Renault committed to future of Mack Trucks, chairman says

November 20, 1991|By Kim Clark | Kim Clark,Sun Staff Correspondent

ALLENTOWN,PA. — ALLENTOWN, Pa. -- Despite massive layoffs, Mack Trucks Inc. has continued to hemorrhage cash and lose market share in the year since French industrial giant Renault Vehicules Industriels took it over.

In his first wide-ranging public discussion of Mack since taking command last fall, Chairman Elios Pascual yesterday angrily denied rumors that Renault would give up on the last U.S. integrated truckmaker -- that is, the last that makes all its own components.

Mack produces its engines and transmissions at a plant in Hagerstown.

The slight, bespectacled French executive told a crowd of reporters gathered at Mack's bulldog-decorated headquarters here that competitors were spreading "unethical and unfair" rumors about Mack's future.

"They say we belong to the past and not the future, these kind of crazy things," he complained.

Affirming that he wants to bring back the image of strength and power evoked by the saying "built like a Mack truck," Mr. Pascual insisted: "We belong to the heart of America."

Mack will tough out the current bad times with the help of its huge parent, he said. "RVI will support us as long as necessary. Europeans are long-term thinkers like the Japanese," Mr. Pascual said.

But he said demand for trucks has fallen so dramatically that prices have dropped and production is about half the level of Mack's boom years in the mid-'80s. A new Mack truck today sells for less than one did in 1983, he said. And Mack may sell only about 12,000 of its heavy duty trucks this year, down from about 19,000 in 1989.

Because prices have dropped so low, Mack has stopped trying to sell to many fleet customers, who often demand discounts. The withdrawal has cut Mack's market share to its lowest level ever, 11.4 percent, Mr. Pascual said.

As a result, he said, the company is losing money at a rate of about $50 million every three months.

It will lose money in 1992, he added.

Renault's deep pockets haven't cushioned the blow much for Mack workers and managers. To help stem the losses, Mr. Pascual has cut the work force from about 7,000 a year ago to 5,460 today.

The number of workers at Mack's engine plant in Hagerstown has been cut from about 1,200 to 900 in the same period.

The work force cuts have reduced costs by $80 million a year, but unless the market rebounds, the layoffs and buyouts will continue, Mr. Pascual said.

He also denied persistent rumors that the company would close one of its three U.S. plants.

"I once heard we were going out of the engine business because we are not capable of meeting the 1994 emission regulations," Mr. Pascual said.

But he insisted that Mack will stay in the business and that Mack's engines can meet the upcoming U.S. air pollution standards.

The Mack chairman said costs at the Hagerstown plant have been slashed in the last year. It takes the workers there only 30 hours to make an engine today, down from 45 hours just a year ago. And the inventory of engines has been cut from 500 to 100.

However, he indicated that Mack's plants may not be secure over the long term. While conceding that the company has more than twice the capacity it needs to make trucks, Mr. Pascual said he had "no plans today" to close a plant. But, he said, "Sooner or later we will have to address that."

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