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Daimler exits North American bus business (Orion to be shut)
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RailBus63
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PostPosted: Wed Apr 25, 2012 7:07 pm    Post subject: Daimler exits North American bus business (Orion to be shut) Reply with quote

MarketWatch - Daimler Buses Reconfigures Operations in North America

- Strategic partnership planned with Motor Coach Industries (MCI) to strengthen Setra's coach business in North America - Daimler would receive a minority stake in MCI - Production of Orion transit buses to wind down after fulfillment of current orders - Daimler to stand behind all current customer commitments and warranties

STUTTGART, Germany, April 25, 2012 /PRNewswire via COMTEX/ -- 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 today 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.

Starting today, 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.

Further information from Daimler is available at: www.media.daimler.com and www.daimler.com .
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Jimbo



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PostPosted: Wed Apr 25, 2012 7:46 pm    Post subject: Reply with quote

Any idea of the number of ORIONS in service in North America ?
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traildriver




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PostPosted: Thu Apr 26, 2012 1:33 am    Post subject: Reply with quote

It is fascinating to read how corporate PR 'spin-doctors' put out a press release that attempts to make very negative news in a positive light...
So farewell to Orion.
And as far as the MCI-Setra arrangement, we will have to wait and see...
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Mr. Linsky
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PostPosted: Thu Apr 26, 2012 12:58 pm    Post subject: Reply with quote

traildriver,

Well said and I agree (now you know what 'spin doctors' are all about!).

In the case of Orion; 'Whoops, There Goes Another Rubber Tree Plant!'.

I happened to be driving behind a brand new MCI (whatever the model was) the other day and I gotta tell you that it ain't no D 4500 any more - those days are over!

Good memories though.

Regards,

Mr. 'L'
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traildriver




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PostPosted: Fri Apr 27, 2012 2:17 am    Post subject: Reply with quote

I agree, Mr. Linsky...the latest D4505's do not have the familiar, and IMHO 'handsome, facade nor back end of the earlier models.
My company has three of them in our fleet, but because of their state supported financing, are limited to only certain of our routes, so I haven't gotten much chance to become familiar with them.

I recall this is not the first time that Daimler has exited the North American bus market. Back in the late '60's, they were selling their Mercedes Benz model 0302's to some properties. I believe Gray Line of either Boston or Washington bought several. They flopped. I heard comments that they just weren't 'rugged' enough to hold up in heavy service, although their proponents cast blame at American drivers and mechanics for not taking proper care of them.....
And the name 'Setra' I recall when Kassbohrer-Setra was the contracted builder of M E Moore's (Principal of Continental Trailways) Eagle coaches from 1956 until 1961. That was well before Daimler acquired Setra.

The German's have not done too well here with buses...Neoplan gave it a good trial before pulling out. And MAN did well for a while with articulated's, before succumbing.
What I am curious about is the lack of Asian attempts to penetrate our market. I know very little of what their products are. I have seen Toyota mini buses of approximately 20 passengers on several Caribbean islands, but never here.

Van Hool seems to be doing well. Their relationship with ABC Coach seems to be the model that Setra is trying to emulate with MCI, as far as sales and service, although ABC is not a manufacturer of what is essentially a competing product.
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RailBus63
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PostPosted: Fri Apr 27, 2012 8:23 am    Post subject: Reply with quote

The impression I'm getting from media reports is that the shutdown was a surprise decision that few in Orion's Mississauga or Oriskany plants saw coming. We all know that the North American transit bus market is slow right now, but Orion was coping and their competitors were not doing a whole lot better. Yes, government funding for new buses has been a political football lately in Washington but something eventually will be done. The bottom line is, the buses in America's cities are getting older every day and sooner or later they will have to be replaced.

I always thought that Orion (and NovaBus) had a leg up on their competitors because they were owned by a large international truck and coach manufacturing company. I thought that being part of a conglomerate could be very beneficial at times like this when Daimler's deep pockets could have subsidized Orion underbidding their competitors to grab market share. They could have really hurt New Flyer in bids for non-articulated buses. In hindsight, thought, it seems like the big shots in Germany expected Orion to sink or swim on their own, which probably explains why they were often a high bidder on major awards. Maybe it was a European way of thinking, as if Orion's hybrids were a premium product that transit agencies would gladly pay more to purchase, but transit buses are commodities in this country. It's too bad because I believe they had just about perfected the Orion VII (it scored very well in recent Altoona testing) and could have done very well with it once the market does come back.
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Bill D




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PostPosted: Fri Apr 27, 2012 2:58 pm    Post subject: Reply with quote

Jimbo wrote:
Any idea of the number of ORIONS in service in North America ?


A member of another bus board posted a link to New Flyer's Annual Information Form. According to this report there are about 75,000 active heavy duty transit buses in the United States and Canada. The breakdown by manufacturer is as follows:

New Flyer - 22,000 units (30%)
Gillig - 14,250 units (19%)
Orion - 10,500 units (14%)
NABI - 6,750 units (9%)
Nova - 5,250 units (7%)
OEM's no longer in business - 5,250 units (9%)
Other active manufacturers - 9,000 units (12%)

It seems that Orion should have done a better job of targeting a specific segment of the market, as New Flyer and Gillig have. The report also indicates that in 2011, Orion's market share was only 9%, far below New Flyer (35%), Gillig (30%) and Nova (16%). NABI also had a 9% market share as well, it will be interesting to see what approach they take in the future.

