Paccar Inc.

P.O. Box 1518
Bellevue, Washington 98009
U.S.A.
(206) 455-7400

Public Company
Incorporated: 1924 as Pacific Car & Foundry Company
Employees: 9800
Sales: $1.796 billion
Market Value: $1.018 billion
Stock Index: NASDAQ

The history of Paccar began with a steel foundry established in Bellevue, Washington (near Seattle) in 1904. At that time, the major industries in Seattle were forestry and shipping, neither of which had any use for primary steel products. Unable to find a market for the steel, the company’s founder, William Pigott, decided to establish a second facility to manufacture finished steel products. In 1905 the company began production of “bunks,” the steel clasps used to secure logs to railroad flat cars. Shortly afterwards, the company began to produce railroad cars, and took the name Pacific Car & Foundry Company.

Over the ensuing 20 years Pacific Car & Foundry developed a variety of special transportation equipment but remained primarily involved in railroad car production. Pacific Car was incorporated in April 1924, and was acquired four years later by the American Car & Foundry Company. In May 1931 Pacific Car acquired the Arrow Pump Company and plants belonging to the Bacon & Matheson Drop Forge Company.

Severe economic conditions during the Depression forced American Car & Foundry to close its Pacific Car plant at Renton, south of Seattle. William Pigott’s son, Paul, repurchased the facility in 1934, and initiated production of refrigerated box cars. The box cars, or “reefers,” were bought by railroads and agricultural combines to transport perishable goods to distant markets. Production of the company’s refrigerator cars was highly profitable despite continuing poor economic conditions, and generated enough surplus capital to permit the acquisition in 1936 of Heisers Incorporated, a manufacturer of motor buses.

During World War II Pacific Car produced railcars for the transportation of war materiel from production plants to major ports. The company also manufactured special vehicles and mechanical components. Following a reorganization in 1943, the company retired its common stock, and compensated stockholders with new preferred shares. The reorganization brought Pacific Car under close family control.

In January 1945, as the war neared its end, Pacific Car & Foundry purchased the Kenworth Motor Truck Corporation, located in Seattle. Kenworth specialized in the production of powerful diesel trucks, and achieved a reputation for quality.

Transportation needs in the western United States grew during the late 1940’s and 1950’s. Despite the growth of smaller communities in the west, it was uneconomic for railroad companies to construct new lines. This created a demand for large trucks capable of climbing steep mountain grades and crossing long stretches of flatland. Kenworth trucks were perfectly suited for this kind of work, and, while expensive, they were also highly dependable and popular.

In 1953 Pacific Car & Foundry bought the Seattle facilities of the Commercial Ship Repair Company. Five years later the company purchased the assets of the Dart Truck Company, a Kansas City-based manufacturer of large “off-highway” construction equipment such as earth movers and giant dump trucks; then in the following year, 1954, Pacific Car acquired the Peterbilt Motors Company, a truck manufacturer like Kenworth, located in Newark, near San Francisco.

When Paul Pigott died in 1961, Robert O’Brien was named to succeed him as president of the company. O’Brien placed greater emphasis on truck sales and structural steel production. As a result of these efforts, Pacific Car experienced an average 23% annual increase in earnings between 1961 and 1966. In 1965 Robert O’Brien was promoted to chairman of the board, and replaced as president by Charles Pigott, grandson of the founder.

Pacific Car purchased a Canadian producer of automotive transmissions and industrial winches called Gearmatic, and in early 1967 completed its acquisition of Sicard Incorporated, a manufacturer of snow removal equipment and airport vehicles.

Workers at all three Pacific Car plants in Seattle staged a crippling labor strike from April 5 to July 22, 1968. This precipitated a 12-week strike at the Gearmatic Division in British Columbia, and a three-week strike at the Dart facility in Kansas City. The strikes cost Pacific Car over $1 million in lost production, but caused no lasting damage to the vehicle divisions.

Pacific Car & Foundry continued to produce railroad cars at its Renton Division. Although railroad car production contributed only a fraction to company earnings, it remained stable and profitable. Structural Steel, the weakest Pacific Car division, was one of the first American steel manufacturers to suffer from the effects of outdated technology and a market restricted by imported steel. While efforts were made to cut costs and increase productivity, Structural Steel continued to perform marginally.

