Volvo says economy to blame for layoffs

December 13, 2008|By HEATHER KEELS

HAGERSTOWN -- Volvo Powertrain North America's decision to lay off 142 workers at its Washington County plant next month is indicative of a global slowdown in heavy truck production caused by less construction, lower consumer spending and other factors, local economic officials and industry analysts said Friday.

The layoffs will be effective Jan. 5, the day the plant is scheduled to cut transmission production by about a third and engine production by 25 percent, Volvo spokeswoman Ilse Ghysens said Friday.

"It's, of course, very unfortunate to make this decision, but that's what we have to do right now with the current market conditions," she said.

The plant north of Hagerstown off Pennsylvania Avenue employs about 1,260 workers who build heavy engines, gearboxes and driveshafts for Volvo brands. The company makes Volvo, Renault, Mack and Nissan Diesel vehicles.


The workers affected by the layoffs are all full-time, union employees, Ghysens said.

They will not receive severance pay, but they will be guaranteed "recall rights," or hiring preference if their jobs become available again, said David Perkins, president of United Auto Workers Local 171, which represents the workers.

Representatives from the Western Maryland Consortium will be at the plant next week to give the affected workers an orientation to unemployment benefits and job search services available to them, said Peter Thomas, the organization's executive director. The consortium also can assist in the cost of retraining or acquiring new skills where needed, he said.

The layoff announcement comes the same week that Volvo announced plans to lay off 180 employees at its Mack Trucks factory near Allentown, Pa., and extend its annual end-of-year shutdown for an extra week at that site because of slow orders.

In November, Volvo laid off more than 1,000 powertrain workers worldwide, including 65 in Hagerstown. Earlier in the year, Volvo announced layoffs of 2,000 workers at truck plants in Belgium and Sweden, and 1,350 workers at its construction equipment unit.

Volvo is based in Gteborg, Sweden, with North American headquarters in Greensboro, N.C.

Market factors

The market for heavy trucks is affected by a number of factors, including construction, delivery transportation demand and fleet management decisions, said Diane Elnick, an industry analyst for Wards Automotive.

Wards Automotive figures show heavy truck production in North America was down almost 25 percent in November compared to November 2007. Through the end of November, 2008's production was down about 15 percent from the same period last year, and 45 percent from that period in 2007.

Many of the engines produced by the Hagerstown plant are used in the construction industry, which has slowed due to market conditions, said Timothy R. Troxell, executive director of the Hagerstown-Washington County Economic Development Commission.

Trucking, too, has slowed as the economy has worsened, Elnick said. Facing slower sales, stores are keeping lower inventories and not ordering as many deliveries, she said. As trucking companies cope with this lowered demand, fleet managers are not replacing vehicles as often, she said.

Thomas said new Environmental Protection Agency regulations for engines also might be hurting the plant. Since January 2007, the EPA has required that 50 percent of engines manufactured meet new low-emissions standards, and by 2010, all must meet the new standards.

Despite the grim picture, experts are optimistic the industry will recover when the general economy improves.

Troxell said he does not anticipate any further layoffs at the Volvo plant and does not see it going anywhere in the immediate future.

"I think the company has invested heavily (enough) into their facilities in Washington County for it to be a viable manufacturing plant well into the future," he said.

In 2005, the plant underwent a $150 million upgrade, which included a new engine testing laboratory, Troxell said. It is also planning a $50 million project to install a new cylinder block machining line.

As part of those projects, the company received state and county aid conditional upon maintaining certain staffing levels, Troxell said. The 2005 upgrades committed the plant to maintaining 1,000 jobs through 2009, he said.

A $900,000 state loan for the engine block machining line was conditional upon the plant maintaining 1,035 full-time employees through the end of 2013, state spokeswoman Karen Hood said.

Hood said she does not anticipate the pending layoffs will have an impact on the plant's eligibility for that loan. The state uses a three-year average staffing level to determine the plant's compliance, so temporary staffing reductions do not compromise the deal, she said.

Ghysens said the plant still plans to introduce the new engine line in 2010.

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