German auto group Daimler to cut 3,500 jobs in the U.S., Canada

Following recent announcements by Volvo, Nissan, and Renault in Europe, and restructuring by U.S. car makers General Motors and Ford, utility vehicles are also being hit by slumping sales.Daimler, the world's biggest maker of heavy trucks, made the decision to shut down its Sterling Trucks brand in March "in response to continuing depressed demand across the industry and structural changes in the company's core markets," a statement said.

The German group is a rare European actor in the North American heavy truck sector, with around 28 percent of the market and sales of 320,000 vehicles in 2007.

As a result however, it has taken a hit from the financial and economic crisis in the United States.

"As the recession deepens, the heavy-truck market is hit harder," German auto expert Ferdinand Dudenhoeffer told AFP. "The sector will see a recession as well."

In addition, a Daimler spokeswoman told AFP, the sector was subject to regular cycles, and the German group had already expected diminished demand late this year and early in 2009.

"It is falling back more sharply now," she noted however.

Finally, new U.S. regulations aimed at reducing pollution have also hurt sales, Daimler said.
The group will eliminate around one quarter of its workforce in North American heavy truck production, based on figures it provided.

Two plants are to be shut down, one in Ontario, Canada in March, and another in Portland, Oregon in June 2010, and production will move to Mexico.

In addition to the loss of 2,300 jobs, another 1,200 administrative posts will also be eliminated, the German group said.

After unloading the Sterling Trucks brand, Daimler will concentrate on Freightliner and Western Star models.

"Sterling and Freightliner occupy the same (market) segment. But Freightliner has stronger sales and is our top-of-the-line," the Daimler spokeswoman said.

The group estimates its restructuring will cost around 600 million euros ($820 million), but will generate annual savings of 900 million from 2011.

"Daimler is trying to limit its losses in the United States," Dudenhoeffer concluded, adding that other heavy truck makers will cut production in Europe.

But he said the market should "pick up again in 2010."

It is likely however to shift towards emerging economies in eastern Europe, India and China.
"There are almost no other means of transporting merchandise there," Dudenhoeffer said.

In general, he concluded, "logistics is clearly a growth industry, it is expanding twice as fast as the market for personal vehicles."