Scania Lowering Production Rate

Starting in November, Scania will adjust the production rate at its units in Europe. The background is a deceleration in demand in various markets. The adjustment will be handled within the framework of existing flexibility agreements between the company and trade union organisations.

Government financial problems in Europe and the U.S. have now begun to affect economic activity and have led to hesitation among customers.

“It is a matter of deceleration in Europe, but also a slower pace of order bookings from the Middle East,” says Martin Lundstedt, Executive Vice President in charge of Scania’s sales and marketing.

During the first nine months of 2011 Scania has maintained a high, stable production rate, but starting in November the company will lower its production rate due to falling demand. Compared to the end of the third quarter, at the global level this means that the vehicle production rate will be reduced by 10 to 15%.

“We will lower the production level and adapt our costs by using the existing flexibility. The adjustment in production level will be handled within the framework of existing flexibility agreements between the company and trade union organisations at the various production units,” says Anders Nielsen, Scania’s Head of Production and Logistics.

“In Latin America, demand has stabilised at a high level, which means that we have continued high capacity utilisation at our production units in Brazil and Argentina,” Nielsen says.

For more than a year, Scania has been working with short, stable delivery times of about eight weeks in Europe, in order to send the right signals to the production network as early as possible in case of changes in order bookings. This minimises inventory build-up and enables the company to limit its order book.

For a long time, Scania has been working in various ways to boost flexibility in its production network. The company recently signed a new flexibility agreement with trade union organisations in Sweden that further increases its ability to respond to fluctuations in demand.