October 14, 2008 / 2:27 PM / 9 years ago

Daimler Trucks drops Sterling brand, closes plants

FRANKFURT (Reuters) - Daimler AG will drop its Sterling truck brand in March and close two North American plants to address continuing depressed demand across the industry, the world’s biggest truckmaker said on Tuesday.

Daimler Trucks North America said it expected to improve annual earnings by $900 million by 2011 as a result of the steps, which include closing a plant in St. Thomas, Ontario, next March and a factory in Portland, Oregon, in June 2010.

Some output will switch to Mexico and the Carolinas.

Around 2,300 workers at the two plants will lose their jobs, including 720 workers in St. Thomas whose layoffs were announced in July. It will also eliminate 1,200 white-collar positions in North America, over half of which were at the Sterling brand.

“We are confident that this forward-looking strategy ... is the right measure to address the challenges in the North American market,” Trucks division head Andreas Renschler said.

Daimler had said for months it was awaiting a rebound in the North American heavy trucks market. Its trucks sales there fell 18 percent in the first eight months of the year, as the market contracted amid a cooling economy.

A spokesman said the Sterling brand, which sold around 16,000 units in North America last year, had not met expectations and that Daimler was confident its customers would switch to the larger Freightliner brand.

Freightliner’s share of the NAFTA heavy truck market was 23 percent last year versus 5 percent for Sterling and 1 percent for the premium Western Star brand, the spokesman said

The steps unveiled on Tuesday will cut earnings before interest and tax by $600 million in all. Expenses of around $350 million will be booked in the fourth quarter of 2008, $150 million in 2009 and $100 million over 2010 and 2011, it said.

Daimler shares, which had fallen on Friday to their lowest in more than 10 years, traded up 9.5 percent at 28.71 euros by 1105 GMT. The DJ Stoxx European car sector index was up 2.8 percent.

European truckmakers had given a cautious outlook for 2009 at last month’s big IAA trade fair, worried that a six-year boom could peter out as the global economy slows.

Hakan Samuelsson, chief executive of German truckmaker MAN AG, added to the gloom on Tuesday, telling a news conference in Munich MAN would rein in output next year given sharply declining demand.

But he stuck to the company’s 2008 forecast. “We will have another record year this year despite the financial crisis,” he said. “Our capacity is being used completely.”

(Additional reporting by Irene Preisinger in Munich; Editing by David Holmes)

michael.shields@thomsonreuters.com, Reuters Messaging: michael.shields.reuters.com@reuters.net; +49 69 7565 1266

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