PORTLAND, Ore. — Freightliner LLC, the North American truck subsidiary of DaimlerChrysler’s Commercial Vehicles Division, has decided to axe two Canuck plants as part of its restructuring efforts.
Freightliner will shift production from the 39-year-old Thomas Built Buses plant in Woodstock to High Point, N.C., and from the 34-year-old Western Star plant in Kelowna to Portland. The company said it expects low demand for heavy trucks until 2004, which could spell lower prices for fleets and O/Os looking to buy new in that time. The company also plans to close a Portland-based parts plant.
The announcement came close on the heels of General Motors’ decision to shut its money-losing assembly plant in Boisbriand, Que., and A.G. Simpson’s move to operate under court protection from creditors so it can reorganize.
In Kelowna, output at the Western Star plant has plunged 60 per cent to 1,383 in the first seven months of this year. It is currently making only 45 trucks three days a week, down from a peak of 150. Hundreds of workers have already been pink-slipped.
“The plant has a lot of senior people who have an average of 12 to 15 years’ service,” Stan Pickthall, an official for the International Association of Machinists and Aerospace Workers, tells media. “I have no idea where these people will go.”
The plan is targeted to deliver annual savings at an operating level of $850 million by 2004. The measures should allow Freightliner, which will report a loss in 2001, to return to breakeven toward the end of 2002. A small operating profit is anticipated in 2003 and Freightliner expects sustainable returns above the cost of capital in 2004 and thereafter.
“This multifaceted restructuring program, shows that we have acted quickly and decisively, to bring Freightliner back on the road to recovery and profitability,” says Dr. Eckhard Cordes, a member of the board of management responsible for the Commercial Vehicle Division.
“Despite the deteriorating economic climate, the Commercial Vehicle Division still foresees achieving a slightly positive result in 2001.”
The targeted savings programme comprises four main elements: material cost savings, production cost savings, overhead reductions and improvements to the existing business model.
Freightliner is confident its turnaround plan will work explaining, it has been based on the conservative assumptions. It assumes a continued slow market demand of around 175,000 Class 8 trucks and 160,000 class 6/7 trucks in the NAFTA area throughout the period 2002 to 2004.
Additionally, Freightliner has been reducing new truck inventory levels and expects that this inventory will have returned to normal levels by the end of 2001.
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