"Turmoil '03" with more closings and consolidations - Street Smarts

Diesel Progress North American Edition, Jan, 2003 by Jim Winsor

As we wound down 2002, it was goodbye Winnsboro, S.C., as Volvo North America moved Mack Trucks' over-the-road truck model production into Volvo's way underutilized New River Valley plant in Dublin, Va. Mack CHs and CXs started down Volvo's No. 2 line now dedicated to Mack in mid-December. It's all part of a massive North America strategy to downsize and better utilize plant investment in Class 8 heavy truck manufacturing.

There's a lot more still to happen. Not in any particular order. Whoever would have thought that Cummins, Inc., that home-grown company that put Columbus, Ind., on the map, would stop building big-displacement truck diesels in its hometown! Well, it's happened. The 15 L ISX high horsepower truck engine is now put together in Cummins' other big assembly plant in Jamestown, N.Y, where the ISM 11 L is built. And all this has happened less than four years after Cummins invested heavily in a new ISX line and added a trucker parking lot right outside the front door where owner operators could park and stroll in to watch their engine of the future being assembled. That was the strategy anyway.

Now that plant, whose original wood-block floor was set in the early '30s, is principally a machining operation. It's all economics. Cummins will be saving tens of millions by consolidating. Unaffected, at least for now, is the nearby Walesboro plant which cranks out the popular ISBs for the Dodge Ram pickups.

Perhaps the biggest news is what is scheduled to happen by August in Chatham, Ontario, home of Navistar's giant Class 8 assembly plant. Shock waves are still reverberating through the province and the headquarters of the Canadian Auto Workers over this announcement. It's not a done deal yet but the economic facts of life are that Navistar says to stay competitive it's got to move production from its 94-year old Chatham assembly plant to its much newer Escobedo, Mexico, plant which is more modern and is underutilized.

Navistar does build its medium trucks in Springfield, Ohio, in a grossly underutilized plant there. It also builds its severe service on/off highway truck models (the old 5000 series) in the former Marmon truck plant in Texas. So except for these trucks, it looks like Canadian Class 8s will become Mexican Class 8s. Call it the way of the world!

The fact that the CAW struck the Chatham plant for six weeks last summer and Navistar ramped up production in Escobedo to pick up the slack doomed Chatham. The fact that labor costs are estimated to be some $29 cheaper on a per-hour basis in Mexico was also a factor.

But there's another element to this likely plant closure that most of us (myself included) aren't aware of. That's the fact that the old Canada-U.S. Auto Pact dating back to 1964 was struck down by the World Trade Organization in 2000 and rescinded by the Canadian government an 2001. That pact was primarily for the benefit of U.S. car companies. They could avoid paying duties as long as they built one car in Canada for every one they sold elsewhere. Ford, GM and Chrysler wasted no time in putting up Canadian plants in the '60s and '70s. The WTO said the deal gave preferential treatment to U.S. producers at the expense of other foreign manufacturers (spell that Honda and Toyota) so today all U.S. automotive-related manufacturers are declared multinationals.

But as Navistar gets ready to bail out of Canada and close its giant Chatham plant, PACCAR is rolling along nicely building trucks in Ste-Therese, Quebec, thanks to major Canadian government grants and tax credits. The plant had been mothballed since 1996. Now it builds all of PACCAR's medium-duty Class 7s, both Kenworth and Peterbilt. It also has capacity and capability to build Class 8s and is quietly doing so, cranking out Pete conventionals while the Peterbilt Madison, Ky., plant and PACCAR are battling the UAW there. Suits prevail. The facts of life are that Peterbilt doesn't need Madison. Its much newer Denton, Texas, plant has capacity, at least for now. Insiders say PACCAR is likely to shutter Madison and maybe close it permanently

So for now, we have all Sterling-branded trucks coming out of the Freightliner-owned plant in St. Thomas, Ontario. The Kelowna, B.C., Western Star plant is no more.

The name of the game is productivity and profit, something sorely lacking for the past two years. As we kick off 2003, heavy-duty truck manufacturing capacity is still much more than the current market needs. If the U.S. economy does what's predicted, we're hoping growth and increase truck tonnage will translate into a decent second half for our truck manufacturers. But don't bet on it. *

STREET SMARTS IS A MONTHLY COLUMN DEVOTED TO THE ON-HIGHWAY ENGINE MARKET. JIM WINSOR IS EXECUTIVE EDITOR OF HEAVY DUTY TRUCKING AND DIRECTOR OF MARKETING FOR NEWPORT COMMUNICATIONS.