Volvo opens new Americas headquarters

The North American construction equipment market has been challenging for a number of years, but last year saw some improvements and the long-term outlook is more optimistic.

Volvo CE president Pat Olney is confident that, with the right strategy, the manufacturer can capitalise on any uptick in demand – they key is staying as flexible as possible.

The company has just opened a new Americas headquarters office at its Shippensburg, Pennsylvania, US, facility. This marks the first phase of a US$ 100 million expansion of the site that also saw the first wheeled loaders to be manufacturers there roll off the production line.

When complete, the development will include offices, a demonstration centre and production facilities for some of the company's larger construction models.

The first new models to come off the lines at the plant will be the L60G, L70G and L90G wheeled loaders (covering the 1.8 m³ to 3 m³ bucket capacity classes), with larger wheeled loaders, excavators and articulated dump trucks expected to follow in the next three to four years. Volvo says the factory could eventually produce 70% of the machines it sells in North America.

Mr Olney said the investment represented a key part of the company’s strategic focus on local production. “We have 370 suppliers throughout North America. In Shippensburg, we already source over 85% of parts locally for existing products, and are initially targeting 50% for new products. We think there is a sweet spot between 50% and 90% local supply chain.

“This strategy is intended to improve our manufacturing flexibility – moving from economies of scale to local hubs. This means we can make changes rapidly and helps to develop a global supply chain. The Shippensburg expansion together with the consolidation of our backhoe production from Tultitlán, Mexico, to Pederneiras, Brazil means we now have two strong hubs in the Americas.”

Volvo CE’s other recent investments include a new factory in Kaluga, Russia, that is due to start producing excavators in April, and the launch of a new wheeled loader – the L105 – in China that has been specifically developed to suit the demands of Chinese customers.

“By focussing on local production, we can be flexible enough to adapt to the markets,” Mr Olney said.

“The reaction to the Chinese Volvo-branded wheeled loader has been good, and we are considering taking that process of adapting a wheeled loader to the Brazil market. The era of taking an American or European product and simply swapping the engine is over – you need to be far more targeted, even within the same customers.”

Dual brand strategy

And the focus is not just on geography – it is also on brands. Volvo CE has set a target to take leading positions in global markets with a combination of its own machines and those of its Chinese joint venture, SDLG.

“Demand is very strong for SDLG,” Mr Olney said. “We see a global opportunity, and are evaluating market by market. Clearly emerging markets are more of an opportunity than regulated markets like North America, but we do not rule anywhere out.

“Flexibility is also key here. We envisage seeing customers who want some Volvo and some SDLG machines, depending on the application. We also see a global advantage compared to our Chinese competitors – we can leverage our existing infrastructure such as our service network. For the Chinese, everything is green field.”