Mack Trucks Inc. on Thursday, Aug. 14, announced a major restructuring plan designed to further improve the company’s competitiveness and position it for long-term industry leadership.
“Through hard work and substantial investment over the last seven years, Mack now has a completely revitalized vehicle lineup, an entirely new engine range and a dealer network that’s stronger than ever,” said Dennis R. Slagle, Mack president and chief executive officer. “But our focus is on long-term leadership in a very challenging market, regulatory and economic environment, and this demands that we continue to improve our profitability and competitiveness.”
Key components of the restructuring plan – which also involves other business units of the Volvo Group, of which Mack is a member – include:
· Moving the company’s administrative headquarters and most support functions from Allentown, Pa., to Greensboro, N.C., where many of these support functions – like information technology, parts logistics, human resources, finance, etc. – already are headquartered, in order to improve organizational efficiency;
· Transferring assembly of all Mack highway vehicles from the plant in Virginia’s New River Valley (NRV) to the plant in Macungie, Pa. – where Mack’s construction and refuse vehicles currently are assembled – to take advantage of efficiencies arising from consolidated assembly of the entire product line, and create a brand-unique environment for Mack customers. NRV will continue to produce all the vehicles in Volvo Trucks North America’s range;
· Consolidating product development and purchasing functions currently located in the Allentown Engineering Development & Test Center to the Technical Center in Greensboro to take advantage of synergies. The Allentown facility will be converted into a Customer Demonstration/Reception Center that also will house personnel supporting Macungie production; and
· Restructuring the parts distribution network serving its dealers and customers – to include creating a new Volvo Group North America central warehouse in a location to be determined; closing the Columbus and Dallas warehouses; and downsizing facilities in Baltimore, Chicago, Jacksonville and Memphis – in order to improve the network’s competitiveness and aftermarket parts support.
In conjunction with this restructuring, an investment of about $20 million is planned to improve the Macungie plant’s paint operation. An investment of about $50 million also is planned to install a new engine block machining line at the powertrain facility in Hagerstown, Md., in order to complement the Volvo Group’s global capacity, and reduce both logistics costs and exposure to currency fluctuation.
“Taking these steps will make us a more efficient, agile and cost-effective organization in almost every aspect of our business, from product development, to production, to aftermarket support,” Slagle said.
Slagle said the company understands that these changes will be extremely difficult for many Mack employees and their communities. “While the additional investment and new positions at our Macungie plant and the conversion of our Allentown Test Center into a Customer Demonstration and Reception Center will mean a major continued Mack presence in the Lehigh Valley, we will do everything we can to facilitate this transition responsibly and sensitively for affected employees,” he said.
More than 1,500 people work in the three Lehigh Valley facilities affected by the restructuring: about 680 at the Allentown headquarters, about 540 at the Macungie plant, and about 300 at the Test Center. The NRV plant currently employs about 1,600 people.
The movement of Mack highway vehicle production to the Macungie plant is planned for the fourth quarter of 2008, a move expected to create at least 200 new positions at the plant. The company also plans to move about 200 people from the headquarters to the Customer Demonstration/Reception Center to support production. Mack said the impact on employment in NRV will depend on the production rate at the time of the move.
The movement of Allentown-based administrative and support functions to Greensboro is planned for 2009, while those functions currently performed at the Allentown Test Center are scheduled to move in 2010. The restructuring of the parts network will begin in 2009 and be completed in 2010.
The impact on employees represented by the United Auto Workers will be subject to negotiation with the union; however, the company intends to offer all affected UAW members positions in other locations. Mack and UAW have agreed that negotiations on a new labor contract will resume on Sept. 2.
The company will offer all affected nonbargaining unit employees relocation opportunities; severance pay and outplacement assistance will be provided to any employee that stays through the transition but ultimately leaves the company.