SPECIAL REPORT: Brand overlap will close Sterling gap, says Daimler

TORONTO — Existing Freightliner and Western Star truck brands would move in and pick up some of the marketshare lost with the elimination of Sterling Trucks, top officials from Daimler Trucks North America said this morning.

In a conference call with trucking journalists following Daimler’s announcement today to shelve its Sterling division and close two plants — including the one in St. Thomas, Ont. — Freightliner LLC President Chris Patterson said the company is shrinking capacity and prepared to press on with a "two-brand strategy" in response to the significant market downturn in the U.S.

He said that Daimler’s two-existing truck brands in North America — Freightliner and Western Star — are poised to pick up the slack in both medium and heavy-duty segments.

While there will be no direct product carry-over from Sterling, Daimler does "intend to augment continuing product offerings to fill niches that were previously occupied exclusively by Sterling," Patterson said in response to a question by todaystrucking.com.

"There’s significant overlap, particularity in the medium-duty product range that services utilities and municipalities, so there’s actually product from both brands already in the space, which is one of the considerations in today’s decision."

Sterling dealers will continue to service
existing Sterling products on the road

Sterling current holds about 4.5 percent of North American medium-duty market, and Patterson suggested Daimler’s existing brands could cover most of that.

As for doing the same in the heavy-duty segment, which Sterling has about 5 percent stake in, Patterson said modifications to a variety of Freightliner and Western Star model frames would be required.

"There’s some gaps in the (heavy-duty) product range where there isn’t a Freightliner product that’s configured exactly for some of the markets that Sterling served, but those are relatively small segments," said Patterson, who preferred not to go into specifics at this time.

The manufacturer confirmed that dealers will continue to accept orders until Jan. 15, 2009. And new truck sales will continue until present dealer stocks are depleted.

There are few stand-alone Sterling dealers in North America. Most franchises are dueled with other brands in the Daimler stable; and some others still have ties to non-Daimler brands such as Ford, which sold Sterling to Freightliner in 1998.

"We’re extending to Sterling dealers an ongoing service agreement that would encourage them to provide service and warranty repairs as well as continuing to offer replacement parts and technical information to Sterling operators. And those negotiations have already begun," Patterson said.

The largest truckmaker in the world was simply overextended in a rapidly shrinking North American freight market.

Andreas Renschler, the German-based head of Daimler’s worldwide commercial truck business, said buyers "are not thinking about the future right now" as they grapple with economic headwinds as well as rising fuel, maintenance and compliance costs.

He said there’s very little indication that the market could be propped up in 2009 by a small pre-buy in advance of the 2010 EPA engine regulations. "The boom market of 2006 will not return."

He added that the lack of interest in new equipment is almost exclusively in response to the economy, not skepticism over new SCR technology, which is the technology most OEMs will adopt to meet the next round of emissions regulations.

Dale Hallman, founder and principal at Highway Sterling & Western Star in Ayr, Ont., first heard the news this morning.

"It was a shock to me," he told todaytsrucking.com shortly after. "This is the biggest thing since Freightliner bought Western Star.

Hallman’s been selling about 150 Sterlings a year for the past few years — Mostly construction vocational types like the 360; and most recently the new offering, the Bullet.

Naturally, he’s disappointed. But in the end, he acknowledges that the manufacturer had to make a business decision.

"You’ve got to remember when they make these decisions they’re not only thinking about our little part of the world but they’re also  thinking globally."