Profitable Growth at Daimler Trucks - Returns Target of Eight Percent Is Within Reach

Stuttgart/Wörth – The positive trend in the commercial vehicle sector, which last year had to cope with an average sales decline of 50 percent, was confirmed in the figures from Daimler Trucks for the third quarter of 2010. Compared to the result posted for the same quarter last year, Daimler Trucks’ sales increased by 44 percent to 94,800 units.

By the end of September 2010, total sales at Daimler Trucks were up by 34 percent to 249,000 units, compared to the total sales of 185,600 units in the same period of last year.

Daimler Trucks also expects the global truck markets to see further recovery by the end of the year. It forecasts market growth of five percent in Europe, ten to 15 percent in the NAFTA region, 50 percent in Brazil, and between 20 and 30 percent in Japan.

Andreas Renschler explained the prospects for Daimler Trucks and Daimler Buses before an audience of analysts and investors today in Wörth: “The forecasts indicate that the worldwide markets for medium-duty and heavy-duty trucks will grow by eight percent to 2.6 million units in the period between 2010 and 2013. At Daimler Trucks it looks like we will succeed in boosting sales by more than 40 percent to over 500,000 units during the same period. Given this outlook, a return on sales of eight percent is within reach for Daimler Trucks across the entire business cycle.”

Renschler attributed this positive business development to the long-term strategy of the Global Excellence program. Business developments in the commercial vehicle sector are characterized by pronounced cycles. Thanks to its long-term strategy and its four initiatives, Daimler Trucks succeeded in maintaining its position as the world’s largest manufacturer of trucks even during the economic crisis.

The aim of the first initiative, Management of Market Cycles, is to orient Daimler Trucks with the cyclical nature of business in the sector and thus ensure long-term profitability. With tools such as flexible production capacities and working-time models as well as a global production network, it was possible to adjust the production of commercial vehicles and engines to the cyclical developments — during the decline and during the current upturn. Renschler added: “The market forecasts make us optimistic and confident. The economy is rebounding, and with it the demand for commercial vehicles. It’s true that this is market-specific and is happening at different speeds from market to market, but the indications overall are positive worldwide. However, the crisis isn’t entirely behind us yet. I expect that it will be 2013 before we return to the level of demand we experienced in the triad markets in 2007 or 2008.”

The second initiative, Operational Excellence, focuses on the systematic optimization of all processes, in particular the cost basis. Daimler Trucks North America (DTNA) and Fuso in Japan are implementing realignment programs that will lead to baseline savings of around €720 million ($900 million) at DTNA and about €760 million (1 billion yen) at Fuso, beginning in 2011. Both of these programs are progressing ahead of schedule. As the world’s largest manufacturer of commercial vehicles, Daimler is also intensifying its efforts to generate further synergy effects and economies of scale by incorporating new products in an intelligent strategy across regions. “A commonality rate of 70 percent appears realistic from today’s perspective,” said Renschler. “That includes not only components such as engines, transmissions, and axles but also our vehicles’ electrical and electronics architecture.”

The third initiative involves the penetration of existing and prospective markets. The focus in established markets is to offer customers the best possible total cost of ownership. In addition to the vehicle lineup, this will increasingly be achieved with a comprehensive range of services, including full-service leasing (CharterWay) and intelligent fleet and cost management for customers (FleetBoard).

With regard to new markets, the focus is on the BRIC and Next 11 countries. It is estimated that new vehicle registrations of medium- and heavy-duty trucks will increase in Russia, India, and China by more than per annum 10 percent between 2009 and 2020.

(Nov 30, 2010)

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