Volvo AB of Sweden said yesterday that it will lay off 600 workers - a third of the work force - at its Hagerstown plant in the first half of 2007 after new emissions standards reduced demand for its diesel truck engines and transmissions.
The Mack Powertrain Division plant, which employs 1,770, produces all of the engines for North American Mack and Volvo heavy duty trucks. Over the last two years, Volvo AB has poured $150 million into renovating the plant, including a $35 million engine testing laboratory.
The emissions standards, which take effect Jan. 1, require new technology that tacks on about $7,500 per truck, said Jim McNamara, spokesman for Volvo Trucks North America. To avoid paying more, customers opted to "pre-buy" the 18-wheelers and dump trucks they would have bought in 2007. With fewer orders next year, Volvo was forced to scale back production.
"We really do regret the necessity of this and the impact this will have on the workers and Washington County," McNamara said.
The layoffs include both union and nonunion workers. Laid-off employees will receive severance packages based on the amount of time they have been with the company. Workers were notified yesterday, McNamara said. A call to United Auto Workers Local 171, which represents hourly workers at the plant, went unanswered last night.
Timothy Troxell, executive director of the Hagerstown-Washington County Economic Development Commission, said the layoffs are significant because they are highly-paid manufacturing jobs.
"Obviously, it's not a great thing for our economy, but they're still our largest manufacturing employer," he said. "We're hoping it's cyclical and they'll ramp back up again."
Last week, Volvo said it would lay off 450 workers at its truck assembly plant in Macungie, Pa.
Volvo, the world's largest manufacturer of heavy-duty diesel engines, predicted in its third-quarterly earnings report Tuesday that the American market for heavy trucks will fall 40 percent in the first half of 2007.
Earlier this month, Caterpillar Inc. also predicted a slowdown next year in sales of diesel engines for heavy vehicles. Caterpillar and Volvo each blamed the new diesel engine emissions regulations.
With the new exhaust technology, McNamara said the heavy-duty trucks will produce 50 percent less nitrogen oxide emissions and 90 percent less soot.
The Hagerstown plant has been making Mack engines since 1961. Last year, Volvo officials estimated the plant produced about 50,000 engines - at a rate of 300 a day - and 15,500 transmissions.
The Associated Press contributed to this article.