Daimler Trucks North America (DTNA) in mid-November announced a comprehensive plan to adjust company operations in response to continuing depressed truck demand. It is dropping the Sterling Trucks brand, eliminating 3,500 jobs, and shutting two North American plants.

The restructuring plan is expected to cost about $600 million and should boost annual earnings by about $900 million by 2011.

The company will stop building Sterling vehicles in March 2009 and will close the St Thomas, Ontario, Canada, plant where those trucks are made. Sterling models have substantial overlap with offerings in the Freightliner Trucks product line, said DTNA officials.

The Sterling dealer network will continue to perform warranty repairs and maintenance services, supply replacement parts, and provide technical support for Sterling Truck owners, officials said. Dealers will continue to accept orders until January 15, 2009, and new truck sales will continue until present dealer stocks are depleted.

Additions to the Freightliner and Western Star product ranges will be made to address market segments that have been served exclusively by Sterling offerings.

Smaller workforce

The Freightliner/Western Star plant in Portland, Oregon, will be closed in June 2010, when current labor contracts expire.

Officials said 2,300 workers at the St Thomas and Portland plants will lose their jobs.

DTNA also will reduce its salaried workforce by approximately 1,200 people, with more than half of those layoffs tied to the Sterling brand.

“Plans based on an expectation of brief, sharp market events driven by regulatory change, followed by periods of reasonable growth, are out-of-step with the emerging realities of the latter part of this decade,” said Chris Patterson, DTNA president and chief executive officer. “We've examined every part of our organization in light of the changed economic environment.”

Andreas Renschler, member of the Board of Management of the Daimler AG responsible for Daimler Trucks, said drastic action was necessary to meet the economic challenges.

Production shifts

When the 39-year-old Portland plant closes in 2010, Western Star commercial production will be moved to the company's new Santiago, Mexico plant, while production of Freightliner-branded military vehicles will be shifted to one of the company's manufacturing facilities in the Carolinas.

A migrating supplier base and high logistics costs have had a major impact on the cost of production at the Portland plant, said DTNA officials.

The closing of the plant will not affect the location or operation of the company's Portland headquarters.

DTNA recently completed the relocation of sales, marketing, and customer support functions to Fort Mill, South Carolina, leaving 2,200 employees engaged in administration, product development, procurement, and information technology in the headquarters building on Portland's Swan Island and neighboring satellite offices.

Production startup at the Saltillo, Mexico, manufacturing plant will occur as planned in February 2009. The plant will produce Freightliner's flagship Class 8 Cascadia model.