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Daimler Trucks sees Brazil upturn, keeps U.S. plant

September 30th, 2009

commercial vehiclesDaimler (DAIGn.DE) will hire 800 more staff for its Brazilian commercial vehicles business and keep open a U.S. truck plant as the two key markets show signs of reviving, the world’s biggest truckmaker said.

The moves offer a glimmer of hope for commercial vehicle manufacturers slammed by the global economic and credit crisis and could signal a broader uptick because truck sales often act as a leading indicator of economic health.

But industry officials have warned against expecting any quick rebound for truckmakers until the global economy accelerates and boosts demand for goods transport.

“The hiring of new staff makes clear that we trust the Brazilian economy will see a slight upturn after the global economic crisis,” Mercedes-Benz do Brasil President Gero Herrmann said in a statement released in Germany.

Daimler will also put 350 staff with term contracts and 160 apprentices onto unlimited contracts in Brazil given improved market conditions since mid-2009, especially in the agricultural, construction and mining sectors, it said.

More than 12,600 people work at the Sao Bernardo do Campo plant there, Daimler’s biggest heavy truck plant outside Germany.

Daimler also reversed a decision to close a U.S. truck plant next year thanks to prospects for a large U.S. military order and an uptick in demand for heavy trucks, it said.

Daimler had announced last October plans to close its Oregon plant in June 2010 as part of an overhaul of its North American operations to address a deep market slump.

“The U.S. market for heavy trucks is showing a slight recovery month by month,” a Daimler spokesman said, citing in particular the end to the U.S. housing slump that was boosting demand from the construction sector.

Talks with labor about the 650 staff in Oregon were under way. He gave no details about the size of the military contract.


Daimler’s upbeat view comes in strong contrast to the gloom truckmakers have spread for two years.

“The drop in economic activity and transport has pushed truck production down to half of pre-crisis levels and there are no real signs of recovery in sight,” the ACEA association of European vehicle manufacturers said just last week.

The heavy truck market in Europe contracted 57 percent year on year in August and fell nearly 48 percent in the first eight months of the year.

The order intake for heavy trucks in Europe stalled at around 25,000 units in the first half of 2009, down 85 percent from the same period of 2008, forcing manufacturers to lay off temporary staff, reduce working hours and cut shifts.

Europe’s commercial vehicle industry employs about 1.5 million people directly and indirectly, according to ACEA.

Michel Rollier, chief executive of French tire maker Michelin (MICP.PA), said at this month’s Frankfurt Motor Show that the truck market was still struggling and “we’re not seeing much recovery.”

Rival truckmakers pointed out that the Brazilian market is not the best litmus test for the rest of the world.

“South America hasn’t been hit as severely by the financial crisis. As for Brazil, the situation is somewhat better (than elsewhere) — demand is fairly good there because of tax incentives which make trucks 5 percent cheaper,” said Marten Wikforss, a spokesman for world number two Volvo (VOLVb.ST).

Brazil’s banking system is also functioning well, which means credit is available for buying vehicles.

Volvo truck deliveries in South America fell 35 percent year on year in August, while group deliveries shrank 52 percent.

Scania (SCVb.ST) (VOWG.DE) spokesman Hans-Ake Danielsson agreed that demand in Brazil was “comparatively good.”

“We haven’t lost nearly as much there as we have lost in Europe,” he said, but added it would not need to hire more staff to meet demand there. Scania now has market share of 23-25 percent in Brazil.

Daimler said it had around a third of the heavy truck market and half the bus market in Brazil in August.

At 1127 GMT, shares in the firm were up 0.35 percent, outpacing a 0.15 percent rise in the DJ Stoxx European auto sector .SXAP

By Michael Shields and Jan Schwartz

(Additional reporting by Victoria Klesty and Jens Hansegard in Stockholm)

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