Mack Trucks, Inc. History

Company Perspectives:

Mack Trucks, Inc. is dedicated to providing customers worldwide with heavy-duty trucks and components that provide total satisfaction.

Key Dates:

1900:

After eight years of testing, brothers Jack and Augustus Mack produce "Old Number One," a chain-driven vehicle that features a Mack-built four-cylinder engine, a cone-type clutch, and a three-speed transmission.

1901:

The Mack Brothers Company incorporates in New York with a capitalization of $35,000.

1938:

The company introduces the Mack Diesel, the first diesel engine made by a truck manufacturer.

1952:

The company introduces its best-selling "B" series.

1967:

Mack agrees to become an affiliate of Signal Oil & Gas Company, on the condition it will retain complete autonomy.

1983:

French auto manufacturer Renault purchases 41 percent of Mack from Signal for $228 million; Mack goes public.

1990:

Renault gains full control of Mack.

2000:

Volvo buys Mack from Renault for $1.71 billion in shares.

Company History:

A prominent fixture in the U.S. truck industry, Mack Trucks, Inc. is one of North America's largest producers of heavy-duty trucks and major product components. In 2000 Mack became a wholly owned subsidiary of AB Volvo, a publicly held company headquartered in Gothenburg, Sweden, with annual sales of approximately $20 billion. In addition to its widely recognized line of heavy-duty trucks, Mack produces a line of medium-duty diesel trucks throughout North America. As of 2002, Mack trucks were sold and serviced in more than 45 countries worldwide.

Early 20th-Century Origins

It was by hauling heavy artillery pieces through the mud of World War I battlefields that Mack trucks first earned their famous nickname. Legend has it that a British officer, trying to free an artillery piece that was mired in mud, coined the name "bulldog" when he called out to a Mack driver, "Bring that bulldog over here." Management liked the term. In 1932 Mack began putting the bulldog emblem on the front of all trucks and in the 1960s, to raise company morale, Mack produced bulldog pins, carpets, flags, T-shirts, and other items. The square-shouldered grimly determined bulldog was an appropriate symbol. Mack, a quality-conscious, pioneering truck manufacturer, had a history of cash flow problems and near collapses.

The youngest of five brothers, 14-year-old Jack Mack ran away from his Pennsylvania home in 1878 to join the Teamsters and work as a mechanic. In 1893 Jack, with his brother Augustus, purchased a small carriage- and wagon-building firm in Brooklyn, New York. The firm was ruined by the financial panics of the 1890s, and the two brothers were forced to enter the business of maintaining and repairing engines, rather than manufacturing them.

During this time they began to experiment with new types of self-propelled vehicles. The Macks had exacting standards, and both an electric car and a steam-powered wagon were dumped into the East River for having too many mechanical flaws. But in 1900, after eight years of testing, the brothers finally produced a vehicle that satisfied them. "Old Number One," the first successful bus built in the United States, was a chain-driven vehicle that featured a Mack-built four-cylinder engine, a cone-type clutch, and a three-speed transmission. It conveyed 20 sightseers at a time through Brooklyn's Prospect Park. The vehicle, which was converted into a truck in 1908 and finally retired in 1917, was the first Mack "million-miler."

Orders for more buses came rapidly, and Jack and Augustus, joined by their other brothers, incorporated Mack Brothers Company in New York with a capitalization of $35,000. In addition to manufacturing buses, the young company pioneered the design of custom-built, heavy-duty trucks. This ran against the prevailing wisdom on such matters. Automakers at that time considered trucks a poor relation to the automobile, and manufactured them from surplus or obsolete auto parts. They made trucks in order to keep their shops busy during periods of slow business. Jack Mack, however, anticipating that the days of the horse and wagon were numbered, decided to make trucks with a capacity of one to seven tons. He introduced the "seat-over-engine" truck, made a seven-ton, five-cubic-yard dump truck for the construction of the New York City subway, and began manufacturing rail cars and engine-driven fire trucks. By 1911 the Mack Brothers Company, manufacturers of "The Leading Gasoline Truck in America," had 825 employees producing about 600 units a year.

