As part of its 'GLOBE 2013' initiative, Daimler Buses is moving to secure sustainable competitiveness through worldwide advances in growth and efficiency. As a result of these efforts, the company is reconfiguring its bus business in North America (U.S. and Canada).
Strategic Partnership planned with MCI to strengthen Setra's coach business in North America
Daimler Buses announced the signing of a Letter of Intent with Motor Coach Industries International Inc. ("MCI") to establish a strategic partnership to combine MCI's product, service and sales network with Setra's North American coach distribution rights and network. The companies have agreed upon the material terms and conditions of the transaction and are working to finalize definitive agreements, which they expect to enter into and consummate not later than May 31, 2012. Upon consummation of the transaction, Daimler Buses would receive a minority ownership stake in MCI, and MCI would become the exclusive North American distributor of the Setra S407 and S417 German-manufactured premium motor coaches.
"The Setra motorcoach represents the highest standards of comfort, performance, customization and quality in a number of key regions worldwide," said Hartmut Schick, Head of Daimler Buses. "We're excited at the prospect of this partnership with MCI, which is a leading manufacturer of coaches in North America with top-flight distribution and service networks in the U.S. and Canada. Under a Setra-MCI partnership, customers will continue to enjoy the same state-of-art technology, quality German engineering, and best total cost of ownership in the market. A strategic relationship with MCI will carry forward Setra's proud tradition in North America, and also take it to the next level -- through increased local presence and enhanced customer services for Setra."
Rick Heller, MCI CEO, said, "The proposed transaction would allow MCI to expand its luxury motor coach offerings in the North America marketplace, while establishing a strategic partnership with one of the world's leading manufacturers of buses and motor coaches. If consummated, we would intend to fully leverage the capabilities of MCI's marketing and distribution networks on behalf of the world-renowned Setra brand. The expected partnership would also allow MCI access to Daimler's world-class Setra engineering and manufacturing capabilities. In addition to our planned consolidation of operations to realize efficiencies and other benefits, the strategic intent of the proposed transaction is to maintain the integrity of the MCI and Setra brands, parts and services."
Under the proposed agreement, through a transition period of several months following the execution of definitive agreements and the closing of the transaction, MCI would evaluate operations related to Setra in North America, and, where appropriate, integrate such operations with existing MCI facilities which will permit MCI and Daimler Buses to realize significant operating synergies. This planned partnership will allow Daimler Buses to better serve its customers through a broader service network, while strengthening Setra's presence in North America. All Setra motor coaches are German-engineered products produced in Neu-Ulm, Germany. This fact remains unchanged.
Daimler anticipates that operations related to Mercedes-Benz Sprinter in Greensboro, NC will be transferred to another Daimler facility.
Wind down of Orion transit bus production after fulfillment of current orders
Expectations for the transit bus business, which suffers from low public sector investments by municipal government agencies, are low and likely to remain depressed over the next several years. As a consequence, Daimler has decided to exit the transit bus business in North America and to wind down production of Orion buses in the U.S. and Canada.
Orion plans to take no additional new orders. Following the fulfillment of current production commitments over the next twelve months, the operating facility in Mississauga, Ontario will be closed, and the facility in Oriskany, New York will continue operations related to parts and field service only. In addition, Daimler expects to continue a retrofit program for current customers at the Oriskany facility. Daimler clearly stands behind all current customer commitments and warranties, and will therefore continue to support all Orion customers' warranty and service agreements through its extensive network of parts and field service representatives in the United States and Canada.
"Daimler Buses considered all possible options for reconfiguring our transit bus operations in North America, but at the end of the day, Orion is facing a situation where the cost position is not competitive, the local market is in a continued slump, and growth opportunities are not available from selling the product overseas," said Schick.
"Discontinuing production of Orion buses was a very difficult decision for us to make, but to secure our leadership position we must always strive to invest resources efficiently in support of our global strategy for growth. As part of our lasting commitment to all existing Orion customers, we will make sure a robust parts and service infrastructure continues to provide a high level of service and support."
Daimler intends to provide a separation benefit to all eligible employees affected by the reconfiguration of its Setra and Orion bus and coach businesses in North America, including to those separating employees for whom such benefits are not otherwise required by law.
'Globe 2013': A worldwide initiative for growth and efficiency
Daimler Buses last month announced GLOBE 2013, an initiative for Global Bus Excellence that aims to shape the future of mobility, while securing sustainable competitiveness through worldwide advances in growth and efficiency. In 2011, Daimler Buses sold 39,740 buses and coaches worldwide. Whereas the bus business was booming in some parts of the world, particularly in Latin America, the industry in Western Europe remained in a slump because of the financial and debt crisis. Market demand was similarly negative in North America, which, like its Western European counterparts, suffered from public sector budget constraints and therefore from substantially fewer calls for bids.