Daimler Trucks Seeks Growth In Emerging Markets To Offset European Decline


Commercial vehicle (CV) manufacturer Daimler Trucks believes that global sales and revenue will increase in 2013, despite expectations of a slowdown in the European and North American CV market. The company believes that sales growth in many emerging markets, including Brazil, should offset such declines. BMI has long maintained that autos manufacturers will increasingly seek to shift their strategic focus away from Europe and North America on the back of weak sales growth, and toward higher-growth emerging markets. Further, we have previously highlighted that companies will seek to produce near their target markets, and that global production facilities will increasingly move to emerging markets. This view is commensurate with Daimler Trucks' global strategy.

Daimler Targets Growing Market
Brazil Commercial Vehicle Sales, CBUs

Weak Sales and Job Cuts

CV sales in Europe fell 12.4%, to 1,695,173 units, in 2012. BMI believes these weak sales reflect the ongoing contraction in industrial and manufacturing activity across much of the region. Many markets witnessed substantial declines in the final two months of the year, bringing many full-year figures below our forecast levels ( see our online service, January 29, 'CV Sales Continue To Decline'). Generally, sales in the larger Western European markets fell further than in the smaller Eastern European markets. In 2013, we expect to see further declines in many markets, although we believe these will generally be smaller than those in 2012.

In North America, we expect to see a slight slowdown in CV sales growth in 2013, although we believe that it will remain in positive territory. This moderation in growth could hamper Daimler's global sales growth targets.

Daimler is the largest CV manufacturer in the world, but is still behind Volvo and Scania in terms of profitability. In January, the company announced plans to cut 2,100 jobs globally from its CV unit to improve profitability ( see 'Daimler Trucks Bid To Improve Profitability', January 31). The company is currently negotiating with the United Auto Workers trade union to cut 1,300 jobs in North America. There are also plans to cut 800 non-production jobs in Germany through voluntary redundancies. We believe that these cuts reflect Daimler's expectation of weak sales growth. The division currently has 27 global production facilities - 14 in the NAFTA region, seven in Europe, three in Asia, two in South America, and one in Africa.

A number of truck and commercial vehicle manufacturers have announced job cuts and other restructuring proposals in Europe on the back of weak sales and high production costs ( see 'Regional Downturn Impacts Margins', February 1). We expect manufacturers to take increasingly drastic measures to improve profitability as the regional market continues to struggle.

Brazil

The company expects to see strong sales growth in Brazil in 2013, in line with BMI's views on the market. BMI forecasts light commercial vehicle sales to increase 8.6% in 2013, and heavy truck sales to increase 14.9% over the year. BMI expects to see a boost in construction activity and an increase in gross fixed capital formation in Brazil in 2013, as the country prepares for the 2014 FIFA World Cup, a general election, and the final year of the government's growth acceleration programme (PAC II). We believe that this construction boom, combined with the weak sales figures in 2012, will drive CV sales figures up in 2013. Daimler is well positioned to take advantage of this upswing, and the market should be a strong source of growth for the company in 2013.

This article is tagged to:
Sector: Autos
Geography: Europe, Brazil

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