The evolution of Paccar Australia’s Kenworth factory

[kscarbel2]

Steve Brooks, Trade Australia  /  July 20, 2016

In his first interview, managing director Andrew Hadjikakou talks exclusively with Steve Brooks about Paccar’s entrenched commitment to local manufacturing and much, much more

It’s one of those things where you just have to see it to truly appreciate it. Such is Paccar Australia’s headquarters and production facility in Bayswater, an hour or so east of Melbourne in the shadows of the Dandenong foothills.

It’s where Kenworths are made for Australia, New Zealand and Papua New Guinea and it is, beyond any shadow of doubt, the jewel in the Kenworth crown.

Still, getting a tour ticket isn’t easy. In fact, it can cost hundreds of thousands, if not millions of dollars. You see, most times you need to be a customer or a highly likely prospective customer to be given the nod for an escorted tour through the plant.

Or, you’re part of an invited entity which has the capacity to at least comprehend the extent of the Bayswater facility and subsequently impart that knowledge for the greater good of Paccar and Australian manufacturing generally. An industry leader, a politician, a special interest group, or very occasionally, the press.

Two things are certain, however. Cameras are not allowed inside the factory and competitors are not welcome. Ever! Some years back the managing director of another truck brand who had several times heard glowing praise of the Bayswater plant’s prowess as a world-class custom-builder, asked if I thought his Paccar counterpart would agree to show him through the factory.

"Don’t waste the phone call," he was advised.

Not to be swayed, he made the call anyway and forever after delighted in recalling the story of the most eloquently polite rendition of ‘piss off’ he’d ever known. Seriously, a true story.

Some might say the seeming exclusivity of factory visits is all part of a carefully managed corporate doctrine to protect the Kenworth image, even mystique. Personally, I think not! It’s protection, for sure, but of the purely commercial kind and if that generates a certain image or mystique, then so be it.

The truly surprising fact, however, is that plant tours are not nearly as rare as some may think. Indeed, in 2015 Paccar Australia says it hosted an astonishing 349 plant tours and as one Kenworth senior executive recently emphasised, "This plant is a huge asset … the most effective tool we have to gather and maintain a customer base."

It sure is! Ask any customer who has been shown through the plant and I’d be staggered if any weren’t extremely impressed with what they saw and learned. They may not always buy a Kenworth but more times than not they will expound the extraordinary impression left by the day they were shown through Bayswater.

Even its fiercest competitors acknowledge that Paccar and its Kenworth flagship are massively successful and among numerous reasons for that success, the Bayswater factory stands at the top of the tree.

The first Australian-built Kenworth emerged in 1971 and according to new managing director Andrew Hadjikakou, they will continue to be built here while ever the Australian market continues to throw up conditions and demands unlike anywhere else in the world.

‘Australian made. World’s Best.’ It’s more than just a slogan at Bayswater. It is a genuine and deeply ingrained belief. The pride that pervades every part of this clinically clean facility, and especially on the factory floor, is neither concocted nor orchestrated. It just is!

"As a country and as a transport industry, we are unique. For that reason we build trucks that are unique to Australia’s requirements," says Andrew Hadjikakou in the hour or so before a recent press tour of the Bayswater plant.

Yet despite the numerous groups that pass through Bayswater, press tours are an uncommon event. In almost 40 years of reporting on trucks and road transport, I can count on one hand the number of ‘official’ visits to the factory. Sure, I’ve managed a couple of unofficial strolls as well but generally, choreographed excursions such as this most recent event are as rare as hen’s teeth.

That said though, it’s this rarity which brings into sharp focus the vast extent of the Bayswater plant’s evolution. At the first visit in the early ’80s, it was a comparatively modest and relatively low-volume factory producing W-models, SARs and K-series cab-overs. Back then, build quality was the strongly stated priority just as it is now but build rates were a fraction of today’s output and automation of any sort was non-existent.

Meanwhile in the main office, engineers worked on large drawing boards producing blueprints for factory tradesmen to convert to hardware while almost all sub-assemblies were completed on site before being fed onto the production line.

