Sweden's truck makers, which shed workers and curbed capacity during the economic downturn as sales dwindled, are encountering problems as they ramp up production now that demand has returned.
Volvo AB, the world's second-biggest truck maker by sales behind Germany's Daimler AG, said Friday that it had suffered "temporary production disturbances" in the fourth quarter of 2010 when it had "raised its manufacturing pace to a higher level." That came just two days after rival Scania AB disclosed problems of its own.
Demand for trucks has rebounded as quickly as it went into reverse. Volvo, which sells trucks under the Mack, Renault and UD Trucks brands as well as its own name, said its sales in 2010 jumped 28% to 48,041 vehicles from 37,678 in 2009. Order intake rocketed 63% to 62,051 vehicles from 38,166 and demand continues to climb, largely driven by the need to replace the aging population of heavy-duty trucks.
Markets in northern and central Europe—Scandinavia and Germany, in particular—have fuelled demand for Volvo's trucks. The market for heavy-duty trucks in Europe, where Volvo generates more than 40% of its sales, last year rose 8% to 179,000 vehicles, a figure that it expected to accelerate to 220,000 in 2011.
The North American market jumped 20% in 2010 to 142,000 vehicles and Volvo expects it to roar ahead to 220,000 this year. While the rebound is good news for Volvo and Scania, both have stuttered as they geared up to fill orders.
"There's no such thing as an ideal ramp-up," said Volvo Chief Executive Leif Johansson.
Volvo's problems are twofold: training new staff and supplier bottlenecks. The Gothenburg-based company, which let go 18,000 temporary and part-time workers and consultants from mid-2008, hired 2,000 workers in the fourth quarter of 2010, and each needed a couple of weeks' training before they could join in production. The company's permanent work force at the end of 2010 edged up to 90,409 from 89,178 a year earlier, but the number of temporary staff more than doubled to 14,851 from 7,104.
Temporary workers allow companies the flexibility to adjust production up or down to meet demand without the social welfare obligations that come with permanent hires.
Volvo's suppliers face challenges of their own. "Our suppliers are on the same journey as us. They are also forced to increase volumes at an extremely quick rate," Mr. Johansson said, adding that he believed Volvo would run into the same sort of production problems in the coming two quarters.
It was nearly impossible to forecast the kind of supplier problems Volvo would run into, Mr. Johansson said. "If we knew what kind of problems we'd meet, we'd do something about it," he said.
He added that supplier problems differed vastly—if a turbo supplier couldn't deliver, that impacted the entire production chain. "But if we're talking about a lack of rear-view mirrors, we can attach those afterwards and that has a very limited effect," he said.
Scania Chief Executive Leif Ostling on Wednesday indicated similar issues, warning of "continued risk of bottlenecks among both sub-contractors and bodybuilding companies." Scania let go 2,000 temporary workers during the downturn and implemented four-day weeks as demand eroded. However, its workforce had increased to 35,500 at the end of 2010 from 32,000 a year earlier.
Volvo AB, the world's second-biggest truck maker by sales behind Germany's Daimler AG, said Friday that it had suffered "temporary production disturbances" in the fourth quarter of 2010 when it had "raised its manufacturing pace to a higher level." That came just two days after rival Scania AB disclosed problems of its own.
Demand for trucks has rebounded as quickly as it went into reverse. Volvo, which sells trucks under the Mack, Renault and UD Trucks brands as well as its own name, said its sales in 2010 jumped 28% to 48,041 vehicles from 37,678 in 2009. Order intake rocketed 63% to 62,051 vehicles from 38,166 and demand continues to climb, largely driven by the need to replace the aging population of heavy-duty trucks.
Markets in northern and central Europe—Scandinavia and Germany, in particular—have fuelled demand for Volvo's trucks. The market for heavy-duty trucks in Europe, where Volvo generates more than 40% of its sales, last year rose 8% to 179,000 vehicles, a figure that it expected to accelerate to 220,000 in 2011.
The North American market jumped 20% in 2010 to 142,000 vehicles and Volvo expects it to roar ahead to 220,000 this year. While the rebound is good news for Volvo and Scania, both have stuttered as they geared up to fill orders.
"There's no such thing as an ideal ramp-up," said Volvo Chief Executive Leif Johansson.
Volvo's problems are twofold: training new staff and supplier bottlenecks. The Gothenburg-based company, which let go 18,000 temporary and part-time workers and consultants from mid-2008, hired 2,000 workers in the fourth quarter of 2010, and each needed a couple of weeks' training before they could join in production. The company's permanent work force at the end of 2010 edged up to 90,409 from 89,178 a year earlier, but the number of temporary staff more than doubled to 14,851 from 7,104.
Temporary workers allow companies the flexibility to adjust production up or down to meet demand without the social welfare obligations that come with permanent hires.
Volvo's suppliers face challenges of their own. "Our suppliers are on the same journey as us. They are also forced to increase volumes at an extremely quick rate," Mr. Johansson said, adding that he believed Volvo would run into the same sort of production problems in the coming two quarters.
It was nearly impossible to forecast the kind of supplier problems Volvo would run into, Mr. Johansson said. "If we knew what kind of problems we'd meet, we'd do something about it," he said.
He added that supplier problems differed vastly—if a turbo supplier couldn't deliver, that impacted the entire production chain. "But if we're talking about a lack of rear-view mirrors, we can attach those afterwards and that has a very limited effect," he said.
Scania Chief Executive Leif Ostling on Wednesday indicated similar issues, warning of "continued risk of bottlenecks among both sub-contractors and bodybuilding companies." Scania let go 2,000 temporary workers during the downturn and implemented four-day weeks as demand eroded. However, its workforce had increased to 35,500 at the end of 2010 from 32,000 a year earlier.
