DaimlerChrysler's Freightliner heavy truck unit, its SelecTruck sales arm and independent dealers across North America are buried in new and used Class 7 and Class 8 heavy trucks. They have been told to move the iron, and DaimlerChrysler's finance arm, Mercedes Benz Credit Corporation, will be launching an aggressive crusade to sell off inventory.

"Business as usual just will not work. Bold steps must be taken," wrote Freightliner President James Hebe in a recent letter to dealers released by The Wall Street Journal.

Freightliner is North America's largest manufacturer of heavy trucks. Brands under Freightliner's control include Sterling, Western Star, Thomas Built Buses, American LaFrance and Orion Buses. Heavy trucks such as Freightliner's generally cost in the neighborhood of USD $90,000.

With a 40% market share, the Freightliner network handles more new and used heavy trucks than any other in the world. And it is North America's leading retailer of used Class 8 trucks through 30+ Freightliner-owned SelecTrucks dealerships and several hundred independent affiliated dealers.

Reportedly sitting on inventory of at least 45,000 used Class 8 trucks, the Freightliner network is under intense pressure. Unfortunately, the glut comes in the midst of what is now a rapidly collapsing market for heavy trucks.

In February, sales of Class 8 trucks fell for the 11th straight month, down over 42% from February 2000. Only 10,700 Class 8 trucks were sold in the U.S. in February, after January sales of 11,350 units were off 31% from the year earlier. The January-February total of 22,000 units is down 37% from January-February 2000. Equally hard-hit have been Class 7 heavy trucks, down 32% in February. Class 6 truck sales were down 15% and Class 5 sales were off by 20%. The one bright spot has been light Class 4 trucks, with sales holding onto what has become a long-term rally, up 21% in February from a year ago.

Freightliner has seen a 37% drop in new Class 8 sales, and most in the industry expect 2001 sales for the industry to be off by 40% or more. Freightliner has taken aggressive steps to cut production of new trucks over the past year, in addition to cutting its workforce by over 5,000.

Putting Freightliner's used truck inventory in perspective, if no new Class 8 trucks were sold in the United States and Freightliner dealers got every used truck sale, it would take more than four months to sell off the inventory.

Mr. Hebe's reported letter to dealers went on to say Mercedes-Benz Credit and Freightliner will unveil programs that "will be the most all-encompassing attack on the market seen to date by any truck manufacturer or finance company."

Financing is usually handled by Acceleron Financial or by Mercedes-Benz Credit Corporation's Freightliner Financial Services Division. It is the Mercedes-Benz Credit Corporation which has begun putting heat on the Freightliner division to move the excess inventory.

However, new and used truck prices are collapsing as the unsold inventories continue to balloon. Freightliner dealers find themselves trapped by high-volume returns from fleets and independent operators; huge sales in previous years now mean huge fleets coming back. Due to the slowing economy, fewer new trucks are being sold to replace those returned used trucks. Also, many trucks were sold to operators basking in the roaring economy who later could not make payments when fuel prices soared and business conditions became more difficult.

As the truck inventory grows and its value declines, some analysts are predicting Mercedes Benz Financial may have to write off as much as USD $500 million to adjust the inventory value.

Heavy truck sales are traditionally a long-cycle industry; their last major drop was in the late 1970s and 1980s. Most dealers expect heavy truck sales to begin rebounding by the end of the year. And in some areas of the U.S., sales are only off fractionally. Northwest Arkansas, for example, home of J.B. Hunt Transport Services, American Freightways and others, says it is a kind of "truck heaven" and not as hard-hit as other areas of the country.

Several truck industry analysts are predicting Freightliner's losses for DaimlerChrysler could run as high as USD $600 million in 2001. That comes on top of DaimlerChrysler's unexpectedly large operating losses from Chrysler (estimated at USD $2.5 billion for 2001) and continuing problems at Mitsubishi.

Chrysler is expected to cut 27,000 U.S. jobs in the next three years, with 19,000 coming this year. Last week, nearly 2,700 salaried employees lost their jobs at Chrysler, including over 1,000 at the corporate headquarters. Local news referred to it as "Black Friday", and one employee said, "It was like that show Survivor."

Shareholders have been putting intense pressure on the company's management, citing the "botched" takeover of Chrysler and ongoing problems in operations around the world. This week, a shareholder rebellion in Germany showed as shareholders filed several resolutions critical of DaimlerChrysler's management. DaimlerChrysler's annual meeting is scheduled for Berlin next month.