Freightliner and the troubled North American commercial vehicle market continue to draw much of the heat for DaimlerChrysler’s lagging profits.

“Our Freightliner activity in the U.S. is facing two major challenges,” CEO Jurgen Schrempp said in a teleconference with financial analysts to discuss the company’s second quarter financial results. “The downturn in the U.S. market and the unpleasant consequences of an excessive cost strategy in terms of market share.” Those consequences, he said, include lower sales and higher incentives for new trucks along with lower prices and higher inventories of used trucks.
He also noted that DaimlerChrysler has acted “quickly and decisively” and that Freightliner’s new management is “accelerating and expanding” a turnaround plan to be presented in detail this fall. According to earlier reports, Freightliner has already cut fixed costs by 22% and material costs by 3%. Industry observers expect more production cuts. Some have speculated that the company will sell its Western Star plant in South Carolina and consolidate or eliminate its Sterling Truck Corp. operations in Ohio.
Worldwide, DaimlerChrysler’s Commercial Vehicle division sold 127,900 vehicles in the quarter, down 12% from a year ago. Sales of Freightliner, Sterling and Thomas Built trucks and buses dropped 35%, to 28,250 units. A 14% drop in units sales of Mercedes-Benz trucks, to 26,100, was blamed on reduced market demand in Europe and the collapse of the markets in Turkey and Argentina.
On a positive note, company officials said they are seeing some signs of recovery in North America. Early in the year, monthly sales indicated a 2001 Class 8 market at about 132,000 units. Slightly higher demand in the past few months now points to a market of 150,000 units. They said Freightliner’s Class 8 new truck inventory, including corporate and dealer stock, was about 8,000 units at the end of June. Its used truck inventory was around 25,000 units.
Total revenues for the DaimlerChrysler Commercial Vehicles division were $6.2 billion, down 5% from a year ago. Operating profit, excluding one-time charges, was $108 million, down from $344 million a year ago but an improvement over its $90 million first quarter loss which DaimlerChrysler said was due mainly to losses at Freightliner.
Overall, DaimlerChrysler reported second quarter profits of $500 million, excluding one-time charges, compared to $1.5 billion a year ago. Revenues were $35.1 billion, down 5% from second quarter 2000. Its other troubled U.S. unit, Chrysler, posted an $85 million operating loss, which was significantly better than analysts’ expectations. A three-year, $3.9 billion turnaround plan is aimed at returning Chrysler to profitability by 2003.