Volvo Moves Backhoe, Motor Grader Production to China

Photo courtesy Wikimedia Commons (in the public domain)
Photo courtesy Wikimedia Commons (in the public domain)

In the latest in a series of cost-cutting measures, Volvo’s construction equipment division announced that it is moving the product of its current line of backhoe loaders and motor graders to one of its Chinese subsidiaries.

The move means more than 1,000 Volvo employees in the US, Poland and Brazil will lose their jobs through a workforce reduction. Volvo’s backhoes currently are built in Wroclaw, Poland and its motor graders are built there and in Shippensburg, Pennsylvania, and Pederneiras, Brazil. While the US and Brazilian production facilities will continue to be use to manufacture other Volvo products, the Polish Volvo plant will be closed entirely, the company said.

About 150 US Jobs Lost

About 15% of the employees, or about 150 of the 1,00 people who work at Volvo’s Shippensburg plant, will be layed off. The layoffs will be implemented incrementally throughout 2015, the company said. The Shippensburg facility, which is Volvo’s only plant in the US, will continue to make wheel loaders, compactors and pavers and will begin making additional wheel loader models with production beginning in the first half of next year.

“Right now we are focused on our employees,” said Sean Glennon, president of the company’s operations in North and South America. “It’s always difficult to go through change, especially when it affects people’s employment, but we are committed to supporting people through the transition with care and respect.”

Production of the products made at the plants will be shifted to Volvo’s Chinese company, SDLG.

Seeking to Cut Costs

Volvo Construction Equipment, a subsidiary of the parent company, launched a review of its operations earlier this year after disappointing profit reports. The company is seeking way to reduce costs and boost profits.

“The measures within Volvo CE are a part of the series of new activities within the increased scope of the  Group’s Strategic Program 2013 to 2015, which was published in conjunction with the report on the third quarter 2014,” states a company news release announcing the move.

Combined, these activities are expected to reduce the Group’s structural costs by about $500 million. The company’s overall plan is to reduce its structural costs by $1.28 billion by the end of 2015.

Recent Investment at US Facility

Ironically, Volvo recently invested an additional $100 million in its Shippenburg facility to build a new North American Customer Center adjacent to the manufacturing plant. The 20,000 square foot structure will be used for sales and operator training, as well as customer and company dealer visits. It also includes Heritage Hall, a museum that showcases the Swedish company’s history, as well as a gift shop.

Volvo bought the plant from Ingersoll Rand in 2007 for $1.3 billion. It added a 200,000 square foot addition in 2010 and another $100 million expansion in 2011.

Volvo has 15,000 employees worldwide and its construction equipment division makes 70 different types of equipment models in 19 countries.

In 2009, the company layed off 135 people at its Shippenburg facility, citing the need to cut costs.