The union man put down his picket sign and walked up to the metal plaque with the sculpted image of the tough Mack Bulldog.
He tapped the dog and grinned.
"All Mack," he said, "and we want to keep it that way."
The man was one of 9,200 United Auto Workers union members who went on strike last week against Mack Trucks Inc., which employs about 3,500 people in its Powertrain Division in this Western Maryland town.
The "number one priority" of the union, as it said in a newsletter, is job security -- keeping the famed Mack trucks "all Mack" with components made by the UAW in Mack plants.
But Mack can't afford to keep it that way, according to domestic truck manufacturing analysts and officials.
They say that the status quo could break the company, or at least turn it into a minor player in the nation's heavy-duty truck-manufacturing industry.
Mack currently is the nation's third-largest producer of Class 8 trucks, heavy-duty machines with gross vehicle weights of over 33,000 pounds. These leviathans of the highway carry over 75 percent of the nation's freight.
If the 84-year-old Mack wants to maintain or improve its rank in truck manufacturing -- indeed, if Mack wants to survive -- the company will have to rely more on outside suppliers for parts such as rear and front axles, axle housings, support frames and other components the company now makes itself, analysts say.
Going outside for parts is called "outsourcing."
It is a way of reducing production costs by getting parts from suppliers who can make them more cheaply, partly because they make the same or similar kinds of parts for more than one customer.
Going outside also means cutting jobs -- about 1,000 if Mack discontinues production of axle-carrier housings, which are made here along with engines and transmissions. And it means means scrapping about 1,400 jobs in Allentown, Pa., Mack's headquarters, where the company is phasing out a 50-year-old machining and forgings plant that turned out axles, axle shafts, support-frame brackets and other truck components.
Mack President John B. Curcio said in statements several months before the strike that the company could save $30 million annually by closing the Allentown facility and buying those parts from outside suppliers.
"This kind of decision is one of the most difficult a chief executive officer faces, because of the impact on employes and on the community," Curcio said. But he said the company has no other choice in a global and increasingly competitive industry.
Harry Allen, an analyst with New York-based Merrill Lynch, Pierce, Fenner & Smith, agrees.
"Mack is locked into a $24-an-hour to $25-an-hour labor-cost situation," which makes producing its own parts an even more expensive proposition, Allen said.
On the other hand, suppliers such as Dana Corp. and Eaton Corp., which make truck components for many of Mack's competitors, steadily are reducing their costs. Buying high-quality parts at relatively low costs gives Mack's competitors a significant production-cost advantage -- one that is scarcely concealed in the truck manufacturing industry's current return to prosperity, Allen said.
"The tradition of the 'all Mack' truck was a good marketing ploy" in the 1950s and 1960s, when trucking -- shipping by trucks -- was a tightly regulated industry in the United States, Allen said.
"One of the advantages of doing it that way was that you could deliver a 'Mack package,' and people accepted that, even though the cost of that package might have been higher," Allen said. The Mack name has stood for quality and durability in heavy-duty trucking. The company's reputation was sealed in the slogan, "Built Like a Mack Truck," often used by advertisers in other industries.
But Allen and others said that the Carter administration's rewrite of the 1933 Motor Carrier Act, deregulating the trucking industry, opened trucking to cutthroat competition. That competition, in turn, knocked the cushion from under trucking firms that once were able to hide the rising costs of truck purchases in higher prices charged to their customers.
Mack's competitors, many of whom had always used outside suppliers extensively, began to rely more on outsourcing as a cost-cutting technique. But Mack remained the only fully integrated Class 8 manufacturer in the United States -- which means that it is the only producer of heavy-duty trucks in this country to make nearly all of its own components.
That situation is aggravated by the fact that outside suppliers, even those with unions, tend to have lower labor costs than the original equipment manufacturers -- the companies that assemble the various parts into cars and trucks.
Mack's $24 hourly labor costs "compares very poorly" with total hourly labor costs of about $14 to $18 enjoyed by many outside suppliers, according to an official at a Mack competitor, who requested anonymity.
The truck-manufacturing official estimated that most of the companies in the domestic Class 8 market depend on outside sources for as much as 65 percent of their components. "They are more like truck assemblers than they are manufacturers," the official said.
