Revving upVolvo growth good for Central Pennsylvania manufacturers
Volvo Construction Equipment is poised to become one of Central Pennsylvania's larger manufacturing and corporate operations when it moves its North American sales headquarters to Shippensburg and begins adding production.
That scale-up of activity for the Sweden-based heavy truck and construction equipment manufacturer could mean hundreds more jobs for the midstate's industrial sector and a significant contributor to the regional economy, companies and business groups said.
Volvo announced March 15 that it would move its sales headquarters from Asheville, N.C., to Shippensburg by September 2012 and spend $100 million to continue expanding and upgrading its factory there. That will include production of three more types of construction vehicles at the plant in Franklin County. Shippensburg straddles the border into Cumberland County.
Volvo is offering all of its construction equipment sales and office staff in North Carolina, as well as the Volvo Rents staff there, the opportunity to move to Pennsylvania, said Beatrice Cardon, a company spokeswoman. But it's likely many of the 220 workers there will not be able to or want to make the move, she said.
It's too early to say how many people Volvo will hire from the midstate labor pool, she said. That goes for the manufacturing side as well. Volvo will ramp up production lines between 2012 and 2015, she said.
Volvo's move of its sales offices to Shippensburg and expansion of that plant is a reversal of a general trend that has many manufacturing operations moving south as companies consolidate facilities.
The most recent example is Carlisle Tire & Wheel Co., a former Cumberland County manufacturer of wheel assemblies for recreation and specialty vehicles. The company's Carlisle plant closed at the end of December and its parent, North Carolina-based Carlisle Cos., moved the midstate operation to Tennessee. The company consolidated three manufacturing operations there, including work it brought back from China.
The Governor's Action Team and the Franklin County Area Development Corp. have spoken with Volvo about the Shippensburg expansion but have not given the company financial incentives, said Theresa Elliott, a spokeswoman for the state Department of Community and Economic Development.
Volvo Group as a whole had a big turnaround in the fourth quarter of 2010 with net income of $543 million compared to a loss of $316 million a year ago, according to the company.
Volvo Construction Equipment helped that recovery, growing its fourth quarter sales by 44 percent to $2.3 billion, the company said. The Asian and North American markets led that surge. North American sales grew by 43 percent to $257 million.
The Shippensburg facility manufactures soil and asphalt compactors, motor graders, pavers and screeds, and milling machines. Volvo last year finished a $30 million expansion to grow that production and began hiring more workers to meet expected sales growth. Volvo employs almost 800 people in Shippensburg.
"This is a long-term plan," Cardon said. "We want to bring manufacturing into North America and do more local sourcing."
Volvo already uses about a dozen suppliers in Pennsylvania, including Franklin County-based Sunset Metal Works Inc. and Cumberland County-based Industrial Harness Company Inc., she said.
Executives from the Sunset and Industrial Harness were not immediately available for comment.
At least one company, Canada-based DeeTag Ltd., opened a Chambersburg location to be closer to Volvo's business in Shippensburg, Cardon said. DeeTag is a manufacturer of hydraulic hoses for construction and manufacturing equipment.
The company provides Volvo with about 80 percent of its hoses for the grader produced in Shippensburg, said Eric Eiker, DeeTag's operations manager. More Volvo manufacturing could mean more work for DeeTag, but it's too early to tell, he said.
Some companies see other opportunities.
York County-based Flinchbaugh Engineering Inc. already does work for Volvo's Hagerstown, Md., plant that makes engines for Volvo and Mack brand trucks, said Thomas Frauman, Flinchbaugh's business development manager. Volvo acquired Mack Trucks Inc. in 2001.
Volvo has a deal with Flinchbaugh to use the company's Hellam Township facility to manufacture spare parts for the engines, Frauman said. By moving that production to a contract company, Volvo frees up space on its manufacturing line for other products, which makes the company more efficient, he said.
Companies that use this process — known as Strategic Cell Migration at Flinchbaugh — can save 20-30 percent on their operations because it's a fast start-up and the company doesn't have to buy new equipment, he said.
"We have to believe these strategies would work with the whole consolidation trend that they're doing in Shippensburg," Frauman said.
Flinchbaugh has had a deal with Volvo since 2005, but it could be coming to a close within the next two years, he said. Flinchbaugh added about six workers and it's likely new cell migration work would increase that number, he said. The company hired 47 people since August due to work with other large equipment manufacturers, such as Illinois-based Caterpillar Inc., he said.
"Any time we bring a line in from another company, we have to staff it up," Frauman said.
Volvo's expanded presence in the midstate will go beyond immediate suppliers, said Tim Ebersole, the loaned executive director of the Shippensburg Area Chamber of Commerce. He's also the spokesman for Shippensburg University.
Restaurants, hotels and other businesses all benefit when a large company expands, he said.
"We're ecstatic," Ebersole said. "We think its going to be a great opportunity for our community, and especially our business community."