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Volvo plans layoffs at Pennsylvania Mack plant

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Transport Topics  /  September 11, 2019

Volvo Group subsidiary Mack Trucks is planning to adjust production at its Lower Macungie Township, Pennsylvania, assembly plant by scheduling two down weeks during the fourth quarter, spokesman Christopher Heffner stated in an email September 10, after the plant’s 2,400 workers were informed last week.

“After two years of very strong demand, it’s become clear that the North American market is softening to a more normalized level, and we need to align production with demand,” Heffner said. “No additional layoffs are planned for now, but it’s too soon to say if layoffs will be required in the future. We will continue to monitor market conditions.”

During the down weeks, Heffner said a majority of the plant will be on temporary layoff, though certain functions such as maintenance, receiving and off-line operations may still be working.

In addition, Mack is not filling positions as workers retire or resign, further offsetting the potential for layoffs, according to an announcement circulated among employees Sept. 5. The announcement concludes by telling workers that the company will have a better picture of 2020 production demand in the first few weeks of the fourth quarter, which starts Oct. 1.

Fluctuations in Mack’s workforce or production adjustments are not uncommon. While Mack planned several weeklong production shutdowns in Lower Macungie during 2016, the last significant layoff at the plant occurred in early 2016, when the company laid off about 400 people as the market slowed.

The news of the planned down weeks comes at an interesting time for Mack. For one, Heffner confirmed the company is negotiating a contract with the United Auto Workers Local 677, which represents much of the plant’s workforce. The current three-year contract expires next month. The union did not return requests seeking comment on the down weeks and negotiations.

Mack is hardly the only one adjusting to the market. Navistar this week started laying off at least 136 workers at its 2,000-person plant in Springfield, Ohio, which makes medium-duty trucks, the Springfield News-Sun reported.

Meanwhile, in the heavy-duty market, orders have slowed significantly from last year’s 490,000 in North America, said an industry analyst. A normal market, he noted, is around 240,000-250,000.

“The biggest issue that we have is just the really strong market that we had last year,” he said. “We took basically two years’ worth of orders last year.”

By comparison, preliminary numbers indicate there have been just shy of 109,000 orders through August this year, he said. With more trucks out there than needed for the amount of freight, the “pricing power pendulum” has swung back in the favor of shippers, he explained. That slowed trucker profitability and, consequently, led to fewer orders this year, Tam said.

But still, production to this point has remained strong, as truck manufacturers work through a backlog of orders. The analyst is forecasting production to hit about 345,000 trucks this year.

That high-production, low-order relationship also has happened at Mack.

Mack received nearly 7,000 orders through the first six months of 2019, down 54% from the same stretch in 2018, according to a second-quarter report from parent company Volvo Group. Deliveries, meanwhile, numbered more than 15,500 through the first half of the year, up 38% from last year.

Looking forward, the analyst projects North American heavy-duty truck production to hit 238,000 vehicles in 2020.

Then, in 2021, he is forecasting a sales and production increase.

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For two years, it has taken 12 months to order a truck out of Macungie. Now, Volvo is going to "slow down" production? Amazing. Apparently, the thought process is that customers should be grateful to get one at all.

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