DaimlerChrysler has announced a four-point plan to return its Freightliner subsidiary to profitability. The plan envisions saving $370 million in materials, $120 million on production costs, reducing overhead by $170 million, and improving operations by $190 million. Announced in Stuttgart, Germany, the plan is designed to return the company to profitability and save a total of $850 million by 2004. Freightliner should begin to break even by the end of 2002, show a small profit in 2003, and reach sustainable profit in 2004. A one-time charge of $330 million will be taken during the remainder of 2001.
Material costs will be slashed by design changes, reduction in parts proliferation, and closer relations with suppliers. Six chassis platforms in medium and heavy trucks will be reduced to three platforms in the next two years. Closing the school bus assembly plant in Woodstock, Ontario, and the heavy-truck plant in Kelowna, British Columbia, will cut costs and help align production and demand. The bus plant will close in 2001, and the Western Star plant in Kelowna will close late in 2002. Freightliner also will close its parts manufacturing plant in Portland OR, pending discussions with union representatives. The remaining truck plants will cut an additional 1,600 hourly employees.
Salaried workers also will be cut. An additional 1,100 employees — 25% of the total — will be laid off. Effective Jan 6, 2002, pay for all workers will be cut 5%; health and welfare benefits also will be reduced. Total layoffs will reach 11,700 employees, a reduction of 47% from peak employment of 25,000 in 1999.
This plan is based on demand for roughly 175,000 Class 8 vehicles per year and 160,000 Class 6 and Class 7 vehicles in North America.