Scania Plans Job and Production Cuts in Europe image

Scania announced it will cut jobs and production in Europe, as the sluggish demand in this market made the truck maker miss its quarterly profit forecast.

Scania, majority owned by VW, announced it will cut daily production in Europe by 15% during the first quarter and around 700 jobs. Analysts expect other automakers to adopt this solution in Europe, where demand for commercial vehicles continues to drop amid prolonged economic weakness. This week, industry data showed that sales of heavy duty trucks, including Scania’s flagship R-series, have dropped 9.4% in 2012 and more than 20% in December.

Scania reported its fourth-quarter operating profit down from 2.74 billion Swedish crowns in 2011 to 2.17 billion Swedish crowns ($340 million) in 2012, missing analysts’ forecast of 2.48 billion. The trucks maker said that order intake in Europe was unchanged during the fourth quarter in 2012, but the overall operating margin dropped to its lowest level over the past three years.

“The big disappointment during the quarter was profitability which I would say has to do with them being forced to give discounts on trucks and scale back of inventories,” Handelsbanken Capital Markets analyst Hampus Engellau said.