Volvo shakes up North American operations

STOCKHOLM, Sweden (Oct. 1, 2001) — Volvo Global Trucks shook up its North American truck manufacturing operations in response to a depressed market that shows few signs of recovery.

In a news release, VGT said it plans to close Mack Trucks’ Winnsboro, S.C., plant and consolidate North American customer and dealer support functions to eliminate duplication of effort between Volvo Trucks North America and Mack.

The company expects to take a one-time restructuring charge of $120 million US, but the company predicts the move will result in improved annual profits of $150 million starting in 2003.

“While the restructuring program involves difficult decisions with major impact on our North American industrial structure, it’s clear that the extraordinary market conditions we are facing require extraordinary – and urgent – actions,” said Leif Johansson, president and CEO of AB Volvo.

The company said that as a result of the ongoing negative business cycle in North America, the total market for heavy trucks has fallen from a high of about 309,000 units in 1999 to an expected 2001 volume of 170,000 (140,000 in the U.S.). Meanwhile, total industry capacity is about 380,000 units, with North American manufacturers currently running at a level of 120,000 – and about 30,000 new heavy-duty trucks in industry-wide inventory.

The group’s three assembly facilities — Mack’s Macungie, Pa., and Winnsboro, S.C., plants, and Volvo’s New River Valley, Va., plant — are operating at only 30% of their total capacity of more than 130,000 trucks per year. Mack’s Winnsboro facility will be phased out within the next 15 months, at which point production will be transferred to the New River Valley facility.

Mack and VTNA will maintain two separate headquarters, each with its own management. Meanwhile, a number of support functions that currently exist at both Mack and VTNA will be consolidated.