don’t,” Nielsen said. “That means we don’t have to live and die on over-the-road only.”
He said that moving Western Star’s production to Mexico would cut costs, and therefore prices. “We expect sales to increase significantly,” Nielsen said.
Renschler said that when the reorganization was complete, Daimler would have a capacity of 139,000 medium- and heavy-duty trucks a year in North America, down from 177,000 units.
All of Daimler brands — along with all other Class 8 truck makers except International — are down in sales for the second straight year, according to data from WardsAuto.com.
Freightliner was the U.S. Class 8 market-share leader through September, with 24,966 trucks sold, down 18.1% from 2007.
Through September, Sterling sales were 5,857 heavy-duty models and 3,196 medium-duty trucks in Classes 3 through 7.
Daimler said the reorganization would cost $600 million, including a $350 million charge in the fourth quarter of this fiscal year, of which $300 million will be for employee and dealer compensation.
By 2011, the reorganization will result in an improvement of earnings of $900 million a year, Renschler said.
