UPS Freight also uses the same dedicated trailer-on-flat-car trains that its package network uses for long-haul moves, which comes with priority loading and unloading and transit times equal to truckload service.
One risk of taking a quantum leap and acquiring a truckload company is the labor factor. UPS drivers are represented by the Teamsters union, and the Teamsters will eventually represent UPS Freight workers as well, starting with the organization last year of the dockworkers and drivers at its Indianapolis terminal.
Some argue that if an acquired truckload company were to be organized, the higher labor costs could be a drag on UPS Freight’s ability to compete.
“I don’t think the Teamsters would be particularly happy” about a nonunion trucking company operating within the organization, said David G. Ross, an analyst with Stifel Nicolaus. “But considering we’re not talking about a relatively high percentage of employees, and it’s not directly competitive with LTL and parcel, and the fact that they’ve been able to grow their supply chain solutions’ business as a nonunion company, I think it’s certainly doable.”
Whether or not an acquisition is in the cards, Ellis says UPS is ready to up the ante. Eventually, that could mean competing head-to-head with truckload giants such as Swift Transportation, J.B. Hunt Transport Services, and Schneider National — companies UPS Freight now partners with.
“I think eventually there will be areas where we’ll continue to work with them and others where we’ll compete — it’s like any other business,” Ellis said. “But we’re going to be in the truckload business, and the market will know it when we are. We’re keeping all our options so we can do the right thing for our customers.”
Mack Trucks, a major supplier of heavy-duty equipment to the trucking industry, will undergo a $60 million overhaul to stream-
9.5% line operations in a move the company 9.0% says will allow it to be more competitive 8.5% 8.0%
MARKET SHARE
in a brutal economic environment. 7.5%
Besides moving its 100-year old head- 7.0%
’2006 ’2007
quarters from Allentown, Pa., to Greens-
34,000
boro, N.C., the company will consolidate
28,500
product lines and restructure the parts
23,000
Truck manufacturers are navigating over some of the roughest roads in years, as the economy has reduced freight volume and environmental regulations require costly changes to equipment. Pre-buys of 2006 trucks by large truckload and LTL carriers in anticipation of cleaner-burning but more expensive 2007 trucks helped account for a surge in North American deliveries for Mack in 2006 and a falloff last year.
Mack’s 2007 U.S. Class 8 retail sales totaled 13,438 units, which represented 8. 9 percent of the heavy truck market. In 2006, Mack posted U.S. Class 8 retail sales of 29,524 units, about 10. 4 percent of the market.
In its attempt to lessen dependence on foreign oil, Mack parent company Volvo Group earlier this year unveiled a line of experimental “CO2-neutral” trucks that run on renewable fuels. However, setting up cost-efficient production facilities is still a major hurdle.
DELIVERIES
distribution network that serves its deal- 17,500 ers and customers. 12,000
“It’s an extremely competitive envi- ’2006 ’2007 ronment, in terms of other (original Source: Company reports equipment manufacturers), regulatory pressures, and the economy we’re facing,” said Mack spokesman John Mies. “When faced with that, we have to continue to take the steps we do to make us more competitive. This is an effort to make us more efficient.”
River Valley, Va., to its existing plant in Macungie, Pa., outside Allentown. The New River Valley plant will continue to produce Volvo trucks.
The company will also consolidate its product development and purchasing functions at its Allentown Engineering Development and Test Center to Greensboro. The Allentown facility will be converted into a customer demonstration and reception center that will also house personnel supporting Macungie production, the company said.
As part of the restructuring, Mack and Volvo will invest approximately $20 million to improve the Macungie plant’s paint operation. It also plans to invest some $50 million to install a new engine block line at Volvo’s powertrain facility in Hagerstown, Md., to reduce logistics costs.
Mack said just more than 1,500 people work in the three Lehigh Valley facilities affected by the restructuring, including about 680 at the Allentown headquarters, 540 at the Macungie plant and 300 at its test center.
Mack will transfer assembly of all its highway vehicles from its plant in New
Volvo Group said it will incur an estimated $60 million to implement the plan, which is expected to be recorded during the second half of 2008.
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