Scania slashes production as Middle East slows

Production to be cut by up to 15% due to economic turmoil

Truck demand fell by 50% in H1 2011
Truck demand fell by 50% in H1 2011


Swedish truck-maker Scania is to cut its production output by 10-15% in November.

While demand remains strong in Latin America, the company said economic volatility in Europe and the US coupled with a slow-down of orders in the Middle East means its is revising current productivity plans and is likely to cull 900 of its 1,400 contract workers in the first quarter of 2012.

"It is a matter of deceleration in Europe, but also a slower pace of order bookings from the Middle East," said Martin Lundstedt, EVP, sales and marketing.

Scania cut 1,500 temporary workers in 2008 before moving to a four-day week for ten months during the height of the downturn.

Sales for Europe’s truck makers declined by 50% in the first half of 2011 and the news that Scania will not re-new the contracts of 900 workers in February will disappoint those hoping for signs of growth in 2012.

However, Scania announced that it will continue its $230 million plan to increase production capacity to 120,000 vehicles from 100,000 at its plants in Sweden.

"It's a cyclical business and we're used to this," said Erik Ljungberg, SVP corporate relations told Dow Jones. "Unfortunately, we do have 2008 fresh in the memory, but the difference now is that the financial system has not fallen apart."


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