ST. THOMAS, Ont. - Sterling Trucks is eliminating one of its two remaining shifts and laying off another 720 workers as of November as the southwestern Ontario manufacturer joins the ranks of Canadian companies being squeezed by a U.S. economic slowdown.

The industrial company, which makes dump trucks and utility trucks used by construction workers and hydro employees and other vehicles, carried out the cuts as the market for trucks slumps because of the weakening U.S. economy.

A high Canadian dollar is also eroding exports to the United States.

The job reductions are another blow to this industrial community south of London.

Magna International Inc. (TSX:MG.A) said last month that it will cut 400 jobs at its Formet Industries plant in St. Thomas, which assembles frames for pickup trucks built by General Motors Corp (NYSE:GM) at its Oshawa truck plant east of Toronto.

The layoffs at the 1,600-employee Formet plant, the first in its 11-year history, take in effect in September when GM's Oshawa truck plant cuts production to one shift from two, as a result of a sudden and sharp decline in demand for fuel-hungry vehicles. a

A further round of cuts to its North American white-collar workforce was announced this week by General Motors Corp. (NYSE:GM), which said further production cuts may also be needed to adjust to customer demands..

Ford Canada has also scaled back production at its St. Thomas-Talbotville car aseembly plant, which makes rear-wheel drive sedans that are favoured by police forces because of their durability.

Thursday's streamlining at Sterling continues the battering experienced by the troubled manufacturing sector based in Ontario and Quebec.

But the overall Canadian economy is growing, especially in the energy-rich West, and consumers appear set to continue their spending, says an upbeat review of the economy issued Thursday by the Bank of Canada.

In its latest monetary policy review, the central bank said Canadians all over the country are profiting from the ongoing commodities boom and helping to rescue the economy from the throes of recession.

At Sterling, the company laid off an additional 600 people in St. Thomas last year when another shift was cut, said Dave Elliott, president of the Canadian Auto Workers Local 1001.

Back when there were three shifts, "We built trucks pretty much 24 hours a day, five days a week," Elliott said.

But with the economy in a slump, "freight's not moving, construction is down - nobody is buying trucks."

"We really need the economy to turn around ... and hopefully the price of fuel can drop and people will start buying again."

The president of the St. Thomas Chamber of Commerce called the layoffs "devastating" news for the city, which has an official population of about 30,000 - or about double that if outlying areas are included.

Bob Hammersley said there is "no way to understate how much impact 720 relatively high-paying positions have in a community."

Each one of those jobs, he said, "can spin to touch at least seven others that sell vehicles, that sell groceries right down to the neighbourhood gas station."

Elliott agreed, saying Sterling's younger and well-paid workforce "puts a lot of money into the local economy" and warns the spinoffs "will be amazingly felt."

Nothing has been arranged yet regarding compensation for the affected workers, he added.

"We've got many meetings to sit down with the company to discuss what's going to be best for the membership."

Sterling Truck is headquartered in Redford, Michigan, and is a subsidiary of Daimler Trucks North America of Portland, Oregon.

The St. Thomas factory produces a range of vehicles under the Sterling brand from small delivery trucks and highway rigs to cement mixers and garbage trucks.

A call to Sterling Truck early Thursday was answered by a security official who said the company would not be issuing a statement about the layoffs.

Meanwhile a spokesman for Navistar International Corporation (NYSE: NAV) said that things are going well at its truck plant in Chatham, Ont., about 120 kilometres southwest of London and St. Thomas.

Navistar recently recalled about 200 laidoff employees in Chatham due to strong demand for its new ProStar fuel-efficient trucks, with production rising to about 100 units per day from 50 units a year ago, said Navistar spokesman Roy Wiley.

"The overall market is still in the doldrums, as everybody knows. But we've been doing better. Our market share is up in a soft market," Wiley said from Navistar headquarters in Warrenville, Ill.

Navistar doesn't disclose how many people are employed at its plants, he said.

Story Source: Canadian Press