Freightliner is trying to renegotiate existing sales contracts that guarantee a vehicle's value at trade-in,
Eckhard Cordes, the senior manager overseeing commercial vehicles at DaimlerChrysler AG, told the German newspaper Handelsblatt last week.
Freightliner, a subsidiary of DaimlerChrysler, is experiencing a glut of used-truck inventory that will only worsen next year, when many of the 108,000 Class 8 trucks it sold in the United States and Canada during 1999 will be due for a trade-in.
Guaranteeing to buy back vehicles at a fixed price helped Freightliner secure sales with big long-haul truckload fleets and propel its market share in North America to 36% in 1999. Other commercial truck manufacturers followed suit with similar offers. But when sales of new trucks started to slump last year, and the used-truck market became saturated with three-year-old highway tractors, prices for used equipment fell far below their fixed buy-back values. It is estimated that truck manufacturers and dealers will write off $1 billion on Class 8 truck residuals between 2000 and 2002.
Cordes said Freightliner, which builds heavy trucks under the Freightliner, Sterling, and Western Star brands, would reduce production and raise prices to increase profit at the expense of market share, which he called a "secondary consideration."
Freightliner is expected to lose more than $1 billion this year. The losses contributed to the resignation of Freightliner CEO and President Jim Hebe in May. He was replaced by Rainer Schmueckle, previously DaimlerChryler's senior accountant and an acknowledged turnaround expert.
In October, DaimlerChrysler announced a series of cost-cutting moves as part of a plan to make the company profitable by 2003.