DTNA to discontinue Sterling Truck brand

Daimler Trucks North America (DTNA) announced a comprehensive plan to adjust and strengthen company operations in response to continuing depressed demand across the industry and structural changes in the company’s core markets.

Measures to be implemented address these areas of DTNA’s operations:

• Focus on a two-brand strategy: discontinuation of the Sterling Trucks product line

  The Sterling Trucks brand will be discontinued effective in March 2009. Sterling models have substantial overlap with offerings in the Freightliner Trucks product line. Launched in 1998, Sterling has only achieved one-fourth of the Freightliner nameplate’s market penetration despite ongoing improvement initiatives and product launches.

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

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

• Consolidation of manufacturing plant network and alignment of network capacity with market demand

  As a result of the decision to discontinue the Sterling brand, the St. Thomas, Ontario, plant will cease truck manufacturing operations in March 2009, concurrent with the expiration of the existing agreement with the Canadian Auto Workers members employed there. The plant manufactures Sterling medium- and heavy-duty trucks.

  DTNA will also close the Portland OR truck manufacturing plant in June 2010, when current labor contracts expire. Western Star commercial production will be assigned to the company’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-year 2010.

  The end of production at the 39-year-old Portland manufacturing plant will not affect the location or operation of the company’s headquarters in the same city.

  Start of production at DTNA’s new Saltillo, Mexico, manufacturing plant will occur as planned in February 2009. The plant will produce Freightliner’s new Cascadia model.

• Expected annual earnings improvements of $900 million by 2011, with estimated program costs of $600 million

  DTNA expects to achieve annual earnings improvements of $900 million by 2011. The EBIT (earnings before interest and tax) effects amount to $600 million in total: approximately $350 million against the fourth quarter of 2008 (including about $300 million, which are primarily related to employee and dealer separation), $150 million in 2009, as well as expenses of $100 million in 2010 and 2011 in total.

An estimated 2,300 workers in the St. Thomas and Portland plants will be affected by mid-2010, on timelines related to the plant closures noted. This figure includes 720 workers at the St. Thomas plant to be laid off in November 2008 as already announced in July.

The company also plans to reduce its salaried workforce by approximately 1,200 positions, with more than half directly related to the Sterling brand. A voluntary separation program will be available, as well as other measures to offer flexibility and choice to affected employees.