MAN SE Cuts Hours for 4,000 Workers on Europe Demand Drop

MAN SE is scaling back truck production by cutting hours for as many 4,000 workers as European commercial-vehicle producers grapple with slumping demand in key markets.

The third-biggest truckmaker in Europe will reduce manufacturing at plants in Germany and Austria starting next month as industrywide deliveries in the region may drop as much as 15 percent in 2014, Anders Nielsen, head of MAN’s commercial-vehicle unit, said at a press conference in Hanover, Germany. MAN also faces a “difficult” environment in Brazil, he said.

Freight haulers and construction companies are slowing their pace of investment as economic growth decelerates in some regions. Demand in Russia has been hurt by the government’s dispute with Ukraine, and weakening gains in China’s gross domestic product have had a knock-on effect in Brazil. The European Central Bank is undertaking monetary stimulus measures to kick-start growth in countries using the euro.

“We’re fighting for our business and are keeping market share” in Europe, Nielsen said. Forecasts by competitors Daimler AG and Volvo AB that the region’s heavy-truck market will shrink by about 5 percent are “too optimistic.”

Brazilian Recession

Brazil’s economy slipped into a recession in the second quarter, with GDP also hurt by holidays during the World Cup soccer tournament in the country at mid-year and a bond-default crisis in Argentina, the country’s third-biggest trade partner.

The market in Brazil for medium-duty and heavy trucks may shrink by at least 10 percent this year, Wolfgang Bernhard, head of the Daimler’s truck division, told journalists today at a trade show in Hanover, reiterating an earlier forecast.

Volvo, which ranks second to Daimler in global truck sales, is predicting an industrywide contraction in the country of 13 percent for heavy vehicles. Volkswagen AG, MAN’s majority owner, said today that its VW commercial-van nameplate is unprofitable in South America as market share erodes in Brazil.

“The outlook for Brazil is very tough” amid questions about government plans to continue a sales-incentive program and truckmakers’ price cuts to combat the market decline, Laura Lembke, a London-based analyst at Morgan Stanley, said in a phone interview.

Russian Contraction

MAN said earlier this month that it was in talks with labor representatives on reducing hours for 2,000 workers at the plant in Steyr, Austria, partly because of a drop in demand in Russia. Nielsen said today that MAN also plans work-time reductions at its factory in Salzgitter, Germany.

The Russian heavy-truck market will probably contract by about 25 percent, and MAN’s plant in St. Petersburg that assembles trucks from component kits is operating at “low speed,” Nielsen said.

The value of European truckmakers’ exports to Russia plunged 35 percent from a year earlier in the seven months through July, and the country accounted for 7.1 percent of sales abroad versus 9.4 percent in the 2013 period, according to data from the Brussels-based ACEA auto-industry lobby.

“The Russian market has always been heavily volatile,” Roman Mathyssek, a Munich-based analyst at consulting company Strategy Engineers GmbH, said in a phone interview. “Once the situation calms down, the market will probably recover quickly.”

MAN will deal with the production cuts by lowering employee hours and not through mass firings, Nielsen said. The works council negotiations involve the structure of the production network as Munich-based MAN struggles with low capacity utilization, he said.

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