WINNSBORO, S.C. — Volvo Global Trucks says it will close the Mack Trucks manufacturing facility located here with in 15 months.
The announcement came as the company announced further details on its restructuring strategies for the North American market.
Citing the fact current market conditions show few signs of a near-term recovery, several key actions will be undertaken:
— Reducing North American industrial capacity by closing the Winnsboro plant.
— Consolidating North American support functions to eliminate duplication of effort between Volvo Trucks North America and Mack Trucks.
— Strengthening of the customer support system and the product offering.
The company estimates a one-time restructuring charge of about US$120 million.
“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,” says Leif Johansson, president and chief executive officer of AB Volvo.
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.
Meanwhile, total industry capacity is about 380,000 units, with North American manufacturers currently running at a level of only 120,000 tractors — 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 company says. The group’s three assembly facilities — Mack’s Macungie, Pa. and Winnsboro S.C. plants, and Volvo’s New River Valley, Va. plant — have only been operating at 30 per cent of their total capacity.
Once Mack’s Winnsboro operations have been transferred to the New River Valley facility — and remain Mack-branded — the two remaining facilities will play a much more significant role in the operation.
“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,” says Tryggve Sthen, president and chief executive officer of Volvo Global Trucks.
Both Mack and Volvo Trucks North America (VTNA) will maintain two separate headquarters, each with its own management. Meanwhile, a number of duplicative support functions, which currently exist at both Mack and VTNA, will be consolidated to increase the overall operating efficiency.
There may still be more changes coming, mind you. In a letter to VTNA employees, the group’s president Michel Gigou says, “Clearly, today’s announcement will raise a number of questions about the turnaround program and its various components. For now, most of those questions can’t be answered — while the overall direction of the program has been established, many specific decisions regarding the scope, timing and implementation of its components are yet to be finalized.”
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