But just as technology has had a major impact on the performance and efficiency of trucks over recent decades so, too, has manufacturing technology and the incessant drive for greater efficiency provided the platforms for massive changes to design, production and quality control systems at Bayswater.

The vast investment in engineering, production technology and the land required for expansion has obviously been huge but so have the returns delivered by robotics, automation and critically, ongoing investment in equipment and training.

As it stands today, the factory covers 12,000 square metres and sits little more than a stone’s throw from a parts distribution centre covering more than 9000 square metres. Decisions made decades ago to invest in neighbouring land that were initially criticised as unnecessary expenditure are today hailed as fortuitous and wise examples of planning for the future.

Meantime, the incessant push for streamlined efficiencies continues and nowadays there’s a far larger number of local suppliers producing and delivering a greater range of complete sub-assemblies on a just-in-time basis to the production line.

Perhaps best of all from Paccar’s perspective, the dedication to investment in local manufacturing continues to deliver big dividends and in turn, strengthens the operation’s ongoing viability.

Paccar Australia last year achieved combined revenue of $750 million and given current production rates, it shouldn’t be too much longer before the 55,000th Bayswater-built Kenworth rolls off the line.

Add to that the 4000-plus DAFs which have now been delivered in Australia since 1998, it’s easy to understand the strong sense of satisfaction lurking just under the surface at Paccar Australia.

The evolution has been huge but it’s certainly not over. Not by a long shot.

Surprisingly perhaps, one of the very few things at Bayswater that hasn’t changed much over the decades is the head office, and notably, that even includes the managing director’s corner.

Next in Line

Andrew Hadjikakou is just the fourth managing director at Bayswater since 1980. He is, however, also the third man to fill the MD’s chair in less than four years.

From 1980 to 2007, the company was run with a firm, calm hand by the pragmatic and shrewd Andrew Wright whose commitment and contribution to the local manufacture of Kenworth trucks remain legendary.

It was no surprise that following Andrew’s retirement, his loyal lieutenant Joe Rizzo would step into the role. Needing a replacement for his vacated general manager’s position, Rizzo in 2007 appointed an aspiring and impressively qualified executive from the steel industry, Andrew Hadjikakou.

Predictably, Joe Rizzo ran a tight ship and Paccar continued to plan and prosper under his leadership. However, in late 2012 Joe surprisingly announced his retirement. After 35 years with Paccar, he’d done more than his fair share.

It wasn’t long before his replacement was announced. Mike Dozier, a highly regarded executive from within Paccar’s US ranks with a strong background in engineering and manufacturing. He officially took the reins at Bayswater in February 2013 and being an American, the rumour mill went into immediate overdrive with speculation that Dozier was here to wind back the local manufacturing operation and pave the way for fully imported Kenworths from the US.

For his part, Andrew Hadjikakou remained in the 2IC role and, from the outside looking in, it appeared Australian managing directors had become a thing of the past. Appearances, however, can be deceiving.

From the outset the long, lean and likeable Dozier strongly refuted suggestions of any reduction in local manufacturing and it was soon obvious he was speaking the absolute truth. Kenworth trucks would continue to be built in Australia and as far as he could see into the future, an emphatic Dozier asserted there would be no American imports.

But if Joe Rizzo’s retirement had been surprising, so too was Mike Dozier’s return early this year to a major role in the US. Most surprised of all, perhaps, was Andrew Hadjikakou.

In fact, Andrew only learned of Mike’s pending departure when he received a phone call from the US offering him the managing director’s position, ending speculation that Australians would no longer be appointed to the MD role.

"It was certainly a nice surprise to be offered the position," remarked the affable and astute Hadjikakou, "but the biggest surprise was hearing of Mike’s return to the US. He’d been here three years and I thought, just like he did, that he’d be here for at least another couple of years."

Asked if his goals and administration will be any different to his predecessor, a thoughtful Andrew Hadjikakou answered, "No, my role will continue where Mike left off. I learned a great deal from Joe and Mike so fortunately, there are no surprises about the job. One thing about Paccar is there’s always great clarity around goals and disciplines.

