Upadate 2: Freightliner plans Mexico factory despite layoffs elsewhere

Bloomberg News | AUBURN HILLS - - DaimlerChrysler's Portland-based Freightliner unit will build a $300 million truck plant in Mexico to meet a surge in long-term demand even as it prepares for as many as 4,000 North America layoffs next year.

The site is in Saltillo, Coahuila, Freightliner said today in a statement. It will be the second Mexico factory for Freightliner, the world's largest truckmaker.

Freightliner is counting on sales to rise after 2007. For next year, company chief Andreas Renschler expects North American truck output may fall 39 percent because 2006 purchases jumped before new U.S. emissions rules boost prices on Jan. 1.

"This news comes as a surprise after their talk about layoffs," said Stephen Pope, a Cantor Fitzgerald analyst in London. "There has to be a major cost advantage or incentive for this plant to get the go-ahead after the layoff. Freightliner may also be easing out of one relatively high-cost area in North America in favor of a lower-cost one."

Freightliner spokeswoman Amy Sills couldn't immediately be reached for comment.

Renschler said last week 800 employees at a St. Thomas, Ontario, plant already had been told they'll be laid off starting in March. The commercial-vehicles unit has about 25,328 employees at 11 plants in North America. Laid-off workers are eligible for recall.

Groundbreaking for the northern Mexico plant will occur in the second quarter of 2007, and production will begin in 2009, Freightliner said. The factory will be able to produce as many as 30,000 trucks annually and employ 1,600 people.

The site is near a Chrysler automotive plant that produces the half-ton and three-quarter-ton Dodge Ram pickups. Chrysler also operates an engine and stamping plant in Saltillo.

U.S. medium- and heavy-duty truck sales rose 8.6 percent through October to 480,608 vehicles, according to Automotive News. Freightliner was the biggest seller, at 103,658.