Tough times prompts Freightliner to announce workforce reductions

| Thursday, October 31, 2002

Freightliner LLC said Tuesday "due to very difficult and extraordinary market conditions," the company will make a series of production and workforce adjustments beginning in January 2003. Major actions include a temporary shutdown of the company's Cleveland, NC, plant and Mount Holly (NC) plant Jan. 2 through Jan. 10.

Freightliner will give notice that it will reduce its manufacturing workforce by 138 regular and 362 temporary employees at the Cleveland plant and 175 temporary employees at St. Thomas (Ontario) Truck Manufacturing Plant. The layoffs are effective on Jan. 2, 2003, at Cleveland and on Feb. 3, 2003, at St. Thomas. Freightliner also will adjust its temporary workforce in Santiago, Mexico.

The company says given the current order intake, further one-week shutdowns are likely in both February and March 2003. Freightliner is also evaluating potential adjustments to its Gastonia Parts Manufacturing Plant.

According to a company press release, the changes are intended to adjust the company's manufacturing capacity in response to the previously anticipated sharp decline in industry Class 8 truck orders and weakness in medium-duty truck markets.

Despite the market situation, "Freightliner LLC's turnaround remains on track, " said Rainer E. Schmueckle, Freightliner LLC President and CEO. "We achieved profitability in the second quarter of 2002, two quarters ahead of schedule. We were also profitable in the third quarter of 2002 and now expect to exceed our 2002 cost savings target of $450 million by $100 million. As announced in our original turnaround statement, we continue to expect a small operating profit in 2003 despite much weaker market conditions."

According to Schmueckle, the decline in industry Class 8 truck orders was expected and relates to new engine emissions requirements that took effect Oct. 1, 2002. Many North American truck fleets ordered trucks in advance of the new emissions requirements, which are the result of consent decree agreements between several North American truck engine manufacturers and the U.S. Environmental Protection Agency. This advanced purchasing phenomenon created a spike in industry Class 8 truck orders earlier in the year, followed by a significant decline.

Almost all major Class 8 truck manufacturers in North America and several major component suppliers have already announced layoffs related to the market situation.

"To this point, we have been able to modify our capacity by deleting overtime and discontinuing extended shifts," Schmueckle said, "but now we must take more significant action."

Schmueckle said measures will include temporary plant shutdowns, production rate adjustments and layoffs.

"We regret having to take these measures, but the entire industry is dealing with an extraordinary market situation," Schmueckle said. "We expect some strength to return to the North American Class 8 truck market in the second quarter of 2003 with the second half of 2003 showing a major improvement."

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