Due to depressed market conditions the demand for trucks slowly diminished and the company, which had relocated to Allentown, Pennsylvania, merged first with the Saurer Motor Company and then the Hewitt Motor Company. The new management did not meet the approval of Jack and three of his brothers, and they left the company. Although regrettable, their departure did not end Mack innovation. The new chief engineer, Edward R. Hewitt, designed a medium-duty Mack truck that was the mainstay of the market from 1914 until 1936. The AB Mack featured a four-cylinder engine with a three-speed transmission, a worm drive rear axle, and two large inspection ports that allowed a quick inspection of the crankshaft and rod bearings. Hewitt's successor, Alfred F. Masury, designed the Mack AC, a heavy-duty, chain-driven truck that featured clutch brakes to prevent its gears from clashing. This was the truck that hauled artillery pieces in Europe during World War I. Its performance there gave rise to the phrase, "Built like a Mack truck."

With improved roads and an increased demand for point-to-point delivery, the truck industry prospered in the 1920s. For Mack, which was producing more than 7,000 units by 1927, sales rose from $22 million in 1919 to $55 million in 1927. The company added improved cooling systems, four-speed transmissions, dual-reduction drive, and the Mack Rubber Shock Insulator (the first major breakthrough in vibration dampening since automobiles were introduced) to the AB and AC models.

At the end of the decade Mack launched a line of high-speed, six-cylinder trucks. These models, designated the BJ, BM, BX, and BQ, marked the beginning of the transition from slow, four-cylinder trucks to high-speed transports. Mack also manufactured the country's first practical off-highway dumper designated the AP. It was used in the construction of the Hoover Dam.

The Depression had a devastating effect on Mack. In addition to the drop in demand, light-duty trucks introduced by other manufacturers created competition for Mack's large models. Mack sales dropped 75 percent between 1929 and 1932. But the company fought back. Instead of reducing production Mack offered a new line of small trucks, and introduced the CH and CJ cab-over-engine models. The cab-over-engine design, the best way of getting a distribution by weight on the front and rear axles, was necessitated by laws restricting axle loading, gross vehicle weights, and overall lengths. Despite the Depression, Mack's new line was successful. Those manufacturers in financial distress, needing more efficient ways of transporting goods, turned to the transportation that offered the lowest cost per ton per mile, namely, the truck. Furthermore, the urban demand for public transit ensured a strong bus market.

Mack's leadership of the industry continued in 1938 with the introduction of the Mack Diesel, the first diesel engine made by a truck manufacturer. In 1940 Mack sales hit $44 million on domestic deliveries of 7,754 units, with a net profit of $1.8 million. By making heavy-duty trucks, small delivery trucks, dump units, buses, and fire trucks, Mack offered the most comprehensive product line of any truck manufacturer.

World War II and Postwar Years

As early as 1940 Mack began producing the NR military six-wheeler, a tank transporter that would be used for British General Montgomery's North African campaign. After Pearl Harbor, Mack produced virtually nothing but military equipment, including power trains for tanks, military trucks, torpedo bombers, and the "MO," which pulled 150 mm field guns. Since it suspended civilian truck production for the duration of the war, Mack set up an extensive maintenance network that enabled those trucks to remain in running condition. Its contribution to the war effort won the company numerous government awards.

But that contribution meant little in the post-World War II environment. Strikes and new taxes resulted in a loss of profits for the company in 1946, while contract renegotiations and a soft market made the late 1940s a financially difficult period in general for Mack. In 1952 the manufacturer again reversed its fortunes by introducing the best-selling "B" series. These trucks featured a widened chassis frame in front for easier maintenance, a wider front axle for improved maneuverability, and rounded fenders with a sleek hood and cab. This appearance was a significant change from earlier long-nosed and box-shaped trucks. By the time the "B" series was discontinued in 1966 approximately 127,000 models had been sold.

Another major innovation was the END 673 "Thermodyne" diesel engine, which was introduced in 1953 and featured direct fuel injection, allowing for greater power (170 horsepower) and reliability. Close to 80 percent of the heavy-duty "B" trucks were sold with Thermodyne engines.

