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Sale could bolster Mack

May 03, 2000|By JULIE E. GREENE

Volvo's proposed partnership with Mack Trucks Inc. could help stabilize the work force at the Hagerstown powertrain plant and possibly add jobs in the long run, Mack's president said Wednesday.

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Mack is the only heavy-duty truck manufacturer to maintain production levels and avoid layoffs following a market dip this year, said Mack President and Chief Executive Officer Michel Gigou in a telephone interview from Chicago.

The Volvo deal would provide investment necessary to better compete in the heavy-duty truck market and improve the company's market share, Gigou said.

Last week, shareholders of Swedish automaker Volvo approved plans to buy Mack Trucks, a subsidiary of Renault S.A., along with Renault's RVI truck division.

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The added investment will give each of the brands, Mack, Renault and Volvo, the ability to grow, meaning greater opportunities for Mack employees, Gigou said.

The engine and transmission manufacturing plant on Pennsylvania Avenue employs 1,426 workers and produces 215 engines and 37 transmissions a day.

"They should not feel afraid. They should not feel insecure," Gigou said. "It's going to be a ride where we're going to have a few challenges, but challenges are opportunities."

The sale is subject to approval by the U.S. Department of Justice and the European Commission, and isn't expected to be completed until late 2000 at the earliest.

Without the deal, Mack would be under pressure from other truck manufacturers because Mack wouldn't have the volume and net sales needed to invest in the future, Gigou said.

"If the deal is not done, we could find ourselves in a difficult situation in 2005, 2006," Gigou said.

While Gigou expressed optimism about the positive impacts the Volvo deal could have on Mack Trucks and the Hagerstown plant, he urged caution about the impact the market could have on the plant.

Under the deal, Mack, Volvo and Renault would each maintain their product uniqueness, he said. The Hagerstown plant will still make Mack engines and transmissions.

"(The deal) means that we are going to belong to a larger organization with one goal and one aim to become number one in the world," Gigou said.

If the deal is approved, Mack, Renault and Volvo will become the second largest truck group in the world behind Mercedes-Benz with its subsidiary, Freightliner, Gigou said.

Mack also has ambitious domestic goals.

Gigou said Mack will have 14 percent of the U.S. market for heavy duty truck retail sales by the end of this year.

"Our goal is to achieve 20 percent of the U.S. market by 2004, 2005," he said.

That could mean adding jobs at the Hagerstown plant, but that depends on the market, Gigou said.

"One thing that we cannot say today and we cannot control is what the market is going to be," Gigou said.

While Mack can try to improve its market share, that doesn't necessarily mean increased production, he said.

Mack is fighting to maintain its current production and employment levels in the declining market, he said.

Even if Mack picks up additional market share, the Hagerstown plant should be able to handle the demand, said Steve Sturgess, editor of RoadStar Magazine and senior editor of Heavy Duty Trucking Magazine. With the market dip this year, Sturgess said he doesn't think Mack would need to expand for another year or two.

While the three brands will maintain their uniqueness, Mack, Renault and Volvo will work together to improve cost efficiencies and make technological breakthroughs, Gigou said.

Together Volvo and Mack could improve cost savings through shared distribution and purchasing, Sturgess said.

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