Sterling Trucks to be closed by Daimler AG

[nadepalma]

SOURCE: Bloomberg News

Daimler to Close Sterling Trucks Unit, Cut 3,500 Jobs
By Chris Reiter and Andreas Cremer

Oct. 14 (Bloomberg) -- Daimler AG, the world's largest maker of heavy vehicles, will close its Sterling Trucks division in North America and cut 3,500 jobs as it reins in production and shifts manufacturing to Mexico.

The reorganization involves the closure of plants in the U.S. and Canada at a cost of $600 million and is aimed at saving $900 million a year by 2011, Daimler said in a statement today. The Stuttgart, Germany-based company will retain the Freightliner and Western Star brands in the region.

Daimler and competitors Volvo AB and Paccar Inc. have seen truck sales dive as growth slows and credit markets seize up. The German company, whose U.S. deliveries fell 30 percent in the first half, will shut Sterling's St. Thomas, Ontario, factory in March and one in Portland, Oregon, in 2010, when labor deals expire. A new Freightliner plant in Mexico will open as planned.

"This is an indication of how bad things are,'' said Michael Tyndall, an analyst at Nomura Securities in London with a "buy'' recommendation on Daimler stock. "It's positive for the long term, but everyone's focused on the short term.''

Daimler rose 2 euros, or 7.6 percent, to 28.20 euros in Frankfurt trading. That pares the stock's decline this year to 58 percent, valuing the company at 27.2 billion euros ($37.1 billion).

Brand Missed Targets

The Sterling brand, a maker of medium-sized models which accounts for 15 percent of Daimler's U.S. truck output, "never met expectations,'' company spokesman Heinz Gottwick said today. The unit was set up in 1998 from truck operations that Daimler bought a year earlier from Ford Motor Co.

With orders remaining on a "downward trend'' and only a "moderate rebound'' foreseen in the U.S. economy in 2009, about 88,000 trucks have been "sidelined'' in North America as companies go bankrupt or are taken over, Chris Patterson, head of the trucks division in the region, said on a conference call.

"We're not happy with the achieved return this year'' at Daimler's North American truck business, Patterson said.

Conversely, with costs at European plants running at lower levels, Daimler is "better prepared'' to cope with a shrinking market there, Andreas Renschler, head of Daimler's global truck operations, said on the call. The company is closing its "highest-cost'' plants as it can't wait for possible government bailouts to maintain profit, and expects the remaining brands to pick up customers from Sterling.

`Streamlining'

"They're streamlining the business, adjusting capacity in line with the market,'' said Arndt Ellinghorst, a London-based analyst at Credit Suisse with an "outperform'' recommendation on Daimler, who added that "there were always doubts'' about what Sterling stood for. "We're going to see more of this.''

The plant closures will cost 2,300 manufacturing jobs, while an additional 1,200 administrative positions will be cut in connection with the reorganization, Daimler said. Costs will amount to $350 million in the fourth quarter, mainly for severance pay and dealer compensation, plus $150 million next year and $100 million spread over 2010 and 2011.

Production of Western Star trucks will be transferred to a plant in Santiago, Mexico. Freightliner is sticking to plans to start making its Cascadia model at a new factory in Saltillo, Mexico, in February and will shift military-vehicle manufacture to plants in North or South Carolina, Daimler said. The North American truck division's headquarters will remain in Portland.

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[nadepalma]

I guess this is the end of what once was Ford's medium and heavy duty truck operations.

However, I wonder if they will soldier on? The article says a new plant is going up in Mexico, but isn't clear (at least to me) on if the lines will be relocated there and just sold under the Freightliner brand?

Also, in light of this news, I guess it isn't any wonder why GM can't seem to sell their own operations off, eh? No one wants to buy them as demand continues to fall unfortunately...

[American_Muscle]

Sterling makes a model of HD pickups w/ just the cab, or a utility bed of some sort. All it is is a rebadged Ram. Suppose GM bought Sterling, would they get Sterlings share of Ram-bodys as well?

[eaton53]

Freightliner's been building in Santiago for a long time.
As for what Sterling stood for, "Rebadged Freightliner" would be accurate. It's nothing the Freightliner and Western Star brands can't cover.

[bone]

In southern Quebec I would say it is the most popular heavy-duty truck and is supported by a strong dealer network which carried on when Ford sold to Daimler.

[PRO_USA1776]

Just another reason for the automotive industry not to be sold out to foreign interests. They have even less loyalty than an American owned company.

[Hudson]

Originally Posted by American_Muscle

Sterling makes a model of HD pickups w/ just the cab, or a utility bed of some sort. All it is is a rebadged Ram. Suppose GM bought Sterling, would they get Sterlings share of Ram-bodys as well?

Actually, Chrysler supplies the Sterling Bullet to Sterling, which is a heavy-duty Ram 4500. I've seen ONE on the road ever...anyone else seen any?

[hotrod1949]

St. Thomas is just getting pummeled by job losses, Stirling, Formet and presstran totalling about 2,000 good paying jobs in a city of 32,000, and all these plants are relatively new. It is sad to see.

[American_Muscle]

nope, never seen one. never knew it existed

[aa2]

Originally Posted by hotrod1949

St. Thomas is just getting pummeled by job losses, Stirling, Formet and presstran totalling about 2,000 good paying jobs in a city of 32,000, and all these plants are relatively new. It is sad to see.

Most people will have to leave that city, unless it has some other industry. Despite what are wise leaders think economies can't function with just restaurants, law firms, accountancy offices and real estate brokers. (and I say that as someone in accountancy).

[kenman923]

Sounds like Mercedes is going to concentrate on passenger cars and crossovers.

[GMCSonoma]

Originally Posted by Hudson

Actually, Chrysler supplies the Sterling Bullet to Sterling, which is a heavy-duty Ram 4500. I've seen ONE on the road ever...anyone else seen any?

I have, and only one...

The township where I live has one for a dump truck/snow plow...

[Joe in T.O.]

It really is a shame but I would still rather see GM medium duty trucks on the road anyways.

[benroethig]

The brand is redundant to Freightliner, but far less successful. I'm surprised it didn't happen sooner

[Hudson]

Originally Posted by benroethig

The brand is redundant to Freightliner, but far less successful. I'm surprised it didn't happen sooner

The thought, at the time, was a good one. Let Freightliner concentrate on bigger, over-the-road trucks while Sterling concentrated on the specialty markets. Sterlings typically didn't have sleeper cabs and were tailored to the local delivery markets. Western Star is just a Class 8, "luxury" truck brand...the big truck you aspire to own...the "Cadillac," if you will.