Mack Delivers Most Vehicles Since 2006, But Volvo AB to Cut North American Production

Mack Trucks delivered 27,411 vehicles in 2015, its strongest year since 2006, according to a report released Feb. 5 by Sweden-based Volvo Group, Mack's parent company.

Mack's worldwide truck deliveries last year marked a 7% increase over the 25,644 sent out in 2014. By comparison, the truck maker delivered 36,838 vehicles in 2006, driven by an influx of orders from customers looking to beat new emissions standards that took effect in January 2007.

In its report, Volvo said last year's high demand for heavy-duty trucks in North America — 25,302, or 92%, of Mack's worldwide deliveries were in North America — was the result of fleet renewal and expansion combined with customer profitability because of a good freight environment, low fuel prices and low interest rates.

As such, Volvo said the total North American retail market for heavy-duty trucks increased by 12% to 301,740 in 2015.

It's a result that isn't likely to be repeated in 2016.

Demand weakened in the fourth quarter of 2015, Volvo said, because of a correction in the longhaul segment. In its report Feb. 5, Volvo adjusted its heavy-duty truck market forecast for 2016 to 260,000 vehicles, down from its previous estimate of 280,000.

Freight activity weakened toward the end of 2015, Volvo said, and the need for fleet expansion and renewal will be lessened this year.

That point was proved in Mack's and Volvo's order intake.

Mack took in 19,226 orders in North America in 2015, a 41% decrease from 2014. Similarly, Volvo recorded 31,365 orders in North America last year, a 20% decrease from 2014.

"The decline is an effect of a slowing market, dealers focusing on reducing their inventories and the comparison with an extraordinarily high quarter last year," Volvo wrote in the report.

Because of declining orders, Volvo said production cutbacks will be implemented in the first quarter in North America to adjust to the slowing market. Mack took those steps in mid-December, announcing it would lay off about 400 people at its Lehigh Valley Operations in Pennsylvania in late January to meet the reduced demand in the market.

After the layoff, Mack Lehigh Valley Operations employs 1,460 workers. The company's 1 million-square-foot Lower Macungie Township plant is where all Mack trucks built for the North American market and export are assembled.

Fluctuations in Mack's workforce are not uncommon because the company monitors the market and adjusts employment needs accordingly. For example, as Mack neared the end of its peak 2006 year, it announced in October 2006 that it would end a second shift at its Lower Macungie plant and lay off 450 workers over several months. The company instead laid off 350 employees, it later said.

Volvo said fourth-quarter earnings excluding interest, taxes and costs related to restructuring were 5.38 billion kronor ($640 million), compared with a loss of 1.43 billion kronor a year earlier. Sales rose 3% to 79.6 billion kronor.

Volvo is predicting that the European heavy-duty truck market will surpass that of North America this year as the world’s second-biggest, behind China. It’s predicting a flat market in China this year after last year’s 26% drop.

“During the first quarter, we will adjust production to the new lower level of demand in North America and Brazil,” Martin Lundstedt, who took over as CEO in October, said in the statement.

Advance sales contracts for trucks declined 20% to 49,088 vehicles in the fourth quarter, while orders for construction equipment dropped 18%.

Contributing: Bloomberg News