Mixed Fortunes

Following announcements by Nissan, Renault, and Volvo in Europe, and restructuring by General Motors and Ford, utility vehicles are also unveiling hits from slumping sales.

In the United States, the market deteriorated "in a way we have not anticipated," Daimler Trucks boss Andreas Renschler told a telephone press conference.

He pointed to weaker demand, a "dramatic" increase in fuel and raw material prices earlier this year and effects of the international financial crisis.

The sector was undergoing fundamental changes, Renschler said, and "a near-term recovery is not on the horizon."

Daimler, the world's biggest maker of heavy trucks, decided to shut down its Sterling Trucks brand in March "in response to continuing depressed demand across the industry and structural changes in the company's core markets," a statement said.

The German group is a rare European actor in the North American heavy truck sector, with about 28 percent of the market and sales of 320,000 vehicles in 2007.

As a result however, it has suffered from the financial and economic crisis there, and has slashed its previous market forecast for 2008 sales of 435,000 heavy trucks down to 294,000.

"As the recession deepens, the heavy-truck market is hit harder," German auto expert Ferdinand Dudenhoeffer told reporters. "The sector will see a recession as well."

In addition, a Daimler spokeswoman told reporters, the sector is subject to regular cycles, and the German group had already expected diminished demand late this year and early in 2009.

"It is falling back more sharply now," she noted however.

Finally, new US regulations aimed at reducing pollution have also hurt sales, Daimler said.

The group will eliminate around one quarter of its workforce in North American heavy truck production, based on figures it provided.

Production at shut-down plants moving to Mexico

Two plants are to be shut down, one in Ontario, Canada in March, and another in Portland, Oregon in June 2010, and production will move to Mexico.

With pressure to reduce production costs rising, Daimler would focus on "low-cost countries," Renschler said.

In addition to the loss of 2,300 jobs, another 1,200 administrative posts will also be eliminated, the Daimler statement said.

After unloading the Sterling Trucks brand, Daimler will concentrate on its Freightliner and Western Star models.

"Sterling and Freightliner occupy the same (market) segment. But Freightliner has stronger sales and is our top-of-the-line," the Daimler spokeswoman said.

The group estimates its restructuring will cost around 600 million euros ($820 million), but will generate annual savings of 900 million from 2011.

"Daimler is trying to limit its losses in the United States," Dudenhoeffer concluded, though he added that the market should "pick up again in 2010."

It is likely meanwhile to shift towards emerging economies in Eastern Europe, India and China.

"There are almost no other means of transporting merchandise there," Dudenhoeffer said.

In general, he concluded, "logistics is clearly a growth industry; it is expanding twice as fast as the market for personal vehicles."

VW shares hit record high

In contrast to the bad news at Daimler, Volkswagen shares have set record highs while almost all other stocks are slammed by the financial crisis.

"There is no rational explanation," said Juergen Pieper, an analyst with the Metzler Bank amid heavy trading in the auto giant's shares.

Merck Finck counterpart Robert Heberger agreed, saying in reference to the group's share price: "There is no longer any relation to its real value."

Last week, as the credit crisis spilled financial blood on stock markets worldwide, shares in the biggest European carmaker took off in Frankfurt, hitting an intraday record high on Tuesday of 452 euros ($605).

Though the shares later dived lower, on Friday, while the German Dax index of leading shares plunged by 7.01 percent, VW gained an incredible 15.2 percent to close at a record 342 euros.

VW shares gained another 3.23 percent amid general market euphoria on Monday to a new record 353.06 euros.

As a result, VW has passed Japanese rival Toyota as the biggest car maker in the world in terms of market capitalization, at more than 90 billion euros, compared with around 80 billion for the Asian giant.

What is all the more surprising is that the auto sector is one of the most exposed to turmoil from the financial crisis.

VW has done better than many competitors, with sales tipped to set new records this year, "but when we are in a recession, it is going to suffer as well," Heberger noted.

Pieper added: "VW's true share value is around half" the present level.

"They are also going to cut production and the boss has already warned that 2009 will be difficult," he said.

Special circumstances attributed to VW boost

Explanations for the stock's health thus lies elsewhere.

First of all, VW is in the process of being taken over by Porsche, the maker of luxury sports cars like the 911.

Porsche currently owns more than 35 percent of the shares in its much bigger German counterpart, and has indicated it will reach 50 percent by the end of November.

But Porsche insists it is not presently buying VW shares on the market.

A persistent rumor has it that someone is doing the trading on Porsche's behalf.

For several months, Porsche has held options to buy VW shares that it obtained in deals with banks.

As the deadline for Porsche's takeover approaches, those banks must make sure they own the shares in question.

Brokers have said banks probably waited until the last minute in a bet that VW shares would fall because of the financial crisis and might be scrambling now to cover their positions.

Mystery surrounds investors

Another hypothesis is that speculative investment funds may have targeted VW shares with the practice of short selling, in which they borrow shares that are immediately sold in expectation of being able to repurchase them later at a cheaper price before they must be returned to the original owner.

If that were the case, funds could also be buying heavily to make sure they can return the VW stock without suffering even heavier losses.

"People must unwind short positions because they are losing money," Baader Bank strategist Robert Halver told reporters.

But in the end, even market specialists say that "no one knows who is holding the positions, who the speculative funds might be, who is buying or selling for Porsche," in the words of BHF-Bank analyst Albrecht Denninghoff.

"We do not know how many people are on board the ship.

"There is no transparency in the markets. At that point, anything is possible."

Halver goes even further, saying that even funds caught short trying to profit from short selling would not fully explain VW's soaring share price. "It is just not possible," he said.

"BaFin should open an investigation," Halver added in reference to Germany's financial market regulator.

A spokeswoman for the market watchdog told the AFP news agency it is examining the data. “It is not a formal investigation," she added.