"There are a lot of exciting things happening that will be revealed in time but my role is not to change the world but to keep doing the good things and ensuring the company remains stable and viable."

But in a company renowned for management consistency, three managing directors in the space of just four years could suggest a corporate mindset to change managing directors more regularly.

"There is definitely no changing mindset," he said firmly, asserting that Mike Dozier’s appointment to Australia was perfect timing because "… it met with the goal to be more integrated with Paccar globally.

"In fact, I believe the management here is actually very consistent. It’s historic within Paccar to appoint from within and I believe it’s one of Paccar’s real strengths."

As for the decision to open the Bayswater facility to the press just one month into the top job, Andrew Hadjikakou was quick to explain, "When you look at all the negatives around the loss of automotive manufacturing in this country, the time is right to showcase this factory. We have a great story to tell here."

What’s more, it’s a story which has been firmly endorsed from the highest levels of Paccar. As Andrew explained, "Our executive chairman Mark Pigott made an address to all the employees in the factory, reflecting on the deterioration of the automotive industry in this country.

"He said that sad as that is, Paccar continues to invest in this country and that is something to be extremely proud of.

"Paccar provides access to capital to improve quality, we employ more than 800 people directly and many thousands more through our dealer and supplier networks.

"So while Toyota, Ford and Holden are ending local car production, Paccar continues to increase its investment in truck manufacturing at Bayswater.

"We stand on our own two feet without government handouts and this company has achieved so much and our goal is to continue to achieve. There’s a lot to look forward to.

"The people we employ are well trained and motivated, there’s a great deal of gratitude that goes both ways between us and our suppliers and our dealers, and we play a big part in the broader community," an upbeat Andrew Hadjikakou continues.

"We are committed to manufacturing in this country. Absolutely!

"We’re all about technology, quality, innovation, investment in Australia and our people, and through events such as this press visit we’re acknowledging all those who contribute to the company and its success."

The passion is palpable.

Tough Competition

Still, Paccar is not the only company producing trucks in Australia. Volvo Group Australia (VGA) is the other big supplier of trucks at least assembled in this country and while Paccar’s investment in local manufacturing is undoubtedly greatest, they are easily the most formidable players in the heavy-duty market.

Indeed, competition between the two powerhouses has moved up several notches over the past few years and while Kenworth comfortably maintains its ranking at the top of the heavy-duty ladder, VGA brands (Volvo, Mack, UD) collectively dominate the total heavy-duty market, marginally ahead of Paccar’s Kenworth and DAF.

Does that fact trouble Andrew Hadjikakou?

"No, it does not," he answered abruptly. "There’s no doubt we’re in a very competitive market and we always keep a close eye on our competitors, but our focus entirely is on making sure we hit the needs of our customers.

"Our priority is building the best trucks possible for Australia, meeting the needs of our customers and training and caring for our people. They are the things that make everything else possible.

"Being number one is not what we are about. It never has been."

Fair enough, but Kenworth has always held the prestige of a premium product at a premium price. Given the intensity of competition these days, how hard is it to maintain the price premium?

It was a question that drew a carefully measured response. "We are a very viable and profitable organisation but certainly, as markets decline, competition increases.

"Yes, the costs of Kenworth do rise and fall depending on currency and supplier input costs but overall our commitment is to make sure we produce a truck in less hours with the highest amount of quality and pass that on to the customer.

"It will always be a premium product and fortunately, a lot of operators understand the lifecycle costs, whether that comes from lower maintenance expenses, greater durability and uptime over the longer term, or higher resale. They are the things that make Kenworth a premium truck."

Still on the competition, it’s surprising to some that Volvo rather than Freightliner’s Argosy has emerged as the most prolific competitor to Kenworth’s super-successful K200 cab-over. After all, as the only other US-derived cab-over in the market, Argosy has long been viewed as the one truck that could actually threaten K-series supremacy.

