Forecasts Up to 4,000 Job Reductions Due to New Engine Standards

Truck maker Freightliner LLC said Tuesday it would cut output and lay off 800 workers early next year at its St. Thomas, Ontario, manufacturing plant, which makes Sterling-brand heavy- and medium-duty trucks.

We will continue to monitor the market closely and make adjustments accordingly, but we anticipate further reductions of up to 3,200 workers in the first few months of 2007. Chris Patterson, Freightliner's chief executive officer, said in a statement.

The Ontario layoffs will be effective April 2, a Freightliner spokeswoman told Transport Topics.

In addition to its own brand, Freightliner LLC which holds the No. 1 market position in North American heavy-duty truck sales is the parent company of the Sterling and Western Star truck brands, and of Detroit Diesel Corp., which makes diesel engines. Freightliner is a unit of DaimlerChrysler.

The news follows last week's announcement by Paccar Inc. that it will reduce output at a Kenworth Truck Co. plant in Renton, Wash., and a Peterbilt Motors Co. facility outside Nashville, Tenn., in January due to projected lower heavy-duty truck demand. (Click here for previous coverage.)

As with Paccar, Freightliner said the projected lower demand will be due to new diesel engine emissions standards that take effect Jan. 1 and associated price increases with those new engines.

Freightliner said that, depending on class, its truck prices are subject to increases of $4,600 to $12,500, due to the new engines.

All manufacturers of heavy and medium trucks, as well as the suppliers of components used in their assembly, are facing a dramatic reduction in volumes presently, the company said in a statement.

Workforce reductions are always the last thing any of us want to do, Patterson said. Unfortunately, it has become necessary at this point, as the entire industry is dealing with an extraordinary market situation.

We are anticipating that demand will begin to recover in the second half of the year, as our customers gain confidence in the new technology, and their existing vehicles suffer the effects of aging, he said. ?We expect to be able to make some positive workforce adjustments at that time.