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Canuck truck plants on the block

PORTLAND, Ore. -- Freightliner LLC will likely release its much-ballyhooed restructuring plan later today and it is...

PORTLAND, Ore. — Freightliner LLC will likely release its much-ballyhooed restructuring plan later today and it is expected to close at least one of its two Canadian truck plants.

As part of a massive overhaul of its North American operations, either Freightliner’s Western Star Trucks operation in Kelowna, B.C., or its Sterling Truck facility in St. Thomas, Ont., will be closed the Globe and Mail is reporting.

At the same time however, John Stark, publisher of the Chicago-based industry newsletter Stark’s News Service, has indicated Western Star will be the division to close its Canadian production and shift operations to Portland, Ore.

The truck giant is also expected to slash its white-collar work force and close at least one U.S. plant. Freightliner officials have refused to comment on any details prior to the release of the complete plan.

Freightliner hopes it can begin the long road back to profitability following the collapse of the North American truck market — a process that began several months ago with the departure of president and chief executive officer Jim Hebe.

The Canadian closure would be the latest blow to an industry that accounts for one in six jobs in this country. A cessation in Kelowna or St. Thomas follows the announcement by GM that it will shut its Ste-Therese, Que., car assembly plant next year. Which came around the same time A.G. Simpson Automotive Inc., Canada’s sixth-largest parts maker, was granted protection from creditors and revealed it would have to close two Canadian parts operations if it can’t find buyers for them.

Western Star employs about 675 people in Kelowna, while Sterling has a work force of about 850 in the southwestern Ontario community of St. Thomas. Both those employment figures are lower than in recent years, however, as both have been hit by several rounds of layoffs and production cuts due to the current downturn.

Freightliner paid $670-million for Western Star and its Orion Bus Industries Ltd. division in 2000.

Last week, unionized workers at Freightliner’s primary plant in Portland, agreed to a pay cut of US$2 per hour, which cast some doubts on the future of the Canadian plants.

Other Freightliner plants in North and South Carolina are newer than the company’s Canadian operations and thus not as likely to be mothballed. Employees at the company’s Canadian operations were told in a memo two weeks ago that salaries and wages will be trimmed by five per cent effective Jan. 6.

“Regrettably, compensation programs must be adjusted in order to reduce costs,” Rainer Schmueckle, president and chief executive officer of Freightliner, writes in the memo.

A key part of Freightliner crisis was created by its policy of guaranteeing buy-backs of used trucks from big fleet customers at fixed prices. When a glut of used trucks flooded the market leading to collapse, new truck sales quickly followed suit.

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