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Weekly UpdatesDaimlerChrysler AG said it was undertaking a $330 million restructuring of its Freightliner commercial truck division that includes an 18 percent cut in jobs. The move comes as the U.S. market for commercial vehicles suffers what company officials called "its worst slump in 20 years, with no signs of recovery in the immediate future."
In addition, Freightliner also must handle self-inflicted costs of deals it made years ago to boost sales by guaranteeing to buy back used trucks. DaimlerChrysler said it would shut three of Freightliner's North American plants and lay off 2,700 mostly U.S. and Canadian workers. The cuts will affect 1,100 salaried employees and 1,600 hourly employees by the end of next year, the company said.
The moves, which were planned well before the September attacks in New York and Washington, will cut Freightliner's production capacity by 15 percent, according to DaimlerChrysler. The company also set a goal of returning Freightliner to break-even by next year, with annual cost savings of $850 million by 2004.
The $330 million cost will be taken as a special charge in the fourth quarter, the company said. The unit is the latest headache for the auto giant, which is already grappling with a $4 billion overhaul of Chrysler, including 26,000 previously announced job cuts worldwide aimed at returning it to profit in 2002. DaimlerChrysler said it also is revamping Mitsubishi Motors Corp., in which it holds a controlling 34 percent stake.
Last month the company said its 2001 profit targets, including a group-adjusted operating profit goal of 1.2 billion to 1.7 billion euros ($1.1 billion to $1.6 billion) were at risk following the hijacked plane attacks on the United States. The company reports its third-quarter earnings on Oct. 23. DaimlerChrysler said Freightliner would report a loss this year, break even in 2002, post a small operating profit in 2003 and then rise to "sustainable returns above the cost of capital in 2004."
Freightliner had used guaranteed buyback deals to boost sales through 2000, but a glut of trucks coming back from fleets has driven down prices for both new and used vehicles. Compounding the problem, sales of the largest Class 8 trucks have fallen 45 percent in two years.
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