October 25, 2012 / 2:10 PM / 6 years ago

Daimler examining cost base in Brazil truck plants

FRANKFURT, Oct 25 (Reuters) - A slump in the Brazilian truck market that has proven to be longer and deeper than expected may have lasting effects on Daimler Truck employees at two local production plants in Juiz de Fora and Sao Bernardo do Campo.

“There we need to review our fixed cost position in Brazil, but that is a different topic - there we have to see what the outcome of this discussion (will be),” Daimler finance chief Bodo Uebber told analysts during a conference call on Thursday.

The company has already been in talks with labour leaders in Brazil over 15 unpaid vacation days through the end of January and training seminars where part of the wages are covered by unions. Daimler Trucks employs roughly 12,000 workers in Brazil, the lion’s share in Sao Bernardo.

Daimler expects the Brazilian truck market to fall between 20-25 percent this year due in part to new emission regulations that brought forward demand from this year into the last one.

When asked about the company’s 1.2 billion euro ($1.56 billion) cash burn in the first nine months of 2012, Uebber said the company lowered its forecast and now expects the industrial business will generate virtually no new cash this year when all things are considered.

This implies the flat 2.20 euro dividend Daimler is targeting for 2012 will be paid straight out of its 8.2 billion euros in industrial cash reserves — already their lowest level since the end of March 2010.

“From today’s perspective the total year cash flow will be slightly positive including M&A activities and contribution to pension plans of roughly 1 billion euros. Excluding this 1 billion, it should be an operating cash flow of 1 billion roughly,” he said.

Part of the expenses will likely be to support in the fourth quarter its dealer network in China, which combines a new margin system with investments in IT support, training and corporate identity.

“It (the support) is a very high double digit number, pretty close to the three digits without saying too much.”

$1 = 0.7711 euros Reporting By Christiaan Hetzner

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