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Freightliner Launches Major Restructuring to Return to Profitability
by Tom Berg and Bill Hudgins
Freightliner's long-anticipated turnaround plan aims to save $850 million a year by 2004 by laying off 2,700 workers, shutting three plants, reducing the number of its truck platforms from six to three, and emphasizing profits instead of high market share. The announcement came Oct. 12 as Road King was going to press.
Freightliner, which will lose an undisclosed amount of money this year, thus hopes to break even in 2002 and begin earning profits in 2003, said Rainer Schmueckle, president and CEO. He said the comprehensive restructuring plan includes "more than 3,000 individual initiatives" affecting all products and operations, and cutting pay and benefits for all surviving employees, including top managers.
The plan's profit hopes are based on a flat market for heavy and medium trucks for the next two years. The current depressed North American market means sales of about 122,000 Class 8 trucks in North America this year -- half what it was two years ago. Any increases will speed the recovery for Freightliner, which has been hit especially hard by the downturn.
The product line will be simplified among the three brands -- Freightliner, Sterling and Western Star, said Roger Nielsen, Freightliner's chief operating officer. Chassis platforms will go from six to three. The Century and Western Star Constellation will survive, some using cabs from older models. A new medium-duty platform will be the third survivor.
Remaining models include the Freightliner Century S/T, Columbia and Argosy, plus the Classic and Classic XL with FLD cab; Sterling A and L with the Ford-derived cab on a Century chassis; Sterling Acterra, with the Sterling cab on a Freightliner midrange chassis, as now; and Western Stars, as now built. The new midrange platform will debut next spring or summer, to replace the current Business Class.
The Century-based Coronado premium conventional is not yet in production, but might start sometime next year if demand builds sufficiently. Until then, the Classic will remain Freightliner's "large-car" model, along with the Western Star 4000. Some dealers will be offered franchises to sell all three truck makes.
Freightliner will go after more vocational business, and put less emphasis on market share and more on profits, said Nielsen. It might continue to offer guaranteed residual values to big fleets, but "only if it's a good deal," Nielsen said.
The company is trying to renegotiate present buy-back deals that have cost it big amounts of money and populated truck lots with large numbers of used sleeper-cab tractors. These will continue to come in as hangovers from booming sales in '98 and '99.
Freightliner will close the Western Star plant in Kelowna, B.C., and build 'Stars at its plant in Portland, Ore. It will keep its various plants in North and South Carolina, perhaps boosting production there as markets come back. It will also keep its main headquarters and truck plant in Portland.
It will probably close its parts plant in Portland by next summer, and close a school bus plant in Ontario and move production to North Carolina. It will close its Sterling headquarters in suburban Cleveland and lease less pricey space closer to the city.
Freightliner's workforce had already been cut by 9,000 employees. With the new job cuts, Freightliner's workforce will have dropped 47% from a peak of 25,000 employees in 1999. Also in the offing are a 5% across-the-board pay cut and elimination of bonuses.
Schmueckle said the board of DaimlerChrysler, Freightliner's parent company, had endorsed the plan before it was announced to the public.
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