These innovations notwithstanding, Mack's financial condition declined drastically in the 1950s and early 1960s. Finance-oriented executives, with no experience in truck manufacturing, deferred maintenance and allowed facilities to deteriorate in order to maintain a strong cash flow. Corporate offices were moved to Montvale, New Jersey, effectively isolating management from union employees. This management style, in conjunction with repeated work stoppages and strikes, left the company with reduced sales. From 1959 to 1964 earnings fell from $15.8 million to $3.4 million. A proposed merger with Chrysler Corporation, which might have saved the company, was not approved by the Justice Department.

In 1965 a dispirited management offered the presidency to career trucking executive Zenon C.R. Hansen. He eagerly accepted the challenge. "Many well-informed individuals advised me that I was taking over a sinking ship ... that Mack was too far gone to save ... that Mack would either go under or be absorbed by one of our competitors," Hansen said later. "But I thought they were wrong. Mack still had a great name, a great product, and above all it had the people."

Hansen assured employees that there would be internal promotions and a cessation to the firings, and he distributed bulldog flags, jewelry, rugs, and other items to boost morale. He set up an accelerated program to improve all the previously deferred maintenance. Corporate offices were moved back to Allentown, and a new assembly plant was built on the West Coast. He also approved manufacture of the "Maxidyne" diesel engine, which produced constant horsepower over a wide operating range. It featured a simple five-speed transmission, compared with earlier transmissions that had 10, 13, or 15 speeds.

These reforms helped Mack improve its financial situation by 1967. But the company remained plagued by a lack of capital. It was forced to stockpile millions of dollars of parts to ensure production of enough trucks during high demand periods, while at the same time advancing millions of dollars in loans to customers. To ease this crisis, Mack agreed to become an affiliate of Signal Oil & Gas Company in 1967 on the condition it was guaranteed complete autonomy.

Mack did not, however, stay abreast with the industry innovations during the 1970s. Because profits went back to the parent company, Mack could not modernize its plants. It did introduce an air-to-air intercooled diesel engine in 1973, the ENDT 676 "Maxidyne," which featured 285 horsepower, 1,080 pound/feet of torque. But industry deregulation and foreign competition drained Mack's profits, and those of other American truck manufacturers as well.

1980s Malaise

To cope with these problems the new president, John Curcio, persuaded the French auto manufacturer Renault to purchase 41 percent of Mack from Signal for $228 million in 1983. Renault not only contributed new capital, but also helped to distribute the Mack light trucks. In 1983 the company went public, although it was unable to pay dividends. Cost-cutting measures by Curcio, which reduced expenses $160 million in four years, returned the truck manufacturer to a sound financial condition in 1984 for the first time since 1980. Sales increased by 73 percent to $2.1 billion. But a write-off on the antiquated Allentown plant led to $58 million in losses during 1985.

Early in 1986 Mack announced that it was moving its main production plant from Allentown to an $80 million computerized facility in Winsboro, South Carolina. The Allentown plant, built in 1926, was so old that trucks were still spray-painted by hand. Parts had to be moved by forklifts since there was no robotic technology. Furthermore, in Pennsylvania unionized labor cost close to $23 an hour including benefits, compared with labor costs of about $12 an hour in the South.

In 1986 Curcio told Forbes magazine that truck transportation had become more efficient, causing the demand for trucks to drop to 125,000 a year. The country's seven largest manufacturers had a combined production capacity of 230,000 trucks a year. "In the next five years, we expect a major skirmish, if not a major war," he said.

Curcio's words were prophetic, for Mack did indeed find itself embattled as the 1980s progressed, but the company's fight for survival was an introspective one rather than a war raged against competitors. Mack was beset by myriad problems during the 1980s, problems that stemmed from its relationship with Renault and precluded the smooth operation of the trucking company's activities. Renault officials had mistakenly thought they could direct Mack's operation from Renault headquarters near Paris, and were slow to recognize their mistake. Quality control slipped as a result. Under the stewardship of Renault, Mack failed to keep pace with its competitors in centralizing purchasing and trimming costs incurred from design and production processes. Renault also failed to expand Mack's distribution network, leaving the truck manufacturer with dealers and service centers situated primarily in the East, far removed from the majority of long-haul truckers who were Western-based. The impact on Mack was decisive and devastating. Executives in France may not have realized what was happening, but Mack's customers did, and they demonstrated their recognition by taking their business elsewhere. Mack's market share, which had stood as high as 20 percent in the late 1970s, was cut in half during the 1980s. By the end of the decade, the situation had become grave enough to set off alarms in Paris.

