Hardball on the Highways: Paccar Closing Strike-Hobbled Peterbilt Plant

Paccar's Peterbilt Motor Co. unit is closing its Madison, Tenn., permanently on Dec. 1. The news comes after the plant stopped manufacturing heavy duty Class 8 trucks in mid-20908. The company and the United Auto Workers Local 1832 were unable to agree on a new contract.

  Management 1, Organized Labor 0.

  That's the final linescore from the hardball labor negotiations between the United Auto Workers Local 1832 in Madison, Tenn., and Paccar's Peterbilt Motor Co.

  This of course is mildly good news for major competitors Freightliner, Navistar, Mack, Volvo and the rest of the financially ailing Class 8 manufacturing sector.

  For the record, the company says it is closing the Class 8 manufacturing plant because of the precipitous decline in demand for heavy trucks.

  That's true -- as far as it goes.

  Class 8 sales will barely tick 140,000 units this year, about half what they were during the boom years of 2005 and 2006.

  Given trucking's notoriously cyclical demand cycles, these boom and bust periods are not unusual. Any company that doesn't see the waves can't last very long in trucking.

  But that's not what's driving this decision. This move is about hardball labor negotiating tactics, and nothing else.

  My colleague, Jay Thompson, has accurately painted the picture of demand for "Petes," which are largely favored by owner-operators and small fleets. Those sectors have been particularly hard hit by the recent decline in truck tonnage demand.

  But all the indicators are pointing upward. There' s genuine hope from the trucking executives, fleet managers and OEM officials I talk with that 2010 and beyond might really be a decent period for trucking. Given that Class 8 truck sales are declining for the third straight year, why get out now before the rally starts?

  As I'm fond of saying, "Don't leave before the miracle happens."

  One can see how Peterbilt is telegraphing its labor strategy through this move. It is moving all its truck manufacturing to a state-of-the-art plant in Denton, Texas, outside Dallas.

  Oh, did I mention the Denton plant is union-free? Yes, it is.

  There are 2,000 workers at the Denton facility, compared to about 370 at the unionized Tennessee plant. That location has been plagued by work stoppages, and lack of progress in contract negotiations.

  There was a 14-week strike at the Nashville plant in 1992. There was another six-month shutdown in 1998. Then in 2002, the workers endured a 10-month shutdown. In fact, this facility has not produced a single truck since mid-2008.

  The Peterbilt plant manager in Nashville, Larry Vessels, is quoted in this Nashville Business Journal story as saying the impasse with the UAW had nothing to do with the decision to shutter the plant.

  If you believe that, I've got a bridge in Brooklyn I'd like you to look at it.

John Schulz consults with leading institutions through GLG