'Treadhead' Volvo Keeps on Truckin' With 1,300-Employee Virginia Expansion If "Truckin'" is the musical anthem of the "Deadheads," those intrepidly weird devotees of the rock band the Grateful Dead, Volvo Trucks North America (www.truck.volvo.se) certainly qualifies as a "Treadhead." The company is truckin' hard in the facility expansion wars, particularly with its $148 million expansion of its leading-edge production facility in Dublin, Va. Over a three-year span, the major move will add 1,300 new jobs at the southwest Virginia site, located on 293 acres (117 ha.) that lie adjacent to I-85, company officials say. Surging truck demand, a new state incentive program and a key union agreement were all major factors in Volvo's decision to pick the Virginia site over several other strong North American contenders.
The expansion, which will increase total employment by some 40 percent at the 1 million-sq.-ft. (90,000-sq.-m.) New River Valley Assembly Plant (NRV) in Dublin, symbolizes the significant spike-up in demand for Volvo's trucks. 1998 marked a record year for Volvo Trucks' sales and profits, with a 36.9 percent increase in Class 8 retail sales over 1997. Volvo's North American unit ran in tandem with the company's overall uptick; its 1998 sales of 29,762 units marked a 35 percent increase from 1997. That strong showing pushed Volvo's share of the North American market up to 11.7 percent. 1998's bullish business validates Volvo's recent aggressiveness, with the company introducing eight new models in only a 24-month span. "Over 80 percent of our sales in 1998 came from products that didn't even exist two and a half years ago," says Volvo Trucks' President and CEO Marc F. Gustafson. The NRV plant in Dublin, which manufactures all Volvo trucks sold in North America, has been a major factor in Volvo's upswing. The roughly 30,000 trucks made in the Virginia plant last year doubled 1996's production levels. Moreover, that 30,000-unit production volume marked a company single-plant record and exceeded Volvo Truck officials' 1998 production projections by 11 percent. But despite Volvo's success in Dublin, the location project certainly wasn't a lock for the existing Virginia site. Volvo considered a number of other locations, with South Carolina and Mexico getting the longest looks, say company officials.
One of the keys in Volvo's Dublin expansion decision was the Virginia Investment Partnership (VIP) that Gov. James Gilmore III recently signed into law. The VIP program, report Volvo and state officials, was first conceived during a meeting between the governor and Gustafson last summer. The VIP's goal is to help Virginia-based manufacturers expand operations and modernize facilities through economic grants and tax credits or incentives, according to officials at the Virginia Economic Development Partnership (www.yesvirginia.org). One of the first companies to utilize the VIP, Volvo will receive, over a 10-year period, an estimated $60 million in performance-based incentives to support the expansion and the hiring and training of plant personnel. The actual incentive amount that Volvo ultimately receives will be based both upon the number of new employees hired and the number of trucks produced annually. In addition to location assistance from the state, support from economic development officials from the New River Valley Economic Development Alliance and Pulaski County was also a major factor in Volvo's decision, company officials say.
That key incentive package the Gilmore administration provided will help make the NRV facility Volvo's largest heavy truck plant in the world. "We are implementing a unique one-plant strategy that leverages our skilled work force and economies of scale," said Gustafson. "The expanded facilities will also allow us to export trucks to additional South American countries and Australia." None of that might've happened, however, without another set of incentives offered during the tenure of previous Gov. George Allen (like Gilmore, also a Republican). In the mid-1990s, Volvo was trying to decide whether to dramatically update its existing facility in Dublin or create an entirely new manufacturing operation outside Virginia. The state then came up with an incentive package that convinced Volvo to stay. The Dublin operation was extensively refurbished, with all renovations completed in 1996 at a cost of some $160 million. The mid-1990s' expansion underscored the technology-fueled sophistication that has come to typify cutting-edge manufacturing operations. Volvo added a world-class paint facility, cab-assembly plant and a second vehicle-assembly line to produce the new Volvo VN Series, which has proved to be one of the strongest recent entrants into the heavy truck sector. Sophisticated cab-assembly robotics and automated scheduling systems were also installed for greater efficiency and better product quality. "The investment we made in systems and technology," says Gustafson, "has provided our employees the means to serve our customers more effectively and produce a higher quality product." The sophistication of the expanded Dublin plant also demanded a vastly improved automated system to create a more balanced production schedule. The Dublin operation chose an OptiFlex software package that uses genetic algorithms and constraint engines to quickly create production schedules based on customer needs. It was the first Volvo plant to employ the OptiFlex technology. "Genetic algorithms evolve good schedules from a population of possible schedules," says Tom Murphy, Volvo Truck vice president of manufacturing. "The system mimics the workings of evolutionary biology, creating many schedules and testing their fitness in terms of the production efficiency they would yield. Constraint engines alert the system to physical and logistical limitations [that] must be considered in each schedule scenario."
Given the Dublin facility's ever-increasing sophistication, worker training was a key incentive in the Volvo incentive package. "The work-force training incentives were a tremendous deciding factor for remaining in Virginia," says Gene Dillon, Volvo's manager of compensation, benefits and training. The expansion will include the construction of a "Center of Excellence," a joint effort between Volvo and the New River Valley Community College. The Center will provide employment training programs not only for Volvo, but for other area residents as well. In addition, Volvo North America will continue its partnership with Virginia Tech in providing work-force development programs for engineering and supervisory personnel at Volvo's Dublin facility. The Volvo-Virginia Tech alliance was initially established as part of the state's incentive package in the mid-1990s. Each of four existing buildings at the Dublin complex will be expanded or refurbished with new systems and equipment. The technology-intensiveness of the facility is underscored by the fact that, although the work force is only being increased by 40 percent, total annual production is expected to rise by 66 percent to 50,000 units. Volvo's plans for the Virginia site also call for new facilities as well as improvements to local roadways.
Another key piece in Volvo Trucks' decision to expand in the United States fell into place when the company negotiated a second six-year labor agreement -- the longest in the industry -- with the United Auto Workers. The new Volvo-UAW pact includes provisions for a manpower utilization system called Quattro. Volvo officials say Quattro will reduce overtime and absenteeism through a four-day work week. Workers at the Dublin plant approved the new contract by a margin of more than 2-to-1. Supplier labor was another factor in Volvo's choosing Dublin. The expanded plant will be supported by a dozen of Volvo's major suppliers who have committed to opening or expanding facilities nearby NRV.
Volvo Trucks North America has also been truckin' on other fronts in its North American expansion. |