Truck maker Paccar to eliminate shifts at Tenn., Wash. plants

Truck maker Paccar to eliminate shifts at Tenn., Wash. plants

By ERIK SCHELZIG
AP BUSINESS WRITER

NASHVILLE, Tenn. -- Truck maker Paccar Inc. is eliminating one shift each at its Peterbilt Motors Co. plant outside Nashville and its Kenworth Truck Co. plant in Renton, Wash.

Both plants will be left with one daily shift because of an expected downturn in demand due to higher costs associated with meeting new federal emissions regulations, Paccar spokesman Andy Wold said Monday.

Wold declined give specific staffing and layoff numbers for either plant, but The Tennessean newspaper reported on its Web site that 667 of 1,200 workers in Madison, Tenn., have been sent layoff notices. Officials with the United Autoworkers Local 1832 in Madison did not return a telephone message seeking comment.

Wold said the average price for trucks will jump between $6,000 and $9,000 in the new year to cover the cost of new emissions regulations.

The planned layoffs come in a banner year for truck production for Peterbilt and Kenworth.

"Peterbilt and its sister division Kenworth in North America are performing exceptionally well, with current market share at record levels above 25 percent," Wold said. "That's a full 2 points above the year prior.

"There's a lot of reasons why the market is strong in 2006: The economy is good, our customers are healthy, there's a lot of freight volumes. And 2007 should be a good year - but lower than 2006," Wold said.

Peterbilt also laid off about 600 of the Madison plant's 900 employees following the launch of new U.S. Environmental Protection Agency emission rules in 2002. Bellevue, Wash.-based Paccar rehired the workers a year later and the expanded the Peterbilt plant amid stronger demand.

New federal regulations on diesel fuel went into effect last month. In the past, diesel could have a sulfur level of up to 500 parts per million; low-sulfur diesel has no more than 15 parts per million. Tougher emissions standards for truck engines take effect on Jan. 1.

"There's been a huge acquisition of trucks in the last year or so and there is likely to come to a fairly sharp drop-off here as the new, cleaner engines are introduced into the population," said Allen Schaeffer, executive director of the Diesel Technology Forum, a Frederick, Md.-based diesel advocacy group funded by automakers, diesel engine manufacturers and others.

Peterbilt is not part of the forum.

The new engines will combine lower emissions with greater fuel efficiency, Schaeffer said. But he acknowledged that it will likely take a while for trucking companies become fully comfortable with the new engines.

"I just think it's going to take some time for some of the natural-born skeptics to take a look at and accept this new technology," he said. "For the first couple quarters of 2007, there's somewhat of an uncertainty there and a hesitation about how robust sales will be."

Paccar shares closed down 63 cents to $64.32 on the Nasdaq stock exchange. Shares have traded between $45.19 and $66.88 over the last 52 weeks.