Volvo to invest $50 million at Maryland powertrain plant and restructure its U.S. operations

The Volvo Group (www.volvogroup.com) is investing about $50 million to install an engine-block machining line at its plant north of Hagerstown, Maryland and spending another $60 million to restructure its U.S. operations.

The $50 million investment will create about 50 more jobs at the plant, which now has 1,200 employees, Volvo Powertrain North America spokeswoman Ilse Ghysens said. The new operation is expected to begin by the end of 2010.

Volvo's decision shows its commitment to the Washington County plant, David Perkins, the president of United Auto Workers Local 171, which represents workers there said. Three years ago, Volvo invested $150 million in plant upgrades.

The engine-block machining line was announced along with a Mack Trucks restructuring plan that includes moving Mack's headquarters from Allentown, Pa., to Greensboro, N.C. Volvo Powertrain's Washington County plant makes truck engines and transmissions for Volvo and Mack.

Volvo, which is based in Sweden, acquired Mack and Renault in 2001.

The new work in Washington County comes two years after Volvo said it would lay off up to 600 employees, roughly one-third of its local work force due to a slumping market. Perkins said at the time that "a massive pre-buy," just before tighter emissions standards, was expected to hurt 2007 sales. By mid-2007, though, Volvo had only reduced its work force by about 340, through both temporary and permanent moves, including retirements. Subsequent market fluctuations have further reduced the plant's work force to about 1,200 jobs. Some layoffs are seasonal and employees might be called back, Perkins said.

A Volvo document says the company has had capacity issues with its foundry in Skvde, Sweden, and its machining operations in Skvde and Brazil.

The Washington County investment will "reduce our logistic costs in North America, provide a currency hedge, and increase the NAFTA content" of Volvo products, the document says. "NAFTA content" refers to North American Free Trade Agreement rules.

The document says Volvo is looking for a North America supplier for the blocks. Perkins said some details of the machining won't be decided until the company agrees to a new labor contract. He said a three-year contract expired Oct. 2, 2007, but employees still are working under those terms. Contract negotiations are expected to resume next month.

Volvo said it was restructuring its U.S. operations at a cost of about $60 million to be recorded during the second half. Volvo, which sells Volvo and Mack truck brands in the U.S., will relocate Mack's head office in 2009 to Greensboro, N.C. -- where many of Volvo Group's North American support functions are concentrated -- from Allentown, Pa. The company will concentrate Mack's truck production at its plant in Macungie, Pa.

Volvo has seen its U.S. sales plummet because of the introduction of new emissions regulations in 2007. However, the company reported a 14 percent rise in U.S. truck sales to $1.1 billion in the second quarter.