Scania cuts jobs as truck orders slow

Financial highlights:
- Operating income fell to SEK 12,398 m. (12,746), and earnings per share rose to SEK 11.78 (11.38)

- Net sales increased by 12 percent to SEK 87,686 m. (78,168)

- The Board of Directors proposes a dividend of SEK 5.00 (5.00) per share

Comments by Leif Östling, President and CEO said “Scania’s earnings for the full year amounted to SEK 12,398 m. Higher vehicle and service volume was offset by a significantly stronger Swedish krona, a higher cost level and a changed market mix. Deliveries amounted to a record of 80,108 vehicles. Order bookings for trucks decelerated during the second half of 2011.

Southern Europe had a lower level throughout the second half compared to the first half and northern Europe was somewhat weaker in the fourth quarter. In the Middle East order bookings decelerated significantly during the second half, compared to the first half, to a very low level in the fourth quarter.

Low level of deliveries
High European truck deliveries during 2005-2008 followed by low level of deliveries in recent years means that the average age of the truck population is increasing.

The higher average age impacts demand for workshop hours and parts positively. This has a stabilising effect on Scania’s profitability. There is also good service demand outside Europe. Production of vehicles has been adjusted, both at the European and the Latin American units, to meet the current level of demand. As part of this adjustment, fixed term temporary contracts for about 1,900 employees are not being extended.

Scania is also deferring some investments and is more restrictive in recruitment and spending. The outlook for 2012 is difficult to assess, pecially in Europe in light of the economic policy problems in the euro zone, Chief Executive Leif Ostling said in a statement.

Lower production rate – job cuts ahead
In November 2011, Scania lowered the daily production rate on a global basis by about 15 percent compared to the end of the third quarter of 2011. Starting in January 2012, the daily production rate was further reduced by about 15 percent. As part of the adjustment, a total of about 1,900 employees will not have their fixed term temporary contracts extended.

Scania is also deferring some investments and is more restrictive in recruitment and spending. Scania will make a changeover to the new engine range in the Latin American production system in the first quarter of 2012.