600 layoffs

Volvo Powertrain to cut back

Volvo Powertrain to cut back

October 28, 2006|by ANDREW SCHOTZ

WASHINGTON COUNTY - Volvo Powertrain North America said Friday it will lay off 600 jobs at its Washington County engine and transmission plant next year - about one-third of the work force - because of a slumping market.

The layoffs coincide with stricter federal emissions standards taking effect Jan. 1.

Company spokesman Jim McNamara said customers are buying engines now to avoid a $7,500 surcharge Volvo soon will add to recoup the cost of new emission-control technology.

A week ago, Mack Trucks Inc. also blamed the market effect of regulatory standards as it announced plans to cut about 450 out of about 1,040 jobs in Macungie, Pa.

The Volvo Powertrain North America plant north of Hagerstown produces Volvo and Mack heavy-truck engines and Mack transmissions.

The jobs being cut primarily will be in manufacturing, plant spokeswoman Cyndi Gagliardi said. The company hasn't decided which jobs.

United Auto Workers Local 171, which represents employees at the plant, wasn't given a breakdown of union and nonunion job cuts, a union representative who declined to be identified said Friday.


The peak employment at Mack Trucks, as the plant was known for decades, was about 4,600 in 1979, but the work force tapered off in the 1980s and '90s.

Peter Thomas, executive director of the Western Maryland Consortium - which assists workers who were laid off in large groups - remembers Mack Trucks cutting 1,250 jobs in the 1980s when it stopped making rear axles here and because of a bad economy.

In the early 2000s, Mack Trucks stayed steady at 1,000 to 1,200 employees.

Volvo acquired Mack in 2001, and decided the next year to center its North American Powertrain Division in Washington County.

As demand grew, the work force at the plant rose to more than 1,700 employees in 2005.

No surprise

Timothy Troxell, executive director of the Hagerstown-Washington County Economic Development Commission, said news of the layoffs wasn't a complete surprise.

Two or three years ago, Volvo was "comfortable" with having 1,000 to 1,100 employees here, Troxell said. Government incentives were based on that work force range.

Gagliardi said Volvo Powertrain North America openly has discussed the expected market decline. Employees were told two weeks ago that layoffs were possible; on Friday, they were given the specific number, she said.

"As a result of the large pre-buy of trucks with the old engines in North America during 2006, we expect sharply lower demand during the first half of 2007," Leif Johansson, the president of parent company AB Volvo, said as part of a 2006 third-quarter earnings report. "We are anticipating that the decline could be as much as 40% during the first half of the year, but due to the uncertainty regarding the second half, we are prepared to increase capacity (later) in the year."

Troxell said the company is offering retirement incentives first, then asking for other volunteers, before imposing the rest of the layoffs.

In a press release, the company said it will hold meetings for employees in coming weeks to provide more details and information on possible assistance.

Thomas said he expects that the Western Maryland Consortium will be involved, offering help with retraining and looking for new jobs.

According to the Economic Development Commission's 2006 Business & Industry Directory, Volvo Powertrain North America - with 1,770 employees - is the county's largest manufacturer and sixth-largest employer.

U.S. Environmental Protection Agency standards require engines to produce 50 percent less nitrogen oxide and 90 percent less particulate matter, or soot, by Jan. 1.

McNamara said the standards will tighten further in 2010, when nitrogen oxide must be cut another 50 percent.

Besides the $7,500 surcharge - on trucks that might cost more than $100,000 - customers also are reluctant to switch to new technology, McNamara said.

On the other hand, new engines will be more fuel efficient and reliable, he said.

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