DaimlerChrysler announces Freightliner "Turnaround Plan"

| 10/12/2001

Freightliner LLC, subsidiary of DaimlerChrysler's Commercial Vehicles Division, announced Friday a restructuring program designed to return the company to sustainable profitability. The plan to be implemented calls for three plants to be shut down and 1,600 more hourly employees to be laid off.

Compared to the peak employment levels in 1999 (25,000 employees), Freightliner had already reduced its workforce by 9,000 employees.

In addition to layoffs, Freightliner will close its Ontario school bus assembly plant in the fourth quarter of 2001 and the Kelowna, British Columbia, truck assembly plant in the third quarter of 2002. Freightliner also plans to completely overhaul its parts manufacturing operation and intends to close its Portland, OR, parts manufacturing plant by mid 2002, pending discussions with the local unions.

In a further major initiative to reduce material costs, the company will move to three chassis platforms, from the current six, in its medium- and heavy-duty truck business within two years.

The company says it will also concentrate on securing profitable business rather than accumulating market share. In this respect, Freightliner will apply more stringent criteria to new truck pricing and residual commitments. Additionally, the cost of the used truck operations will be streamlined, while maintaining the trade capabilities of the Freightliner group, supporting and strengthening the three brands of Freightliner, Sterling and Western Star. The group will more pro-actively pursue the vocational truck markets.

The restructuring plan is targeted to deliver annual savings at an operating level of $850 million by 2004. Freightliner, which will report a loss in 2001, hopes this plan will allow the truckmaker to return to breakeven toward the end of 2002. A small operating profit is anticipated in 2003 and Freightliner expects sustainable returns above the cost of capital in 2004 and thereafter.