WOERTH, Germany - DaimlerChrysler, the world's biggest maker of commercial vehicles, told Reuters demand for heavy trucks in the United States fell sharply in the first quarter, but by less than expected.
"The market came in a little bit stronger than we saw in last September or October, but was pretty weak in the first quarter -- but not as weak as we had thought," Eckhard Cordes, head of DaimlerChrysler truck, said in an interview late on Monday. The comments were embargoed until Tuesday.
On an annualized basis, demand for heavy trucks in the United States totaled about 110,000 to 120,000 vehicles in the first quarter, down from a peak of 310,000 in 1999 in North America, he said.
New emissions standards introduced last fall in the United States have led companies to fear for a very weak first quarter, anticipating that advance purchases made ahead of the regulation would dampen demand later.
Daimler expects a recovery in subsequent quarters as the one-off effect from the clean engine standard wears off and the wider economic situation improves. Despite the recovery, Daimler expects 2003 demand in North America to be lower than 2002's level of 182,000 heavy trucks.
North America accounted for roughly a quarter of the unit's sales last year.
Demand for commercial vehicles is closely linked to overall economic conditions and Daimler's biggest global rival, Volvo, predicts no major recovery in North America in the first part of 2003 and a continued downturn in Europe.
DaimlerChrysler's trucks division, including the U.S.'s Freightliner unit, Setra buses and Mercedes Benz vans and heavy trucks, expects western European demand to stagnate at last year's level of about 285,000 vehicles for medium and heavy trucks. Cordes declined to comment on the possible effect of the war in Iraq.
The division, emerging from deep restrucuturing, aims to gain from further cost savings this year to lift operating profit from last year's level of 176 million euros on flat revenues and unit sales.
Cordes said he expected Freightliner to post a profit for the full year, despite the tough market conditions. After job cuts and plant closures, the unit returned to profit earlier than expected in the second quarter of last year.
"We planned that Freightliner would post a profit for the full year 2003, I can confirm that is still the case," he said.
Mid-term profit boost
Cordes declined to say how business had developed in the first quarter of the year but said his medium- to long-term target was for the division to post return on net assets, the company's main measure of profitability, of more than 13 percent in conditions that were not particularly favorable.
DaimlerChrysler's CFO Manfred Gentz has said the trucks unit had a pretax return on net assets of 2.1 percent in 2002.
To boost profits, the unit will seek further parts sharing between various brands, including axles and electronic systems, and also will introduce new models.
Keeping spending down by sharing high development costs has become a priority in the trucks business, which has seen a flurry of consolidation and joint ventures in recent years.
But Cordes said Daimler would not take part in consolidation in the European trucks sector as it already was big enough.
Volvo may spark some activity as it has to sell its 45 percent stake in Swedish rival Scania by early next year.
Cordes also is intent on expanding DaimlerChrysler's presence in Asia, the world's fastest growing trucks market.
He is confident of finding a Chinese partner with whom to build heavy and medium trucks after talks with First Automotive Works collapsed. He declined to name potential partners or say when a deal might be made. He said Daimler would not be rushed into a strategically bad move.
"China has not been that important for us so far in trucks but it will become more important because the segments that are growing are those we can serve," Cordes said.
Daimler already has trucks ventures with Japanese partner Mitsubishi Motors and Korea's Hyundai Motor.