Mack entered the 1990s losing $20 million a month, part way through a five-year period when the truck manufacturer racked up a staggering $900 million loss. The company was teetering on the brink of bankruptcy. Its trucks broke down at an alarming rate and its distributors frequently were too far away to provide expedient assistance. Employee morale was depressingly low. To begin curing Mack's numerous problems, Renault officials made two important decisions in 1990. First, pressing financial concerns were given a reprieve when Renault V.I., the commercial vehicle division of the Renault Group, acquired the remaining 55 percent of Mack it did not already own. Second, and perhaps most important, Elios Pascual was dispatched from Renault's truck division to Mack's headquarters in Allentown. To Pascual, who assumed the title of chief executive officer of Mack, fell the task of arresting the truck manufacturer's deleterious financial slide and turning the venerable company around.

Turnaround Beginning in 1990

Pascual immediately set about cutting costs, improving manufacturing quality and efficiency, and instilling a sense of pride among Mack employees. A plant was closed in Ontario, Canada, the number of Mack suppliers was sharply reduced, and the company's finance division was sold. Pascual ordered a redesign of Mack trucks, which greatly increased productivity. In 1991, 2.5 trucks were produced each year per employee; by 1994, four trucks were produced each year per employee. As these productivity figures rose, Mack's payroll shrank, making the turnaround more dramatic. From more than 13,000 employees during the mid-1980s, the number of workers was reduced to roughly 7,000 by the early 1990s, with the sharpest reductions coming from the salaried ranks.

Although Pascual orchestrated sweeping changes throughout Mack's operations, the impact of these changes did not materialize immediately. The company continued to languish throughout the early years of the 1990s, making little ground in the face of mounting competition. In 1993, when Mack lost $64 million on revenues of $1.7 billion, the U.S. heavy-duty truck industry recorded its greatest sales volume in the previous 15 years, engendering sizable profit totals for many of the industry's largest players. Mack was excluded from the celebrations. Progress was being made, however, and the supporting evidence was readily discernible by the mid-1990s.

By the end of 1995, Mack had improved its market share for the third year in a row after four consecutive years of decline. The changes implemented in 1990 were showing their effect at last. After recording financial losses every year during the 1990s, Mack moved back into the black in 1995, returning to profitability after a long absence. The market for Class 8 trucks was in a slump in 1995, declining more than 15 percent, but Mack held its own and gained some ground. The company's market share rose during the year, up to 12.1 percent, making 1995 the fourth consecutive year in which Mack increased its share of the market. Further, Mack was one of only two manufacturers to increase its market share in a declining market. On this bright note, the company celebrated its 95th anniversary with renewed optimism and charted its course for the future, intent on bringing the unique Mack mystique into the 21st century.

Consolidating Gains for the New Millennium

In 1996, Mack's leadership was faced with the challenge of shoring up the company's tentative recovery. An essential aspect of this task was to find ways of insulating Mack from the cyclical volatility of the U.S. heavy truck market. Although by 1995 demand had more than doubled from its nadir in 1991, the forecast for 1996 was dismal, with demand expected to decline 30 percent. To escape the impact of this downturn, then, Mack would have to improve its margins enough to remain profitable from the sale of only 14,000 vehicles--6,000 vehicles fewer than its bottom line for 1995. Other means of bolstering Mack against the precarious domestic market included improving Mack's presence in markets outside its stronghold in the Northeast and expanding sales overseas. In October 1996, responsibility for these initiatives fell squarely on the shoulders of the company's new president and chief executive, Michel Gigou, who had been with Renault for 24 years.

Luckily, the market was revitalized after 1996, and by March of 1998 Mack was boasting its fourth consecutive year of profitability, along with its fifth consecutive year of increased market share. The company reported overall sales of $2.45 billion for 1997, a marked increase from sales of $2.14 billion in 1996. While the company held fast to its position as the third leading U.S. brand, it also managed to increase its overseas sales by 54 percent, capturing 22.5 percent of market share and moving into the number two spot among U.S. truck exporters. Indeed, the company appeared poised to enter the new millennium--and celebrate its own centennial--on solid footing.

