Daimler Trucks to Cut Its Workforce at Cleveland, N.C., Factory by 30%
This story appears in the Jan. 11 print edition of Transport Topics.
Daimler Trucks North America announced plans to lay off an estimated 936 employees, or 30% of the 3,100 workers at its Cleveland Truck Manufacturing Plant in North Carolina, which makes heavy-duty Freightliner and Western Star trucks.
The layoff notice was in response “to a sustained reduction in orders and a diminished build rate and is considered temporary,” DTNA spokesman David Giroux said in a statement.
Giroux said that Jan. 8 is scheduled to be the affected employees’ last day of work, but they would be paid through March 5. The company has said it anticipates a softer truck market this year, “which will be somewhat below the very strong market of 2015.”
DTNA is the market leader in U.S. Class 8 sales and had a 49.9% market share in November, WardsAuto.com reported.
The size of that market appears to be contracting though. Class 8 orders overall in November totaled about 16,500 units, a plunge of about 60% year over year, analysts said.
Industry orders in November 2014 totaled 40,925, ACT Research Co. said.
Higher inventory levels on the nation’s shelves, more trucks sitting on dealer lots waiting to be sold, slower growth in freight levels and a softening in rates have combined to put the brakes on orders as manufacturing contracts, the analysts said.
David Leiker, an analyst with Robert W. Baird & Co., conceded in a Jan. 4 note that he had been “on the wrong side of the truck cycle over the last six months.” He said too much capacity was added by early 2015 “as productivity headwinds were relaxed — the hours-of-service postponement — [together] with slowing industrial and energy demand.”
Truck makers provided aggressive incentives in fall 2014 “driving elevated build rates, which inflated channel inventory,” he said.
“The industry is now working off both excesses,” Leiker wrote to investors.
He expects “near-term” Class 8 annual order levels to be in the low-200,000s, which he called weak.
“By spring into summer, demand could return to replacement levels of 250,000 or so, with stable economic conditions,” he said.
Thomas Albrecht, an analyst with BB&T Capital Markets, wrote to his firm’s clients in November that he believed December’s orders will be in the 14,000-to-18,000 range.
That would be “well below expectations from a few months ago of 30,000 to 35,000. As a reminder, December tends to be the strongest order month, and fourth-quarter orders are typically stronger than first-quarter orders,” Albrecht said.
In December 2014, orders climbed to 44,037, ACT said.
Meanwhile, DTNA said employees are “free to seek and accept other employment during the notice period without jeopardizing their entitlement to the Worker Adjustment and Retraining Notification [WARN Act] period payment or benefits.”
DTNA’s decision follows a similar move by Volvo Group late last year for both its U.S. truck divisions, Volvo Trucks and Mack Trucks. That action also was intended to match production with expected market declines this year.
Other truck makers did not respond to inquiries about the possibility of additional layoffs.
