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Canadian truck plants gear down for slowdown

CHATHAM, Ont. - