Major cuts and restructuring were announced by Volvo Global Trucks this morning in response to a depressed North American market that shows few signs of a near-term recovery.

In a news release, VGT officials said they are reducing North American industrial capacity by closing Mack's Winnsboro, S.C., plant; consolidating North American support functions to eliminate duplication of effort between Volvo Trucks North America and Mack Trucks; and strengthening the customer support system and product offerings.
The company expects to take a one-time restructuring charge of $120 million, but the company predicts the move will result in improved annual profits of $150 million starting in 2003.
“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.
Tryggve Sthen, president and CEO of Volvo Global Truck, said the move will improve Volvo's North American profitability and break-even point, helping the company withstand the industry's ups and downs.
They said that as a result of the ongoing negative business cycle in North America, the total market for heavy trucks has fallen from a high of about 309,000 units in 1999 to an expected 2001 volume of 170,000 (140,000 in the U.S.). Meanwhile, total industry capacity is about 380,000 units, with North American manufacturers currently running at a level of 120,000 – and 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, they said. The group's three assembly facilities - Mack's Macungie, Pa., and Winnsboro, S.C., 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.
By streamlining manufacturing facilities, officials said the Macungie assembly operations will play an even more significant role in the competitiveness of the Mack brand in North America.
Mack and VTNA will maintain two separate headquarters, each with its own management. Meanwhile, a number of support functions that currently exist at both Mack and VTNA will be consolidated.