In November 1971 Pacific Car & Foundry created a holding company, incorporated in Delaware, called Paccar Incorporated. On February 1, 1972 Paccar absorbed Pacific Car & Foundry. Company divisions such as Kenworth and Peterbilt retained their names, but other subsidiaries (particularly in finance) adopted the Paccar name.

Unlike competing truck manufacturers, Paccar was insulated from severe shifts in market demand by maintaining virtually no manufacturing facilities. Kenworth and Peterbilt trucks were merely assembled from parts produced by Eaton, Rockwell International, Cummins Engine, and Caterpillar Tractor, among others. This permitted Paccar to avoid costly investments in manufacturing facilities, and easily reduce production when demand fell. In addition, Paccar had the freedom to purchase components from a variety of competing manufacturers, allowing it to custom build trucks to a customer’s specifications and take full advantage of the newest products.

Inflation and high oil prices in 1974 led trucking companies to utilize their equipment more efficiently which, in turn, caused a decline in new truck orders. Demand for higher quality Kenworth and Peterbilt trucks, however, was not seriously affected and production losses during 1974 were due more to the reoccurrence of strikes than to poor market conditions. Many labor disputes between 1974 and 1978 were caused by wage disputes as labor contracts expired.

In November 1979 Paccar failed in an attempt to gain control of the Harnischfeger Corporation, which produced cranes and earth-moving equipment. But eleven months later Paccar successfully completed a takeover of Fodens Ltd., a British manufacturer of heavy-duty trucks. Fodens, which had been bankrupt since July, sold trucks in Britain, Europe, and Africa. The company’s operations were taken over by a newly created Paccar subsidiary, Sandbach Engineering.

A second oil crisis in 1979, and the subsequent implementation of deregulation in the trucking industry, once again compelled operators to utilize their equipment more efficiently. This caused sales of Class 8 trucks (those over 33,000 pounds in gross vehicle weight, and the only type produced by Kenworth and Peterbilt) to fall 58% between 1979 and 1982. However, despite an overall 35% drop in sales, Paccar remained profitable.

The Freightliner subsidiary of Daimler-Benz and the merged operations of Volvo White and General Motors became particularly aggressive in the mid-1980’s, forcing Paccar’s share of the Class 8 truck market to drop from 23% in 1983 to 18% in 1986. Plagued by overcapacity, Paccar was forced to close a Kenworth plant in Kansas City in April 1986, and a Peterbilt plant in Newark, California the following October.

In an effort to reduce its dependence on the depressed Class 8 truck market, Paccar announced its intention to purchase Trico Industries, a manufacturer of oil exploration equipment based in Gardena, California. After initial resistance, Trico agreed to be acquired for $65 million.

During this time Paccar also announced that it was negotiating with the Rover Group, the state-owned British automotive company, for the purchase of its British Leyland truck division. However, Rover management, with substantial support in Parliament, elected to sell the truck division to DAF, a Dutch automotive concern.

Paccar continued to experiment in new markets, and in early 1987 concluded an agreement with Volkswagen do Brasil to import Class 7 trucks (26,001 to 33,000-pound gross vehicle weight) for sale in the United States. The Class 7 market, however, is overwhelmingly dominated by Navistar, General Motors, and Ford. Paccar also remains interested in acquiring the Bell Helicopter division of Textron, a unit it first attempted to purchase in 1985.

A recovery in demand for Class 8 trucks in early 1987 reinforced Paccar’s position that Kenworth and Peterbilt should not be merged. While truck production continues to provide Paccar with about 90% of its operating income, the company has yet to find a viable alternative to the cyclical demand and production of Class 8 trucks.

Principal Subsidiaries

Paccar of Canada, Ltd.; Paccar International, Inc.; Paccar Financial Corp.; Truck Acceptance Corp.; Paccar Financial Services, Ltd.; Paccar Insurance Co., Ltd.; Paccar Leasing Corp.; Paccar Australia Pty., Ltd.; Paccar Acceptance Pty., Ltd.; Paccar U.K., Ltd.; Ranease, Inc. (90%); Paccar Machinery Corp.; Paccar Rail Leasing, Inc.; Vilpac, S.A. (49%).

Further Reading

Paccar: The Pursuit of Quality by Alex Grones, Bellevue, Washington, Documentary Book Publishers, 1981.