“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.” -Chris Patterson, president and CEO, Daimler Trucks North America
So I‘m driving back home from Dulles International Airport at 1:30 in the morning, with only Metallica‘s new album “Death Magnetic” for company (and this is about the ONLY time I‘ll ever be able to play the whole thing on the car stereo), still trying to get my head around the sudden demise of Sterling Trucks Corp.
It‘s not like Sterling is a household name here. I mean, technically, it‘s built on the bones of Ford Motor Co.‘s old heavy truck division - the folks that produced the Aeromax Class 8 tractor, more than a few of which are still on the road - that Freightliner purchased back in 1997. Renamed “Sterling Truck Corp.” in 1998, the fledgling addition to Freightliner‘s family struggled for years to establish its own identity (rolling out a medium-duty offering dubbed “Acterra” of all things - a name more appropriate perhaps in Greek mythology than trucking.)
Dealers are supposed to keep accepting orders until January 15, 2009, with new truck sales continuing until dealer stocks are depleted, but we‘ll see how THAT plays out. Yet the company built a lot of trucks over the last decade, rolling out number 250,000 in June this year. Lots of folks liked them, let me tell you.
Yet you could see it coming, though - I mean, Freightliner (now Daimler Trucks North America or DTNA) became in a way the “General Motors” of the trucking business under its old CEO Jim Hebe (now with Navistar), paying big bucks to bring several different brands under its umbrella - Sterling, Western Star, and Thomas Built Buses, just to name a few.
Yet Sterling overlapped with Freightliner‘s core products pretty significantly - Class 8 wise as well as in the medium-duty segment - and never seemed to find the proper gear. It discontinued its SilverStar Class 8 sleeper in 2002, only to roll out a new one this year called the NightShift, aimed at LTL fleets. Of course, now, that entire engineering effort - including funding for the lavish media day spread - got dumped over the side, along with a bunch of other things, such as its new LNG-powered tractor model aimed at port truckers.
Perhaps it was just inevitable - I mean, in this time of pre-buys, falling sales, skyrocketing fuel prices, sparse credit and a host of other economic woes, Daimler needed to right size its product mix and operational footprint in North America - and dumping Sterling (officially set to disappear from the face of trucking March 2009) along with reorganizing its production facilities, may be just the right medicine; albeit a truly bitter one.
“We‘ve examined every part of our organization in light of the changed economic environment,” said Chris Patterson, DTNA‘s president and CEO in a press release. He noted that Sterling has only achieved one-fourth of the Freightliner nameplate‘s market penetration despite ongoing improvement initiatives and product launches.
DTNA is also going to shut down its St. Thomas, factory in Ontario, Canada plant next March (concurrent with the expiration of the existing agreement with the Canadian Auto Workers members employed there.) as that plant manufactures the bulk of Sterling medium- and heavy-duty trucks. That‘s a really sad note for me - I visited that factory several years back and loved its setting amidst the rolling farmland in northern Ontario. A neat place, St. Thomas - yet it won‘t be home to truck building anymore.
The same fate awaits DTNA‘s 39 year-old Portland, Oregon, plant in June 2010 (which produces Western Star products) also when current labor contracts expire. Western Star commercial production will be assigned to DTNA‘s Santiago, Mexico plant, while production of Freightliner-branded military vehicles will take place at one of the company‘s manufacturing facilities in the Carolinas by mid-2010.
That‘s another piece of history gone. My only visit to the traditional “heart” of Freightliner‘s enterprise came in 1993. Delicately placed along the river that cut through downtown Portland, with its corporate headquarters nearby, this place didn‘t look like a traditional truck factory. In the end, that fact aided its demise, as a migrating supplier base and high logistics costs heavily impacted the cost of production in this location, said Patterson.
Of course, there‘s as human cost to all of this - some 2,300 plant jobs and a further cut of 1,200 salaried positions, mostly from Sterling‘s staff. All told it‘ll cost DTNA $600 million to make these changes ... but should reap the company $900 million in savings by 2011.
It wasn‘t supposed to end like this. I still remember talking with Sterling‘s old boss, gravelly-voiced John Merrifield (whom Jim Hebe brought out of retirement to run Sterling and then Western Star as well), about the goals for the still-fledgling division back in 2004 at the Mid America Trucking Show.
“Sterling‘s goal for 2004 is to reach 5% market share for Class 6 & 7 trucks and 7.5% for Class 8 trucks in the U.S. In Canada, our goal is 7.5% and 8.5%, respectively,” he told me back then. “However, we ultimately want to achieve 10% market share for Sterling in both the U.S. and Canada. It‘s not easy but we think we can do it.”
Sadly, it never happened. According to WardsAuto.com, Sterling currently has only 4.5% of the heavy-duty market share and about 3% of the medium-duty market share - a definite drop from more confident days four years ago. As the old saying goes, numbers don‘t lie - and those kinds of numbers indicated it was time for Sterling to go. Farewell, then - but all the same, it‘s still sad to see you go.