Volvo Global Trucks to reduce production in North America

| 10/1/2001

Citing extraordinary market conditions, Volvo Global Trucks has announced details of an emergency program that is designed to respond to a depressed North American market that shows few signs of a near-term recovery. According to the company, a substantial reduction of Volvo Global Trucks' North American (VTNA) manufacturing capacity is a key component of the restructuring program.

The company has announced it will close the Winnsboro, SC, plant. The group's three assembly facilities - Mack's Macungie (PA) and Winnsboro (SC) 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.

The company says another emergency action will be consolidating North American support functions to eliminate duplication of effort between Volvo Trucks and Mack Trucks Inc. 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 that currently exist at both Mack and VTNA will be consolidated to increase the overall operating efficiency.

"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. "With this initiative Volvo Global Trucks will significantly improve its North American profitability and break-even point..." 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 running at a level of only 120,000 - with about 30,000 new heavy-duty trucks in industry-wide inventory.