Not long after Volvo AB acquired Renault V.I. and its Mack Trucks unit, Paul Vikner became Mack’s president and chief executive. He succeeded Michel Gigou, who now holds the same position at Volvo Trucks North America and is head of Volvo Group’s North American truck operations.
Vikner, who began his career in truck manufacturing at Mack in 1972, held management positions in Mack’s international division until 1979. He held management positions at Iveco Trucks of North America, Isuzu Truck of America and American Isuzu Motors before returning to Mack in 1995 as senior vice president-sales. In 1996, Vikner became executive vice president-sales and marketing.
We met with Vikner late last year.
CCJ: These aren’t the best of times for truck manufacturers. What produced this state of affairs?
Vikner: [Truck manufacturers] mismanaged how we supply products and how we work to bring those products to the industry. I don’t want to sit here and pick on any one company – I mean one was worst than most. But I think people overreacted. Everybody wanted to keep their market share at least in the range of what they had been doing.
CCJ: How did the situation get out of hand?
Vikner: We all looked at this super-heated growth in 1998 and 1999. Everybody was building factories and hiring people. Fleets will run their trucks for two years, roll them and get high residual values. Hundreds of thousands of used truck buyers will get into the business – buying all these late-model used trucks for nothing down and 20 percent interest. You know – just go, go, go. So everybody kept feeding this hungry, wild animal.
And then the minute we had any deterioration in the market – fuel prices going up, insurance prices going up – all of a sudden the market starts to drift down, and all these buy-back guarantees start to come back in and flood the market. The value of those trucks starts to drop like a stone because there are just too many in the marketplace.
CCJ: Do you think Mack’s addition of capacity into the market was any more realistic than its competitors?
Vikner: One of Mack’s strengths is that we have diversity in our product line. So we were able to feed a lot of our growth in markets where other dynamics were going on. Construction was better, for example. Things were going on in the economy that really did support our business. Mack had more eggs in different baskets. It helps us to weather through some of the cycles that certainly the big over-the-road, long-haul market goes through.
But I’m not here to tell you that we’re healthy. Sixty percent of our business is in the highway segment – most of that in daycabs and small sleepers. Only a very small percent of our business is in that over-the-road sleeper market, so that has insulated us a bit.
As the over-the-road market has gone down, everyone is saying they want to come after Mack. So we’re going to get more competition, but it’s not an easy business to penetrate.
CCJ: How does 2002 look for your business?
Vikner: The vocational market should continue to be pretty decent. I would say within 10 to 15 percent of where it was in 2001. The refuse market will hold up nicely. The construction markets overall will be pretty decent also. Whether it’s roughly the same as 2001 or 5 or 10 percent off, we believe the market will remain strong.
The big fleets are saying that they are fairly optimistic. They see their business as steady as holding on.
The problem we’re all experiencing is that our visibility forward is so limited, because people just aren’t ordering trucks five, six or seven months out anymore. They know that they can get them in faster.
There are some unknown issues for 2002, however. For example, what’s going to happen with EPA 2002 from the standpoint of customer buying? Those customers that have the need for trucks – how many of them will pre-buy? And how much will they pre-buy – six months, three months, one month? There’s going to be a $2,000 to $3,000 difference in those trucks. Is a fleet going to take the risk to pre-buy based on anticipation of business or based only on business they know they have? Or it could be that the EPA 2002 issue helps to bring down the inventory of late-model used trucks.
CCJ: Do you see Volvo and Mack sharing development resources, perhaps to the point of the European model, in which four different makes use the same cab?
Vikner: It’s becoming harder and harder to make money in this business. One of the reasons is that it costs a fortune to develop new cabs and engines. The volumes that a regional player has available to it aren’t enough anymore. You have to be part of a global truck organization. You have to try to build off of more common chassis. The automobile business did it years ago. You will see more common cab architecture and more common truck platforms. And you will see more common engines in the future.
Still, you have to differentiate. Maybe Mack and Volvo someday will have the same platform. But Mack is competitive in different segments of the market and has different needs. How you customize or adapt that basic platform to the regional market or regional customer is very, very important. The worst thing you can do is send the message that you are trying to sell a European truck in the States.
In some markets, of course, we won’t be able to use a common platform. With any kind of highly specialized application, such as the refuse market, it’s almost certain that we will need some kind of specialized piece of equipment. But if you can have common rails, common reinforcement systems and maybe common engine mounts, you save a lot of engineering time and parts complexity.
CCJ: Do you see market forces eventually eliminating product lines developed specifically for customer preference in one region?
Vikner: We’re the only market in the world other than Australia that is not using cabovers. At some point – with all the Asian and European ownership of all these companies and the hundreds of millions of dollars spent on development of conventional products – possibly. And it wouldn’t surprise me one bit if there were more regulations on length and weight that would come into play. There should be some common development of engine emissions standards across the world. The money wasted to get within a certain range of each other is silly.
I don’t think there is any question that conventionals will be the only Class 8 products for some time. But at some point, people will start to ask the question, “Do we have to spend hundreds of millions to develop trucks for the States to sell 20,000 to 30,000 trucks a year by each brand?” But the only thing that will make it happen in this country is regulation. But that might happen.