Still, the new century brought with it more change, and by the end of 2000, Mack had come under new ownership. That year Renault sold Mack to Volvo for $1.71 billion in shares. With the acquisition of Mack, Volvo expected to develop several key manufacturing efficiencies and become the number two truck manufacturer in the world, capturing 28 percent of the European market for heavy trucks and 24 percent of the U.S. market. According to the terms of the deal, Renault would become Volvo's largest shareholder, with a 20 percent stake in the Swedish company. All three companies retained their own brand names, as well as their manufacturing plants and employees.

No sooner had Volvo closed the deal on its new subsidiary than it was faced with serious challenges posed by the dramatic downturn in the U.S. economy--and nowhere was the downturn felt more acutely than in the trucking industry. The total U.S. market for heavy trucks declined from its high level of about 309,000 units in 1999 to an approximate volume of only 170,000 units by the end of 2001. Mack responded to the weakened market by scaling back production, with manufacturing plants in Pennsylvania, New River Valley, Virginia, and Winnsboro, South Carolina, operating at only about 30 percent of capacity. By September 2001, Volvo announced that it would close the Winnsboro plant altogether, and implement restructuring measures to maximize efficiencies between its Mack Trucks and Volvo Trucks North America subsidiaries.

While pursuing aggressive cost-cutting measures in 2001, Mack also sought to improve its product offering. In June of that year, the company unveiled a new line of trucks, the Granite Series, designed to further secure its position as North America's leading supplier of heavy-duty vocational vehicles. Well received by industry experts, the trucks proved immediately popular with Mack customers as well, and by early 2002 the company was increasing production of the Granite series to meet growing demand--even while the overall market for heavy trucks remained weak. Still, Mack's truck deliveries remained weak through the end of 2003, with the company reporting a 23 percent decline at the end of October over the same period for the previous year. Well seasoned in the art of riding out cyclical downturns, Mack could only hope to maintain the sound reputation of its brand, as well as a focus on stringent cost-cutting, while the economy fought its way to recovery in 2004.

Principal Subsidiaries: Mack Americus, Inc.; Mack Canada, Inc.; Mack Properties, Inc.; Mack Truck Worldwide Ltd.; Mack Truck Australia Pty., Ltd.

Principal Competitors: DaimlerChrysler AG; Navistar International Corporation; PACCAR Inc.

Further Reading:

• Berss, Marcia, "Mack Malaise," Forbes, April 11, 1994, p. 73.
• Griffiths, John, "US Trucks Role for Gigou," Financial Times (London), October 30, 1996, p. 18.
• Hannon, Kerry, "Missed Turn," Forbes, August 7, 1989, p. 10.
• Hansen, Zenon C.R., The Legend of the Bulldog, New York: Newcomen Society, 1974.
• Jocou, Pierre, "Beyond Buzzwords: TQM at Mack Trucks," Chief Executive, September 1996, p. 54.
• Sawyer, Christopher A., "Mack Under Attack," Automotive Industries, February 1992, p. 111.
• Simonian, Haig, "Europeans Find US Market Tough to Colonise: Truck Groups Have Encountered a String of Obstacles Since They Crossed the Atlantic in the 1980s," Financial Times (London), August 22, 1996, p. 24.
• ------, "Recovering Its Faded Image As the Bulldog Breed," Financial Times (London), March 12, 1996, p. 32.
• ------, "Volvo GM Has Eye on the Ball," Financial Times (London), November 22, 1996, p. 28.
• Southall, Brooke, "Mack Trucks Inc. Posts Solid Gains," Daily Record, March 30, 1998, p.1.
• Sternberg, Ernest R., A History of Motor Truck Development, Warrendale, Pa.: Society of Automotive Engineers, 1981.
• Tillier, Alan, and Hendrik Lundin, "Volvo to Buy Renault Truck Unit," Daily Deal, April 25, 2000.

Source: International Directory of Company Histories, Vol.61. St. James Press, 2004.

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