Volvo to slow truck output
Mack’s assembly plant in Lower Macungie Township will likely be affected in Q2
Heavy-duty trucks, like the ones Mack Trucks assembles in the Lehigh Valley, use semiconductors in several components in the vehicle’s engine, transmission controls and beyond. Trucking industry analyst Steve Tam said there can be as many as 17 computer locations in a truck — double that in some cases.
“They’re used prolifically throughout the truck,” Tam said.
So a global semiconductor shortage, like the one happening right now, can create headaches for truck
makers trying to keep up with demand. That scenario led to an announcement Monday by Mack’s parent company, the Sweden-based Volvo Group, in which it said the shortage will have a “substantial impact” on the company’s production in the second quarter.
“In the beginning of the quarter, the group will implement stop days across its global truck manufacturing operations,” Volvo said. “In total, these are currently estimated to between two and four weeks depending on production site. In addition, disturbances are also expected to impact the group’s other business areas.”
Mack’s assembly plant in Lower Macungie Township is expected to be affected in the second quarter, spokesperson Kimberly Pupillo confirmed. The company’s longtime plant employs 2,350 people who assemble all Mack Class 8 models for North America and export.
“At the moment, we believe this will mean some nonproduction days during the quarter,” she said. “The situation is fluid. We’re doing everything we can to minimize the impact, and we are maintaining the flexibility to increase production if the situation allows.”
Volvo noted the production disturbances are expected to have a negative effect on earnings and cash flow.
Tam, vice president of Americas Commercial Transportation Research Co., said the semiconductor shortage has been ongoing since November or December and hit automakers first.
When the pandemic forced automakers to temporarily idle their plants, Tam said, they relayed to the chip manufacturers that they didn’t need the same semiconductor output that they initially ordered.
“When the auto (original equipment manufacturers) gave up their share, guess where it went?” Tam said.
The chip manufacturers, already running at full tilt to keep up, pivoted to consumer electronics, items such as TVs and computers that were booming with the increasing number of people stuck at home.
Many automakers have been forced to cut production as a result. Most recently, on Wednesday, Volvo Cars announced it would adjust production in the United States and China as a result of the shortage, Reuters reported. A fire Friday at a Renesas Electronics Corp. plant in Japan that makes chips for automakers is expected to exacerbate the issue.
The shortage, to this point, hasn’t hurt truck-makers to the same degree as the auto manufacturers, Tam said, making Volvo’s announcement Monday even more noteworthy.
“This is the first formal admission that we’ve had that lines are going to have to be stopped for shortages of a component,” Tam said.
The shortage comes amid a hot heavy-duty truck market. Tam said ACT is forecasting Class 8 retail sales for North America of just over 300,000 trucks this year, which would be up more than 40% from where it was last year. Still, demand could call for as many as 325,000 trucks, he said, so supply constraints could leave some production on the table.
Mack, for its part, took in more than 7,800 orders in the fourth quarter, up 61% from a year earlier.
Mack COVID-19 update
The rate of new COVID-19 cases among Mack employees in Lower Macungie has significantly slowed over the last two months, according to information posted on the United Auto Workers Local 677’s website. The union represents a majority of the workers at the plant.
For example, the plant as of Jan. 20 had 257 cases, which included 31 active cases and 226 recovered employees. The most recent update, posted March 15, had the plant at 293 cases — 283 recoveries and 10 active cases.
That’s very different than the rate during the second wave that gripped the country late last year into 2021.
During that time, Mack’s employee cases went from 33 on Nov. 17 to 254 on Jan. 19, according to information posted on the union website.
Mack also has a plan to vaccinate its workforce once the state’s rollout enters phase 1B, which includes manufacturing workers.
Pupillo told The Morning Call on Feb. 1 that the company has partnered with St. Luke’s University Health Network, which will administer vaccine doses in a phased approach to Mack employees and contractors at the Lower Macungie plant and the Mack Customer Center in Allentown.
In preparation, Mack encouraged employees to register for the vaccine.