Paul Vikner is president and CEO of Mack Trucks Inc. He's been president since 2001 and spent the five previous years at Mack as executive vice-president of sales and marketing (1996-2001). Previously at Iveco Trucks North America and Isuzu Trucks...
TOP DOG: Mack Truck's president and CEO, Paul Vikner.
Paul Vikner is president and CEO of Mack Trucks Inc. He’s been president since 2001 and spent the five previous years at Mack as executive vice-president of sales and marketing (1996-2001). Previously at Iveco Trucks North America and Isuzu Trucks North America from 1972-1994, Vikner has a bird’s eye view of what’s going on in the industry.
Truck News caught up with Vikner to ask him whether the future looks bright.
TN: Class 8 truck sales in the Canadian market grew by about 2,220 units in 2003 – an 11 per cent increase. Sales are also now picking up in the U.S. How are you feeling about 2004?
Vikner: We have moved from cautiously optimistic to cautiously enthusiastic. We don’t want to get too overly aggressive about where we think the market is going to go in 2004 because many things can happen. Right now, with the pent-up demand and where dealer inventories are, the ability to meet the level of orders coming in – over 50,000 the past few months – is not sustainable. Our backlog is currently (as of the third week of March) well into the third quarter at both of our plants. We feel the market is going to be significantly better this year than last year, and we believe that 2005 and 2006, barring any unforeseen developments, should be good years as well.
TN: At the same time, Mack’s share of the Canadian Class 8 truck market is down 2.2 per cent. What is accounting for this and what steps are you taking to remedy the situation?
Vikner: We are not comfortable with that market share number. In the past, we’ve had market share in the 10-11 per cent range. Part of this loss is attributable to the fact that in early 2003, as we transitioned production of our highway vehicles from our plant in Winnsboro, South Carolina to the New River Valley plant near Roanoke, Virginia, we went through a ramp-up phase, and for about five or six months we were building fewer trucks than we normally would. And so, as a result of having less product available, we lost some of our position in the highway business. The market was also down quite a bit at that time because of the highly disruptive pre-buy associated with the 2002 emissions regulations. We also found ourselves in a competitive environment where some companies were able to offer engines that do not comply with the ’02 regulations at a price that was significantly lower than we can realize for our compliant engines. So we did lose some business from traditional Mack customers who elected to buy the non-compliant engines. We simply could not reduce our prices to the point where we could be competitive with the non-compliant engines. It’s easy to give dollars away, but it’s tough to get them back. So rather than digging a hole for ourselves, we decided to take a more long-term approach to market share. Now that as of Jan. 1 of this year, every engine manufacturer must be in compliance with the regulations, the playing field is much more level, and we’ve already seen some of our customers who did not buy our product in 2003 buying our product in 2004.
TN: What do you see as the main operating challenges facing your customers today and how are you moving to answer their concerns with your truck and engine designs?
Vikner: It depends on the segment. In general, vocational customers are looking for a product that starts in the morning and works for them all day. Getting the job done is their main priority. Now that perspective is changing a little bit, but not nearly as fast as with the on-highway sector. Highway customers today are constantly looking for products that are more efficient and can lower operating costs with no unscheduled downtime. We are trying to build the best product we can and make sure that we have a support network in place so that when a customer does have some kind of event, we can get that person back on the road as quickly as possible. The investment we have made in our dealer network in the U.S. and Canada over the last two years has been very significant. I think fleets are also looking for somebody else to take on more and more of the kinds of activities that are not core to their businesses, including maintenance. This is not going to happen overnight, but we have to make sure that we continue to build our network in a way that enables dealers to provide more of the types of additional support services customers are looking for. I think the companies that will survive long term will be the ones that are going to be more than just equipment suppliers – the ones that can provide a broader range of services. The key is making sure that all your dealers are strong dealers. If not, it’s going to be tough to sell to fleets that are running coast to coast.
TN: How is the owner/operator holding up? Is he going to need special incentives or financial help to get back on his feet?
Vikner: I think the owner/operator business is going to become increasingly more challenging, frankly. I know that in the U.S., it has become tougher and tougher for small operators to survive and be competitive as they face higher insurance costs, low rates and competition with some of the services the larger companies can offer. I don’t think the owner/operator market is going to go away, but the way they do business is going to change. I think you’re going to see them more and more aligning themselves with the bigger players.
TN: Will your role have to change too? Will you have to provide them with more business training for example? Is that a role an OEM should play?
Vikner: That’s an interesting question. Certainly, we need to have a competitive capability for things such as the financing of the truck. I think our trucks and technology have to provide the tools they need to run their businesses well. The truck business if very different from segment to segment, and I think one of the strengths of Mack is that we have a strong position in most of the segments in the trucking industry, which gives us a capability to provide some of the services that these varied types of fleet operators or small owners require.
TN: In 2003 Mack introduced a new addition to the T300 Maxitorque ES transmissions, designed for highway applications but also suitable for on/off highway jobs. Also the first Vision Daycab was delivered. What’s coming in 2004?
Vikner: We are not going to have a revolutionary new product in 2004, but we are going to make some enhancements in our group of core products. We are launching a new version of a specialty size sleeper at Mid-America, for example.
TN: A few months ago you became a member of Volvo’s Executive Committee. What should truck buyers read into that? Should they expect closer collaboration among the two brands?
Vikner: I think it exemplifies AB Volvo’s commitment to positioning the Mack brand on an equal basis with its two other truck brands. In the past, we did not have a person on the committee that was exclusively Mack. I think this sends a strong message to our customers about the value of the Mack brand within the Volvo group. It’s also very important for the Mack family to see that we are represented at that table, which reports directly to the CEO of the parent company. I think that’s a very strong statement as well.
TN: All truck manufacturers have been placing greater emphasis on leveraging economies of scale to curtail price increases. I assume this is a trend that will continue in coming years. How is it affecting how your own company approaches the marketplace, particularly since it has a close working relationship with Volvo?
Vikner: These economies of scale are not only what we want to have but what we need to have to survive. Mack could not have continued to invest at the levels it had been capable of in the past and remain a major player in the future. But we are now part of a group of companies that is a world leader in investing in the architecture of chassis, engines, cabs, etc. Equally importantly, the architecture will be designed in a way that allows products to be regionalized. We understand very well that we can’t sell a European truck here or a North American truck in Europe. The vehicle has to b
e suited for the market in which it will be sold. You can’t believe the amount of kick back we are getting from people who think we want to sell one truck all around the world just to cut operating costs and make more money. It just isn’t true. As we are designing the chassis, cab and engine architectures, we are very much communicating with the market. This is happening well before we get to the design stage. What we are moving towards is a family of chassis with a similar architecture. But that doesn’t mean that a dump truck frame is going to be the same as a tractor frame, for example. A Mack still has to feel, smell, drive and ride like a Mack. In addition to allowing us to realize the kinds of cost efficiencies and levels of investments we need to stay competitive, moving to global architectures will also enhance our ability to make improvements to our products much more quickly than we could do in the past. Status quo is not an option. A company simply can’t survive selling 25,000-30,000 trucks a year. It wouldn’t have the investment capability long term to grow or even sustain its business in view of all the new technology and regulations. I think you will see further consolidation in our business. You have to be part of a major global player to survive.
– See next month’s edition of Truck News for the conclusion of the exclusive interview with Paul Vikner, president and CEO of Mack.