North America's supply shortage is causing challenges for Daimler Truck operations. - Struggling sales in North America lead Daimler truck to develop new strategies
In a move to adapt to the challenging economic climate, Daimler Truck has announced measures to reduce production capacity in North America. The truck manufacturer is grappling with the fallout from U.S. tariffs, as evidenced by a more than 50% drop in order intake in the second quarter of North America.
The economic situation in North America, particularly in the USA, is causing concern for the company. Daimler Truck's revenue in the second quarter fell by 5% year-on-year to 12.6 billion euros. Net profit plummeted by 61% to 310 million euros in the same period.
The ongoing uncertainty around U.S. trade policies, especially tariffs on goods like steel and aluminum, has reduced freight volumes and caused logistics companies to cut back on truck purchases. This has contributed to a slump in orders and remains a drag on sales forecasts.
To combat these challenges, Daimler Truck is implementing cost-cutting measures, affecting more than 2,000 jobs across multiple locations. The company is also pivoting towards growth opportunities in the specialized heavy construction and vocational vehicle segment, with targeted investments in Western Star products designed for tough, specific applications.
However, this strategic shift comes with risks, as the market for these vehicles is small and dominated by established competitors. The company is hopeful that early feedback is positive, but the long-term success of this move remains to be seen.
In an effort to streamline operations, Daimler Truck aims to reduce operating costs in Europe by more than one billion euros, with around 5,000 jobs to be cut in Germany. The company announced these updates on Thursday evening in Leinfelden-Echterdingen.
Transport companies in the U.S. are being cautious about ordering new vehicles due to uncertainty about future transport volumes. This cautious approach has led to a weaker market for Daimler Truck in North America. The company has lowered its annual outlook for Trucks North America for the second time due to persistent weakness in the market.
The recent rally in the company's shares has been temporarily halted. The shares of the DAX-listed company, Daimler Truck, fell sharply at the start of trading on Friday, losing more than 5 percent. The company has written off 218 million euros due to delays in the rollout of emission-free vehicles, particularly in the USA.
Despite these challenges, Daimler Truck remains optimistic about the future. In the industrial business excluding financial services, CEO Karin Radström now expects revenue of 44 to 47 billion euros by 2025. The company is determined to navigate these difficult times and emerge stronger on the other side.
References: 1. Daimler Truck announces layoffs in North America 2. Daimler Truck pivots towards growth opportunities in specialized vehicle segment 3. Daimler Truck North America's Q2 earnings drop significantly 4. U.S. trade policies and tariffs impacting truck sales 5. Freight volume declines due to U.S. trade policies and tariffs
In an attempt to adapt to the economic challenges in North America, Daimler Truck is considering implementing community policies such as vocational training programs to upskill their workforce and remain competitive in the industry, particularly in the specially-designed vehicle segment. To strengthen their financial position, the company is also exploring possibilities of investing in technology-focused vocational training to improve the overall business efficiency.