The link can be found here: http://www.newflyer.com/index/cms-filesystem-action/investor_relations/financial%20reports/2012_03_30_annual_information_form.pdf

Bill
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RailBus63
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PostPosted: Fri Apr 27, 2012 6:20 pm    Post subject: Reply with quote

Those numbers by manufacturer would also indicate that Orion had a significantly larger market share at one time if their buses still make up 14 percent of the current U.S. fleet despite poor sales in recent years. I once counted their sales in the 1997-2000 time period and if I recall correctly they were selling about 1,200 to 1,300 buses per year back then. They did good in keeping and even expanding their sales to NYC and Toronto but lost their former strongholds in Ontario and Upstate New York and generally never competed in much of the U.S. The market was there once the Flxible Metro and the RTS went out of production but it was New Flyer and Gillig (and NABI to a lesser extent) who took advantage. Having a poor product in the Orion VI and being late to the game with the Orion VII definitely hurt them.
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traildriver




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PostPosted: Sat Apr 28, 2012 10:23 am    Post subject: Reply with quote

Bill D wrote:
Jimbo wrote:
Any idea of the number of ORIONS in service in North America ?


A member of another bus board posted a link to New Flyer's Annual Information Form. According to this report there are about 75,000 active heavy duty transit buses in the United States and Canada. The breakdown by manufacturer is as follows:

New Flyer - 22,000 units (30%)
Gillig - 14,250 units (19%)
Orion - 10,500 units (14%)
NABI - 6,750 units (9%)
Nova - 5,250 units (7%)
OEM's no longer in business - 5,250 units (9%)
Other active manufacturers - 9,000 units (12%)

It seems that Orion should have done a better job of targeting a specific segment of the market, as New Flyer and Gillig have. The report also indicates that in 2011, Orion's market share was only 9%, far below New Flyer (35%), Gillig (30%) and Nova (16%). NABI also had a 9% market share as well, it will be interesting to see what approach they take in the future.

The link can be found here: http://www.newflyer.com/index/cms-filesystem-action/investor_relations/financial%20reports/2012_03_30_annual_information_form.pdf

Bill

The stats are very interesting....thanks for providing them. I am not very familiar with NABI. Are they derived from Ikarus in some way?
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RailBus63
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PostPosted: Sat Apr 28, 2012 1:04 pm    Post subject: Reply with quote

Yes - NABI started out as American Ikarus.
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timecruncher



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PostPosted: Sun May 13, 2012 1:57 pm    Post subject: Reply with quote

Orion bid agressively on the TARC RFP last year. They were #2 in polling when we did the final evlauation. They lost primarily because:

Rooftop a/c - our maintenance, ever mindful of how our workers like to get paid for not working, saw a potential for injury working from scaffolding and platforms.

Demonstrator visit - the Orion people would not let us touch the bus. We were not allowed to drive it, we were not allowed to look it over (much) and the sales reps were simply not willing to share anything about why we should purchase their vehicle.





In discussion with other industry professionals, it is a collective opinion that when Gillig began offering a CNG alternative, Orion saw a big chunk of their business (California) going away. It is just speculation on our part, of course.

Bottom line: More Gilligs.

timecruncher
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RailBus63
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PostPosted: Mon May 14, 2012 11:27 am    Post subject: Reply with quote

timecruncher wrote:
In discussion with other industry professionals, it is a collective opinion that when Gillig began offering a CNG alternative, Orion saw a big chunk of their business (California) going away. It is just speculation on our part, of course.

timecruncher


Hi Cliff - good to hear from you. I suspect you are correct and that the Gillig CNG decision did impact Daimler's long-term outlook. I think they realized that transit buses are commodities in North America - any competing bus could be ordered as a CNG, hybrid or diesel, and that low bid typically rules.
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Springbus



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PostPosted: Fri Jul 13, 2012 9:44 am    Post subject: Reply with quote

How will Orion leaving the market impact companies like New Flier and Gillig? Is most of there business going to go to Gillig or will it be spread out?
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frankie



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PostPosted: Fri Jul 13, 2012 10:08 am    Post subject: Reply with quote

I would think now that there's one less competitor in the bus market, there should be an increase in orders for NF, Gillig, Novabus and NABI.

I notice a trend here. Back in the early '50's, there were tons of bus builders that eventually dwindled down to two by the early '60's - Flxible and GMC. Then we had an influx of new builders in the '70's and '80's mainly from foreign influences that eventually put Flxible and GMC out of business. Today with the exit of Orion, we're again down to a few.

Ironically the causes of the declines were very different. The first wave were simply builders going out of business and now it's mainly from merges and buyouts. With four major builders left today, it's be interesting to see how the economic atmosphere plays into their future.

Frankie
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Springbus



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PostPosted: Fri Jul 13, 2012 2:09 pm    Post subject: Reply with quote

I guess the question is: are we done yet? With Orion moving out of the market that is ~10% of the volume, there still is significant manufacturing capacity that is not being utilized and will that cause further pricing pressure causing eventual disruption when some of the bigger players get in trouble. Alternatively, Orion leaving the market stabilizes prices and the remaining big 4 continue on.
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