Daimler Reverses Its Decision to Close Portland Truck Plant

This story appears in the Oct. 5 print edition of Transport Topics.

Three major truck makers altered their manufacturing activities last week. Daimler Trucks reversed its decision to shutter its Portland, Ore., plant; Peterbilt Motors closed its dormant Madison, Tenn., factory; and Navistar International announced it has found a Chinese manufacturer with which it will work as part of its partnership with Caterpillar Inc.

Daimler’s Sept. 28 decision gives new life to the 40-year-old Swan Island plant, once home to Freightliner Trucks, Daimler’s North America flagship brand. The company said a year ago it would close the plant in mid-2010 and shift production to other Daimler facilities in North Carolina and Mexico.

The Portland-based truck maker said demand for military trucks built at the Portland facility weighed heavily on its decision.

“We recently received a large military vehicle order from the U.S. Army’s Tank Automotive Command and expect more to follow. We’d prefer to keep our focus on ensuring timely delivery without interruption or the distraction of moving production at this time,” said Roger Nielsen, chief operating officer of Daimler Trucks North America.

DTNA uses Swan Island to make military vehicles for the United States and Canada and civilian Western Star trucks. Nielsen’s public statement said Daimler would proceed with reconfiguring its Cleveland, N.C., plant for military vehicles, but it has “placed on hold” plans to make Western Stars in Santiago Tianguistenco, Mexico.

However, Daimler was not entirely enthusiastic in its statement about the decision, saying, “The cost disadvantages of operating a truck manufacturing plant in Portland have not changed, and . . .  negotiation of a new labor contract to continue plant operations must focus on increased flexibility in work rules and cost reductions that lead to further gains in competitiveness.”

The International Association of Machinists and Aerospace Workers, which represents most production workers at the plant, welcomed the DTNA decision.

“This is good news that the Portland plant will stay open,” said Joe Kear, District 24 business manager for the union. “I think they underestimated some of costs involved with closing the plant — especially on retiree benefits — so closing just doesn’t pencil out well right now.”

Daimler and the machinists have a contract in place through June 30, Kear said, and the company said it would like to begin negotiations early on a replacement agreement. The closing date mentioned last year coincided with the expiration of the union contract.

Kear said there would be some discussions before serious negotiations begin, but the union would like to reach a mutually satisfactory agreement well before the current pact expires.

Daimler would not comment on the plant and issues related to it beyond Nielsen’s statement, but Kear said the machinists are one of four unions at the plant. The others are the Teamsters union, the Service Employees International Union and the painters union.

During the truck sales boom of 2006, Kear said, about 1,700 unionized employees worked at Swan Island for Daimler. Well into a third year of declining sales, total unionized employment at the plant is down to about 600, he said.

At Peterbilt, a division of Paccar Inc., the company formally closed a plant near Nashville that had not made a truck since July 2008. The company cited poor industrywide truck sales in its Sept. 28 announcement.

“The current and projected market conditions are very challenging, and Peterbilt is aligning its production capacity with market demand,” General Manager Bill Jackson said in a statement.

Peterbilt’s contract with the United Auto Workers at the Madison plant expired in June 2008. The plant was kept open for salaried employees until April (click here for previous story). Jackson said in an interview that the official closing will be Dec. 1 and that the company is considering what to do with the factory.

Madison once manufactured all heavy-duty Peterbilt models, except for Nos. 320 and 387, Jackson said. Since mid-2008, though, that production has been moved to the plant in Peterbilt’s headquarters city of Denton, Texas, northwest of Dallas.

Peterbilt also shares plants in Sainte-Therese, Quebec, and Mexicali, Mexico, with Paccar’s other U.S. brand, Kenworth Trucks.

Jackson would not comment on the output of the Madison plant, but The Associated Press quoted a Peterbilt employee there as saying 390 people once worked at the factory.

Navistar International Corp. said Sept. 28 that NC2 Global, its joint venture with Caterpillar, has selected a Chinese partner for international manufacturing, Jianghuai Automobile Co. Ltd. of Anhui Province.

NC2 said it has signed documents with JAC that could lead to a joint venture. Navistar and Caterpillar formed NC2 last year to build a North American construction truck and to seek opportunities for international manufacturing (click here for previous story).

Spokeswoman Karen Denning said the JAC proposal is the first by NC2 on the international side. JAC manufactures light- and heavy-duty trucks, as well as cars and other vehicles. She said JAC already exports vehicles to Latin America, the Middle East and Southeast Asia.

For now, there are no details on which company would do what in a joint venture. Navistar might serve as a consultant, financier or actual manufacturer, but there has been no agreement yet.