Scania Lowering Production Rate

Scania announces it will lower its production rate starting January 2012 due to a slowing demand for products.

Economic worries in Europe and the world have made customers more hesitant about investing in new products. In November 2011, Scania cut back its production rate by about 15% at the global level, but since then demand has deteriorated further.

“The slowdown in Europe and the Middle East has continued. Meanwhile we are also seeing a lower rate of order bookings from other markets,” says Martin Lundstedt, Executive Vice President in charge of Scania’s sales and marketing.

In Brazil there is uncertainty about the market trend during the first half of 2012 in light of the transition to new Euro 5 emission legislation and the trend of global demand for agricultural products and other commodities.

At the global level, Scania will lower its production rate by about 15% starting in January. The adjustment of production levels will occur at Scania’s production units in Europe and Latin America and will be handled within the terms of the existing flexibility agreements between the company and the respective trade unions.

“This implies that we must gradually adjust staffing, which unfortunately means that we will be unable to renew the contracts of more than 1,000 fixed term temporary employees in our global production network,” says Anders Nielsen, Executive Vice President in charge of Scania’s production and logistics.

As a result of the production cutback that Scania carried out in November, the contracts of 900 of a total of 1,400 fixed term temporary employees at European production units were not renewed. The adjustment that has now been decided will mean that most of the remaining number of fixed term temporary employees in Europe will be affected, along with a majority of the fixed term temporary employees in Latin America.

For nearly two years, Scania has been working with short and stable delivery times, approximately eight weeks in Europe, with the aim of getting the right signals to the production network as early as possible when changes occur in order bookings. This minimizes inventory build-up.