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Steven Pearlstein

Making the Best Of Globalization In Hagerstown

By Steven Pearlstein
Friday, November 19, 2004; Page E01

HAGERSTOWN, Md.

The Washington area economy was never renowned for its manufacturing, and much of what there was has been consolidated at factories in other parts of the country or shipped overseas. The only surprise in this week's announcement that General Motors would close its Baltimore plant was that it hadn't happened sooner.

The same fate might have befallen the Mack Truck plant here in western Maryland. When Sonny Showalter, Darcy Bock and Dave Bricker signed on in the mid-1970s, the plant had 4,500 employees assembling axles and engines and machining many of the parts that went into them. All were sons of Mack workers and, like many in Hagerstown, considered a job at Mack to be the best in town.

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Beginning in the early '80s, however, Mack's share of the truck market began a long, slow decline. As control of the company passed to Signal Corp. and then Renault, investment lagged and more and more work was outsourced. On the factory floor, hardly a single new employee was hired from the mid-'80s until the short-lived boom in truck sales in the late '90s.

But these days, things are suddenly looking up. Volvo (the Swedish truck company, not the car company) has bought both Mack and Renault's truck division and committed $150 million to transform the Hagerstown plant. The state-of-the-art factory will produce engines not just for Mack, but also for all of the truck brands the company sells in the United States. Ground has been broken for a lab where engineers will work on the design of a new generation of cleaner, high-tech engines that meet increasingly stringent U.S. environmental standards. And if it all goes according to plan, Sten-Ake Aronsson, the Swede sent over to run the operation, hopes to double Hagerstown's engine production with the same number of workers -- 1,500 -- that he has now.

Leif Johansson, Volvo's chief executive, admits that he seriously considered closing Hagerstown and moving engine production to Mexico. But in the end, Johansson said, the economics weren't that clear-cut -- the cost of moving was high and while Hagerstown wages are around $20 an hour plus benefits, labor represents only 10 percent of the cost of an engine. Moreover, Hagerstown offered the kind of skilled workforce he thought was essential for making a multitude of different engines to precise specifications on a single production line. It also didn't hurt that the state of Maryland kicked in $5.7 million in grants and loans.

But the real key to the decision came last year in a breakthrough agreement with the United Auto Workers union. In exchange for Volvo's investment and commitment to increase engine output at the Hagerstown facility, the union agreed to allow a number of functions to be outsourced to companies, or other Volvo plants, that could do them for a lower cost. The union also agreed to set aside restrictive rules and job classifications so that more could be done by machines -- with the remaining human work assigned to largely self-directed teams of workers trained to do several jobs.

So far, one corner of the 1.5 million-square-foot plant has been walled off, cleaned up and outfitted with a sleek new computerized assembly line. The first crew of mostly younger workers has been trained, with a few, like Showalter, scheduled to head off to Sweden to see firsthand how it's done. And Bricker is eager to shed his old role as white-collar supervisor for one that's more coach and facilitator.

Meanwhile, with truck orders up 27 percent this year and a new line of Volvo engines soon to move through the plant, Mack is hiring, adding 23 new workers just last week.

The ongoing transformation of facilities and culture at Mack's Hagerstown operation puts the lie to the popular notion among business types that unions are always the enemy of competitiveness, or to the widespread belief in union circles that globalization is always a losing proposition for U.S. workers.

"This kind of change is not necessarily something we like, but it's something we have to deal with," Bock admits. "So far it's turned out pretty good."

Steven Pearlstein can be reached at pearlsteins@washpost.com.


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