Volvo Group said on Wednesday (16 October) it would “optimise” its truck making in Europe “to enhance the efficiency of manufacturing and thus strengthen competitiveness”.
Over the next two years, it will relocate cab trim operations from Umeå to Gothenburg, concentrate the assembly of heavy duty trucks in Gothenburg on one line, and concentrate the assembly of medium duty trucks in Blainville.
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“The directional decision is expected to result in staff cutbacks and operational changes,” the truckmaker warned, adding that the latest announcement “corresponds to a minor part of the financial impact of the previously announced group-wide efficiency programme”.
“Today’s European industrial structure for truck manufacturing is partly the result of acquisitions and we now intend to use the various plants in an optimal way”, said Volvo president and CEO Olof Persson. “This will generate more efficient truck manufacturing operations which will improve our potential to compete successfully in global markets.”
The plants in Volvo’s “European industrial system for truck manufacturing” affected by the change are the facilities in Umeå and Gothenburg in Sweden, Ghent in Belgium and Blainville in France.
The company has now decided that the resources for truck manufacturing in Europe will form a joint system, whereby each plant will be more specialised and optimised for its respective area. By optimising the manufacturing, efficiency will increase and the manufacturing cost per truck will decrease. To decrease manufacturing cost is one of the objectives in the group’s new truck strategy for 2013 to 2015.
As well as relocating cab trim operations from Umeå to Gothenburg, the plant in Umeå will further specialise in its main core business – sheet metal pressing, welding and painting of cabs.
Concentrating heavy truck assembly in Gothenburg into one line from two will free space to facilitate better and more efficient manufacturing and logistics. The manufacturing capacity for heavy duty trucks will be balanced with the plant in Ghent, the total capacity of which will therefore be better used.
Assembly of medium trucks will be concentrated in Blainville, and one assembly line there relocated from Ghent. This will contribute to improved logistics in Ghent and make medium truck making more efficient. In Blainville, there is already a manufacturing line for medium trucks, complete with cab manufacturing and cab trim operations for both Volvo and Renault Trucks. This change means that cabs manufactured in Blainville will no longer have to be transported to Ghent.
Volvo has promised trade union consultations, said the changes will be made gradually over two years and the number of affected employees will ultimately depend on several factors, including future manufacturing volumes and the results of the union discussions. A total of about 900 people, with roughly 700 in Sweden, are currently working in the areas that will be relocated.
Overall, the Volvo Group-wide efficiency programme is estimated to incur restructuring costs of approximately SEK5bn with most of the restructuring costs expected to affect operating income in 2014.
Annual savings are estimated at SEK4bn and will gradually generate results in 2014, to then achieve full effect at year-end 2015, Volvo said.
According to recent data compiled by the European Automobile Manufacturers’ Association (ACEA), the heavy trucks segment grew 6.5% in July, accounting for 18,453 new registrations. Except for Italy (-23.4%), all major markets expanded, from +3.2% in Germany to +3.5% in Spain, +8.1% in France and 22.8% in the UK.
In August, only the UK posted growth (+32.0%), as France (-3.8%), Germany (-5.4%), Italy (-7.8%) and Spain (-8.7%) all saw their market contract. Overall demand in the EU was stable (+0.5%). Eight months into the year, the UK market remained unchanged (+0.5%), while double-digit downturn prevailed elsewhere, ranging from -10.1% in France to -10.4% in Germany, -13.2% in Italy and -15.2% in Spain.
In total, 131,714 new heavy trucks were registered across the EU, or 8.0% less than in the first eight months of last year.
For medium trucks over 3.5 tonnes, ACEA said July registrations amounted to 24,380 units, or 4.9% more than in July 2012. Italy was the only major market to shrink (-18.8%), while Spain (+3.6%), France (+4.5%), Germany (+6.0%) and the UK (+11.8%) all expanded.
Results for August showed a 2.0% fall in new truck registrations in the EU, as Germany (-5.4%), Spain (-6.8%), France (-8.2%) and Italy (-15.3%) recorded fewer vehicles than in August last year. The UK stood out with 27.1% growth. From January to August, downturn prevailed across major markets, reaching -3.3% in the UK, -10.0% in Germany, -11.1% in France, -14.4% in Spain and -16.4% in Italy. The EU registered a total of 176,188 new trucks over the period, or 8.6% less than in the first eight months of 2012.
