Bloomberg News

Scania to Cut European Truck Production on Economic Turmoil

October 10, 2011

(Updates with MAN SE comments in eighth paragraph)

Oct. 10 (Bloomberg) -- Scania AB, the Swedish truckmaker controlled by Volkswagen AG, plans to lower production at European factories by as much as 15 percent beginning next month as demand for commercial vehicles drops.

“Government financial problems in Europe and the U.S. have now begun to affect economic activity and have led to hesitation among customers,” the Soedertaelje, Sweden-based company said in a statement today.

Scania will lower vehicle production rates in the region starting in November by 10 percent to 15 percent compared with the end of the third quarter, the truckmaker said. The adjustment will be handled within the framework of existing agreements between the company and unions.

Scania is the first of the European truckmakers to announce production reductions over concerns the region’s economy is cooling. European leaders are struggling to contain turmoil that has raged in financial markets for 19 months over growing worry that Greece is headed for a default. Commercial-vehicle makers are often early indicators of changes in economic output as transport companies adjust their fleets to meet demand.

“It’s unlikely that all the truckmakers in Europe will get free of these effects that Scania are now seeing,” said Morten Imsgard, an Aabenraa, Denmark-based Sydbank A/S analyst with an “underweight” rating on Scania. “It’s most likely that we will see them in the coming months moderating their language in terms of growth opportunities in Europe.”

Shares Drop

Scania fell as much as 5.15 kronor, or 5.1 percent, to 96.25 kronor and was down 2.7 percent as of 2:15 p.m. in Stockholm trading. The shares have dropped 36 percent this year, valuing the company at 78.3 billion kronor ($11.7 billion). Swedish rival Volvo AB traded down 2.4 percent. Daimler AG, the world’s largest truckmaker, was little changed in Frankfurt, while MAN SE was 3.3 percent lower.

Daimler’s truck factories have sufficient orders to operate at full capacity until at least the first quarter of 2012, Heinz Gottwick, a spokesman Stuttgart, Germany-based company, said today by phone. Daimler Chief Executive Officer Dieter Zetsche said on Sept. 30 the company was optimistic about its truck operations, even with the debt crisis, because of demand for the revamped Mercedes-Benz Actros long-haul model. Volvo spokeswoman Jenny Bjoersne declined to comment.

“We are monitoring closely how the uncertainty from the financial crisis affects us and are prepared to make cuts at various levels should they be necessary,” Stefan Straub, an MAN spokesman, said today by telephone. “We are not expecting a major slump. It is all dependent on how the market develops, but cuts are certainly a possibility.”

Europe Dependence

Scania is dependent on Europe, with the region accounting for 45 percent of first-half deliveries. Heavy truck sales in Europe gained 30 percent in August, slowing eight-month growth to 49 percent, as customers began delaying purchases, according to the most recent data from the European Automobile Manufacturers’ Association.

“This has turned around sharply in a very short period of time,” Imsgard said. “This is very concerning for Scania as I see it, because they’re very, very exposed to the European market.”

Scania has been operating with “short, stable” delivery times of eight weeks to limit inventory build-up, the truckmaker said today.

“It is a matter of deceleration in Europe, but also a slower pace of order bookings from the Middle East,” Martin Lundstedt, Scania’s sales chief, said in the statement.

--With assistance from Kim McLaughlin in Stockholm. Editor: Chris Reiter, Chad Thomas.

To contact the reporter on this story: Alex Webb in Frankfurt at awebb25@bloomberg.net.

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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