Mack Trucks Inc. announced yesterday that it will eliminate many of the 3,000 jobs at its Hagerstown, Md., engine plant and close its Allentown, Pa., operation to build a new assembly plant elsewhere.
The moves could mean not only the loss of about 1,000 jobs in Hagerstown in coming months, but also that the company would close the Maryland plant and consolidate its manufacturing operations at the new assembly plant within a few years, company and union sources said.
Company sources said the new $80 million plant will be built in the south -- probably in North Carolina or South Carolina.
Mack has been demanding substantial cuts in wages and benefits from the United Auto Workers, and the company said it was making the moves because the UAW had not offered Mack sufficient cost savings during weeks of negotiations.
The UAW, arguing that Mack was still a profitable enterprise, had refused wage and benefit cuts. Instead, the union offered to divert roughly $1 an hour in wages into a fund to help Mack modernize, saying it could save the company $50 million a year by agreeing to changes in work rules and productivity improvements.
But Mack chairman John B. Curcio said yesterday the union's cost-saving claims were exaggerated and could not match the savings that Mack plans to achieve by relocating from Pennsylvania and by "out-sourcing" some of the work now performed at Hagerstown. Out-sourcing is the use of outside sources to supply parts more cheaply than the prime manufacturer.
Mack officials have said privately that the assembly plant in Allentown is expected to close in 1987, when the new assembly plant comes on line. The move would eliminate 2,000 jobs in Allentown.
The officials also have said they plan to eliminate about 1,000 jobs in coming months by purchasing transmission parts at an outside supplier instead of making them in Hagerstown.
Moreover, if Mack builds its new plant in North Carolina or South Carolina, the Hagerstown facility would no longer be a three-hour drive from the assembly plant and would probably be closed eventually, company sources said.
"This will be a bad move for the company," said Ronald L. Bowers, president of the Board of Commissioners in Washington County, where Mack is the largest employer. Bowers, a 24-year Mack employe, said that out-sourcing "will not improve their product or decrease their costs. This will be a mistake that will come back to haunt them."
Bowers said Mack has been an "integrated" company for its 85-year history, producing virtually all its own parts and building a reputation for quality, embodied in the slogan "Built Like a Mack Truck." Bowers said, "We've had good quality workers in Hagerstown and they will have a hard time finding . . . the same work ethic."
"The sad part is that Mack employes have not really had a say in this," Bowers said. He said that many local workers have expressed willingness to take pay cuts but that UAW officials in Detroit were opposed because they feared that giving concessions to Mack would mean that other companies would demand deep cuts from other UAW workers around the country.
"This has not been a decision based on the will of the employes. It has been Mr. Curcio talking with people from Detroit. We have good solid people here . . . who want to keep their jobs," Bowers said. He said he was unsure what, if any, moves Hagerstown people could make to try to change the company's decision.
A UAW spokesman said last night that elected representatives of the Hagerstown workers have been involved in "continual communication and dialogue" related to the bargaining.
Mack pays about $14 an hour in average wages and about $23 an hour in total labor costs, including all benefits. The company said it needed cuts because of intense competition from lower-wage firms seeking to undercut Mack in the highly competitive and shrinking truck sales industry. The company was seeking the cuts midway through a three-year contract, an unusual demand that the union resisted.
Curcio, in a statement yesterday, said the company had been seeking a $3.85 hourly cut in wages and benefits, followed by a lengthy wage freeze. He said the company then modified its demand, asking for a $2.04 cut or a $3.17 cut starting in October 1987, and eliminating the wage freeze demand, but the union rejected that, he said.
UAW spokesman Karl Mantyla said last night that the union had advanced proposals for cost savings that it believed would have yielded greater cost and cash flow savings than Mack's demands. He also said the union presented a revised offer late Friday and offered to submit differences over the extent of savings to "third party scrutiny."
In its statement, the company said, "These decisions, which were so painful, were made only after a very thorough consideration of all the alternatives and after concluding that they were in the best interests of the majority of our employes, the company and its shareholders."