Freightliner turnaround ahead of schedule

Freightliner’s restructuring plan is “well ahead of schedule,” the head of DaimlerChrysler’s Commercial Vehicle Division said last month.

In a speech to journalists covering the IAA Commercial Vehicles Show in Hanover, Germany, Dr. Eckhard Cordes said that through September, Freightliner’s plan had improved results by more than $500 million. In addition, Freightliner reached the breakeven point in profitability in the second quarter of this year, significantly earlier than the projected fourth quarter, Cordes said.

In October 2001, Freightliner President Rainer Schmueckle announced a three-year plan to improve results by $850 million by 2004. The plan involves closing plants, reduction in purchasing and materials costs, workforce reductions and changes in pricing and business practices, such as a curtailment of the residual value deals that created many of Freightliner’s financial problems.

Freightliner had estimated that the first year of the plan would yield $450 million in improved results. In an interview with North American trucking journalists at the Hanover show, Schmueckle said that the better-than-expected results stem from an improvement of 10 percent to 15 percent in all areas, perhaps somewhat more notably in purchasing and materials than in other areas. Most of that improvement came not from softness in price, which could be temporary, but from design changes, Schmueckle said.

As for the remainder of the restructuring plan, “I’m not concerned,” Schmueckle said. “We’ll get this done.” He acknowledged, however, that the entire industry will be challenged by some forces outside of their control. “Steel tariffs are a big issue, and I think it will get worse,” Schmueckle said.

Rolled steel is up 15 to 30 percent since President Bush’s decision to impose tariffs, and tariffs ultimately could increase the price by 50 percent, he said. Health care cost is another challenge, Schmueckle said. But in terms of making good on the turnaround commitment, the only real worry is the extent of the sales slump once current-technology engines are no longer available.

But sales shouldn’t slump until December because there should be enough new trucks without exhaust gas recirculation-equipped engines to satisfy demand through November, Schmueckle said. Freightliner expects Class 8 retail sales to approach 182,000 this year in North America, up from 174,000 in 2001. Schmueckle attributed this more to how bad sales were last year after Sept. 11 than to the strength of the pre-buy this year. In fact, North American retail sales through August totaled 118,000, which is 3,000 fewer than were sold through the same period last year.

Another positive trend, Schmueckle said, is the owner-operator market. “Financing is starting to come back. Owner-operators are coming back and asking for trucks.”