Scania Will Lower Production Rate Due to Slowing Demand

Sweden--December 2011: Regulatory News:

“The slowdown in Europe and the Middle East has continued. Meanwhile we are also seeing a lower rate of order bookings from other markets”

Scania (STO:SCVA)(STO:SCVB) foresees a continued slowdown in demand in various markets and, starting in January, will lower the production rate at its units in Europe and Latin America. This adjustment will be handled within the terms of existing flexibility agreements at the company.

Economic worries in Europe and the world have made customers more hesitant about investing in new products. In November 2011, Scania cut back its production rate by about 15 percent at the global level, but since then demand has deteriorated further.

"The slowdown in Europe and the Middle East has continued. Meanwhile we are also seeing a lower rate of order bookings from other markets," says Martin Lundstedt, Executive Vice President in charge of Scania's sales and marketing.

In Brazil there is uncertainty about the market trend during the first half of 2012 in light of the transition to new Euro 5 emission legislation and the trend of global demand for agricultural products and other commodities.

At the global level, Scania will lower its production rate by about 15 percent starting in January. The adjustment of production levels will occur at Scania's production units in Europe and Latin America and will be handled within the terms of the existing flexibility agreements between the company and the respective trade unions.

"This implies that we must gradually adjust staffing, which unfortunately means that we will be unable to renew the contracts of more than 1,000 fixed term temporary employees in our global production network," says Anders Nielsen, Executive Vice President in charge of Scania's production and logistics.

As a result of the production cutback that Scania carried out in November, the contracts of 900 of a total of 1,400 fixed term temporary employees at European production units were not renewed. The adjustment that has now been decided will mean that most of the remaining number of fixed term temporary employees in Europe will be affected, along with a majority of the fixed term temporary employees in Latin America.

For nearly two years, Scania has been working with short and stable delivery times, approximately 8 weeks in Europe, with the aim of getting the right signals to the production network as early as possible when changes occur in order bookings. This minimises inventory build-up.

Scania is one of the world's leading manufacturers of trucks and buses for heavy transport applications, and of industrial and marine engines. Service-related products account for a growing proportion of the company's operations, assuring Scania customers of cost-effective transport solutions and maximum uptime. Scania also offers financial services. Employing some 35,500 people, the company operates in about 100 countries. Research and development activities are concentrated in Sweden, while production takes place in Europe and South America, with facilities for global interchange of both components and complete vehicles. In 2010, net sales totalled SEK 78 billion and net income amounted to SEK 9.1 billion. Scania press releases are available on Scania