DaimlerChrysler Sees Freightliner Profit

Associated Press | By TERRY KOSDROSKY 12.11.06, 5:57 PM ET

The head of the DaimlerChrysler AG truck and bus group said Monday that the auto maker expects its U.S.-based Freightliner truck division to be profitable in 2007, despite an expected sharp downturn in heavy truck building next year that will lead to job cuts in the unit.

Andreas Renschler, head of DaimlerChrysler (nyse: DCX - news - people )'s truck group and a member of the management board, said that its North American plants are prepared for the downturn, which could mean an industry-wide reduction in heavy truck volume of nearly 40 percent compared with 2006.

Freightliner could see job cuts of up to 4,000 in 2007 due to the downturn, Renschler said. The company already said it would lay off 800 at a plant in Canada early next year.

The DaimlerChrysler Truck Group has about 25,300 employees in North America.

New environmental regulations go into effect next year and truck makers are pulling orders ahead this year.

"I think we have prepared very well," he said Monday in a meeting with journalists. "Based on this market development, we see at the moment we still will be profitable."

Renschler said he expects industry heavy-truck volumes to fall off dramatically in the second quarter before picking back up in the fourth quarter.

The truck group's performance has become an important part of DaimlerChrysler's overall earnings, especially with the struggles of Chrysler Group, the U.S.-based maker of passenger cars.

Third-quarter operating profit at the truck group division was up 57 percent to about $735 million, or 556 million euros, its best-ever third quarter from an operating standpoint.

Renschler said the company learned a lot during the last heavy-truck downturn earlier in the decade, and he added that suppliers also seem to be better prepared.

Overall, DaimlerChrysler's truck group, the largest maker of commercial trucks in the world, also expects to be profitable in 2007. The Japanese heavy-truck market is expected to be down about 25 percent next year but Europe is expected to be down only slightly.

DaimlerChrysler produces trucks under the Mercedes-Benz, Freightliner, Western Star, Sterling and Mitsubishi (other-otc: MSBHY.PK - news - people ) Fuso brands.

The company learned from the last downturn to prepare its plants for the "worst-case scenario" ahead of expected downturns, Renschler said.

Renschler said DaimlerChrysler will produce one global heavy duty truck engine in the coming years, down from the four it produces now. This will help save costs, he said.

DaimlerChrysler will begin producing the engine next year at its Detroit Diesel plant. It will take until 2014 to 2015 before the common engine hits all of DaimlerChrysler's trucks.

He also said the truck group is working on a common engine for its medium-duty commercial trucks.

Renschler wouldn't give details on the turnaround plan that Chrysler Group, the U.S.-based maker of cars and light trucks, is expected to unveil in the first quarter.

Asked if the board stands behind Chrysler Group Chief Executive Tom LaSorda, Renschler said, "Absolutely."

Chrysler Group lost $1.5 billion in the third quarter, as it struggled to stem a loss of market share and to rein in costs. The company is facing the same problems as its larger U.S. rivals - General Motors Corp. (nyse: GM - news - people ) and Ford Motor Co. (nyse: F - news - people )

DaimlerChrysler shares rose $1.06, or 1.8 percent, to close at $59.86 on the New York Stock Exchange.