Daimler Trucks North America (DTNA) today announced that it will discontinue the Sterling Trucks brand in March and cease truck manufacturing operations at the St. Thomas, Ontario, plant.
Sterling models have substantial overlap with offerings in the Freightliner Trucks product line. Launched in 1998, Sterling has achieved only one-fourth of the Freightliner nameplate's market penetration despite ongoing improvement initiatives and product launches.
Additions to the Freightliner and Western Star product ranges 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.
The St. Thomas, Ontario, plant will cease truck manufacturing operations 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, Oregon, 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. A migrating supplier base and high logistics costs have had a major impact on the cost of production in this location.
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. The company recently completed the relocation of sales, marketing and customer support functions to Fort Mill, South Carolina, leaving 2,200 employees engaged in administration, product development, procurement and information technology in the headquarters building on Portland's Swan Island and neighboring satellite offices.
Start of production at DTNA's new Saltillo, Mexico, manufacturing plant will occur as planned in February. The plant will produce Freightliner's new flagship Cascadia model.
Additionally, due to the impact of recent increases in the cost of raw materials and the limited ability to pass those on to North American customers, a significant focus will be placed on identifying and expediting material optimization efforts in all DTNA manufacturing operations.
As a result of the measures cited above, DTNA expects to achieve annual earnings improvements of $900 million by 2011. The EBIT effects amount to $600 million in total: approximately $350 million against the fourth quarter of 2008 (including approximately $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 above. This figure includes 720 workers at the St. Thomas plant to be laid off in November as already announced in July.