Daimler (DAI) has revealed its optimism about the U.S. truck market stating that the market has bottomed. The company has predicted that the North American truck market sales would rise 10% in 2010. Citing possible improvement in consumer and housing markets in the U.S. due to government stimulus, Andreas Renschler – a member of Daimler’s board – has commented that demand for trucks carrying consumer goods or construction materials would revive.

In line with this expectation, the company has reversed its decision to close the Oregon truck plant last month. Last year, the company had slashed capacity by closing plants in Ontario and Oregon , aiming to improve annual earnings by $900 million within 2011. Nevertheless, Daimler believed that the global sales would not return to such peak levels in the near future.

The company anticipated demand for medium- and heavy-duty trucks to fall 50%–60% in Western Europe this year, and 40% in Japan and North America . Daimler Truck revenue slashed 33% to €9.2 billion ($13.5 billion) in the first half of the year.

The division sold about 120,000 trucks in the period, down 48% from the year ago level. Daimler’s Trucks segment develops and produces vehicles within a global network under brands such as Mercedes Benz, Freightliner, Sterling , Western Star and Mitsubishi Fuso. The segment has 35 production facilities.

In the segment, the company intends to achieve an average return on sales of 8% throughout its business cycle by 2010. Daimler has the advantage of an extremely versatile product range in the Trucks division.

This includes economical and environment-friendly trucks with the BLUETEC technology for the European markets, the new generation of the Actros launched at the end of January 2008, the new Cascadia heavy-duty truck under the Freightliner brand for North America, improved Mitsubishi Fuso Super Great heavy-duty truck and the low-emission version of the Mitsubishi Fuso Canter light-duty truck for the Asian markets.

We recommend the shares of Daimler as Neutral.

Zacks Investment Research
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