Volvo Global Trucks Launches Restructuring Program in North America
Sep 28, 2001 12:00 PM
Volvo Global Trucks today announced an aggressive program to respond to a depressed North American market that shows few signs of a near-term recovery. The main actions are:
Reducing North American industrial capacity by closing the Winnsboro SC, plant.
Consolidating North American support functions to eliminate duplication of effort between Volvo Trucks North America and Mack Trucks Inc.
Strengthening of the customer support system and the product offering.
"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 chief executive officer of AB Volvo.
"With this initiative Volvo Global Trucks will significantly improve its North American profitability and break-even point, allowing us to better withstand the cyclicality of the industry, and creating a highly competitive North American structure for the future," said Tryggve Sthen, president and CEO of Volvo Global Trucks.
As a result of the ongoing negative business cycle in North America, the total market for heavy trucks has plummeted from a high of about 309,000 units in 1999 to an expected 2001 volume of only 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 only 120,000 - with about 30,000 new heavy-duty trucks in industry-wide inventory.
A substantial reduction of Volvo Global Trucks' North American manufacturing capacity is therefore a key component of the restructuring program. The group's three assembly facilities, Mack's Macungie PA and Winnsboro plants, and Volvo's New River Valley VA plant - are operating at only 30 percent of their total capacity of more than 130,000 trucks per year.
To address this situation, operations at Mack's Winnsboro facility will be phased out within the next 15 months, at which point Winnsboro production will be transferred to the New River Valley facility - and remain Mack-branded.
By streamlining manufacturing facilities, the Macungie assembly operations will play an even more significant role in the competitiveness of the Mack brand in North America.
Mack and VTNA will maintain two separate headquarters, each with its own management and all of the functions necessary to deliver brand-specific, premium products and services to the brand's core markets. Meanwhile, a number of duplicative support functions which currently exist at both
Mack and VTNA will be consolidated to increase the overall operating efficiency.