"That’s a good observation," Andrew comments with a somewhat wry grin. "We couldn’t be happier with the acceptance of K200. It’s our biggest selling model and there’s no doubt lifecycle cost is the thing that keeps it on top in the minds of customers.

"At the end of the day, Argosy is just another competitor and while we keep an eye on all competitors, our priority is supplying the best product we can, cab-over or conventional."

Cab-over queries

But when it comes to cab-overs, has DAF yet achieved its true potential despite being part of Paccar Australia since 1998?

"Certainly we’d always like more (sales) but the DAF product is doing well in the 13 litre cab-over market," he quickly responds. "We don’t want to see DAFs pulling roadtrains across the Nullarbor. It’s not that sort of product but there are many other applications where it is perfectly suited."

As for the suggestion that DAF is something of a poor cousin to Kenworth, an adamant Andrew Hadjikakou says, "No, it’s definitely not a poor cousin. Our dealers are committed to it and run dedicated DAF sales, service and support teams.

"DAF is a vital part of our business and I can guarantee it will continue to be."

Derived from DAF, of course, is the MX13 engine released in Kenworth’s T4 range at the end of 2014 after a long and detailed development program.

"The MX is now a third of all our T4 sales, so it is definitely meeting our expectations," he insists. "Driver and fleet feedback has been exceptional." The other two-thirds of T4 sales are, of course, powered by Cummins 15 litre ISXe5 engine.

Asked if the MX13 and perhaps even its MX11 sibling will become more widespread in the Kenworth range, Andrew says candidly, "Yes, there are certainly opportunities in the T3 range and maybe other cab-over product."

What ‘other’ cab-over product?

The answer this time was a tad more cautious. "Of course, K200 is only available with a 15 litre (Cummins) engine and at this stage there’s no plan to put the MX into a Kenworth cab-over but that’s not to say it won’t happen or that we’re not already looking at it.

"Let’s just see what happens," he smiles.

Still on engine business, Cummins is obviously the core of Kenworth’s power base and in the big bore department, that won’t change. "Cummins is a fantastic partner to Kenworth and that partnership has only strengthened in the last five years," Andrew remarks.

It is, however, a partnership which has also endured some testing times, not least during a protracted spate of problems with early EGR versions of the 15 litre ISX engine. Fortunately, those problems are now largely in the past thanks to determined remedial work by Cummins and the introduction of the ISXe5 engine with SCR emissions technology.

"But even so," Andrew quickly adds, "the EGR product today has improved immeasurably and Cummins has done an amazing job to get it to where it is now. The updates to hardware and software on EGR have really eliminated all the earlier issues.

"We still sell EGR today, it’s about five percent of our 15 litre sales, mainly to customers like livestock haulers who are in remote areas for long periods and may not have access to AdBlue or just don’t want to carry it.

"And we will continue to offer the EGR engine," he confirms. "Besides, EGR will be back with us soon enough when new emissions standards (Euro 6) are introduced in a few years’ time, and SCR and EGR will form part of the same emissions package."

Meanwhile, Andrew Hadjikakou is certainly aware of another card up the Cummins sleeve. It’s called the ISG12, an advanced 12 litre engine with significant potential for Kenworth’s T4 and perhaps T3 families.

So, given Kenworth’s historic platform to give the market what the market wants, is the ISG a possibility despite its potential clash with Paccar’s own MX engine?

"Yes, it’s a possibility," he replies, "but right now we’re focussed on bedding down the MX across our product range. Like I said, the feedback we’ve had from customers about the MX shows us that it’s right on the mark for T4 and possibly other models in our range.

"When it’s all boiled down, our aim is to add value by enhancing our product and we do that by constantly innovating and looking for new opportunities. When we find an opportunity we pursue it, whether it be new interiors or common cab platforms or the introduction of new engines.

"But we’re only able to do those things effectively and efficiently because our trucks are engineered and built here. In Australia," an emphatic Andrew Hadjikakou concludes.

Photo gallery - http://www.tradetrucks.com.au/features/1607/paccar-australias-world-class-kenworth-factory/