Mack, like most of its competitors, took a financial drubbing during the last recession. Class 8 truck factory sales -- which include trucks produced for export -- fell dramatically. The drop-off was most noticeable among diesel Class 8s, which make up the bulk of the heavy-duty truck division.
Factory sales of the big diesels fell 60 percent from a peak of 165,000 units in 1979 to about 100,000 in 1980. That number slid to 97,000 in 1981 and 70,000 in 1982.
Mack lost $18.2 million in 1980, compared with $67.3 million earned in 1979. The company dropped another $10.1 million in 1981, and $50 million in 1982 -- when the UAW agreed to $40 million in wage and benefits concessions to help keep Mack trucks rolling.
Mack turned a fourth-quarter profit of $4.3 million in 1983, but still dropped a total of $26.2 million for the year.
Riding a general upturn in the national economy, Mack earned $31.6 million in the first half of this year on record sales of $1 billion.
But the industry has changed. For one thing, foreign heavy-duty truck manufacturers took advantage of the recession to take over or to buy major shares of the financially weakened U.S. companies.
French auto maker Renault now owns 45 percent of Mack; West Germany's Daimler-Benz owns all of Portland, Ore.-based Freightliner Corp., and Sweden's AB Volvo, maker of Volvo cars and trucks and Marine engines, now owns White Motor -- renamed Volvo White Truck Corp. -- based in Greensboro, N.C.
Daimler-Benz produces trucks in Hampton, Va., and Volvo produces buses in Chesapeake, Va.
The upshot is that the foreigners are pulling in more and more parts, made for and by their parent companies, at production costs made even cheaper by foreign exchange rates that are working in their favor, analysts say. The foreigners also are pushing for standardization of truck parts and components to reduce further the costs of truck manufacturing and assembly.
And then there is this: The heavy-duty truck market is becoming a replacement market only. Once that replacement need is satisfied, heavy-duty truck sales are expected to settle at around 125,000 units a year, maybe even lower, analysts say.
At any rate, few analysts believe that the industry will be able to use fully its current supplier and assembler capacity to build 250,000 heavy-duty trucks a year.
As a result, the prices for and profits from Class 8 trucks are expected to rise more slowly, Allen said. The estimated average price for a heavy-duty truck in 1983 was $51,350. That rose to $53,200 this year and is expected to inch up to $53,750 in 1985, Allen said.
Mack's Curcio said he has long been aware of those trends. In comments before negotiations, he said: "The culmination of all of this is that we are now facing a shrunken heavy-duty diesel truck market globally, a mature market, a replacement market only, with few, if any, prospects for significant growth. . . .
"It is common knowledge that, compared with our major competitors, Mack has been too highly integrated and too capital intense," Curcio said. "Labor costs notwithstanding, we do not have the economy of scale to compete with the major parts manufacturers who are now faced with a serious under-utilized capacity situation," he said.
He added: "We believe that by making the necessary decisions which will result in Mack becoming more cost effective and more competitive, we will not only maintain, but increase, our share of a shrunken global heavy-duty truck market."
Those "necessary decisions" don't sit well with the members of UAW Locals 171 and 1247, which represent about 3,200 of the 3,500 Mack employes here. They have seen their numbers fall from a peak of about 4,600 employes in 1979 to as low as 2,279 in early 1983. Even if the unions manage to hold on to the axle-carrier jobs, their recovery-boosted membership is apt to fall again.
Mack, like its competitors, is automating, installing things such as flexible manufacturing systems, which can turn out small numbers of machined parts as efficiently as dedicated machines can produce large volumes of standard parts. Flexible manufacturing systems also work much faster and with greater accuracy than the people they replace.
But Local 171 committeeman Bill Nutter, a big fellow who seems as tough as the Mack Bulldog, says his union members have a right to the jobs many of them have held since the company opened its Powertrain Division here in 1961.
"We want that work to be kept in Hagerstown," Nutter said. "Any engines, transmissions, carriers that go into Mack trucks, we want them to be made right here in Hagerstown."
Nutter said he doesn't want "any reporters going around trying to make us look like a bunch of greedy workers who are out to get the company."
"It's not about that," he said. "We got nothing against the company here. I want you to say that Mack workers are proud of their company, proud of the quality of the work they do, and proud of the UAW," said Nutter, a 44-year-old Hagerstown native.
"The point is, we want to keep our jobs. You understand that? We want those jobs to stay in Hagerstown."