AB Volvo CEO Johansson "Bullish" About Volvo/RVI/Mack Merger
June 21, 2000
AB Volvo’s dynamic young CEO Leif Johansson visited Mack Truck’s corporate headquarters in Allentown yesterday to see what he bought in
Volvo’s acquisition of Renault VI’s truck
business which included Mack Trucks.
While it’s expected to take six to nine months for the $1.5 billion deal to be approved with U.S. and European regulatory agencies, Johansson, in his first meeting with the press here, was very upbeat about the combining of
Volvo’s, Renault’s and Mack’s truck businesses into a new heavy truck powerhouse which will make Volvo the No. 2 producer world wide (after Daimler Chrysler) and a strong player in the U.S. market with a Volvo/Mack combined
market share of 26%.
Johansson is in the middle of a whirlwind
tour visiting with governors and U.S. senators from Pennsylvania, Maryland and South Carolina, the three states where Mack has manufacturing plants.
Purpose, we were told, was to assure those elected officials that the Volvo-Mack deal would be good for employment, that there were no plans to close or merge plants. Because the merger is yet to be approved, Johansson is not visiting factories, nor is he talking about specific products and plans. His one-day stop in Allentown was to meet with middle and senior Mack managers, review Mack’s 100th
anniversary traveling caravan which was
parked in front of headquarters and spend a half-hour with a handful of U.S. newspaper and trade press editors.
"An opportunity like this comes but once in a lifetime," Johansson said referring to the Volvo/RVI/Mack deal. "We will double the volumes of our truck platforms and engines from the start and grow the business from there." He was referring to Volvo’s two truck platforms, the VN line and the new construction and vocational line which debuts in the U.S. at the end of July. Mack and Renault V.I. have a new common platform (chassis) for vocational markets ready for introduction in the U.S. early in 2001. The U.S. version is code-named "Granite."
Johansson sees a good but competitive
"fit" between Volvo’s and Mack’s new
product offerings."It is our intention to
offer the best trucks in both product lines
and let the customers decide. There will be no manipulative coordination between brands." He confirmed earlier announcements that separate Volvo and Mack product lines, dealer organizations and manufacturing facilities would be continued. "This is not a combining of products. We will offer a wider selection
of products for our customers to chose from," he said. There are projected savings of $400-million annually after the first two years of the merger by combining certain unnamed functions such as accounting and purchasing.
Volvo, Renault V.I. and Mack each offer its
own line of engines and transmissions.
Mack and RVI also have their own branded axles. Johansson said AB Volvo (the parent) is committed where practical to vertical integration. "25% of U.S. Volvo trucks now are sold with our engine. I see an entire new line of engines (to meet upcoming U.S. and European emission regulations) built on a common platform (block and internal parts) but tailored to the needs of each market. We will start with a new 12-liter engine, and then
possibly a 16 liter." Engines will have
distinctive electronic software and other features to clearly make the completed engine a Volvo or a Mack.
Johansson made it clear that the U.S. versions of the engines would be built or assembled in the U.S. without being specific where. While he didn’t say so, other sources feel quite certain it will be at Mack’s engine and transmission plant in Hagerstown, MD, which is one reason he met with Maryland leaders. "With greater financial resources and at least a doubling of volumes, we can invest in new technology," he said. For the short term, Johansson said there is time for Volvo and Mack to share and transfer technology for model year 2002 engines which must meet new, 40% lower EPA emission regulations.
When questioned about the downturn in U.S. truck sales, Johansson said Volvo had already cut back production twice and Mack would be lowering production after its July vacation shutdown. Mack president and CEO Michel Gigou said that Mack’s current forecast for the North American U.S. retail Class 8 truck market is 235,000 which, if it holds up, would
make 2000 the second best year on record.
He estimates there are 50,000 new trucks in dealer inventory, which must be worked down.