UPDATE 2-Scania to raise output as demand recovers

* Scania says strong Latam demand behind output hike

* Says also seeing “some recovery” in Europe

* To resume five-day working week at many units in April

* Scania shares up 1.7 pct, outpacing broader market

(Adds analyst comment, share price, detail, background)

By Niklas Pollard and Victoria Klesty

STOCKHOLM, March 16 (BestGrowthStock) – Truck maker Scania AB
(SCVb.ST: ) will raise production and bring back staff to
full-time work to cater to a recovery in demand from the deepest
market downturn in decades, it said on Tuesday.

Scania, majority-owned by German auto group Volkswagen AG
(VOWG.DE: ), said in a statement workers in many of its factories
would return to a five-day working week in April after having
worked four-day weeks during the downturn.

“There is a need to increase production mainly because
demand remains very high in Brazil, but some recovery is also
occurring in Europe,” the Swedish company said.

“By efficiently utilising our global production structure,
we are boosting our manufacturing rate in Europe so that we can
supply South American production units with components.”

Scania shares rose on the news and were up 1.7 percent at
115.5 crowns 1018 GMT, outperforming a 0.3 percent gain in the
Stockholm bourse’s blue chip index (.OMXS30: ).

European truck makers have been savaged as the global
financial crisis pulled the plug on years of booming demand,
sending commercial vehicle sales down more than 30 percent last
year. [ID:nLDE60O2J8]

Economies across the region have limped out of recession on
the back of massive stimulus measures from governments and
central banks, injecting some measure of activity in the highly
cyclical heavy-duty market though demand has remained tepid.

BRAZILIAN BOOST

But in recent months demand in emerging markets such as
Brazil, one of Scania’s biggest markets, has grown steadily more
robust while activity in Europe has lagged behind.

“In part, one might say this is expected, since some of the
component manufacturing in Europe is moving to a five-day week
to meet the strong demand in Latin America that we’ve actually
been seeing for a couple of quarters, mainly in Brazil,”
Handelsbanken analyst Hampus Engelleau said.

“But at the same time one should say that production has not
been brought back to meet increased demand in Europe. Levels
remain low there.”
Scania said the resumption of a five-day week at its
production plants applied primarily to April and added that some
workshops not involved in component manufacturing for South
America would continue on four-day weeks in the second quarter.

“I am not, however, ruling out that additional production
rate increases may lead to a resumption of the five-day week at
these units as well, if the positive demand trend continues,”
said Anders Nielsen, head of production and logistics at Scania.

“Though it should be noted that the level of demand is
substantially lower than during the record-breaking years 2007
and 2008,” he added.

Scania has been running a four-day working week since June
2009 for all employees in its Swedish home market while various
forms of working time reductions have also been in effect at
plants in countries such as the Netherlands, France and Germany.

Stock Market News

(Editing by David Holmes, Mike Nesbit)

UPDATE 2-Scania to raise output as demand recovers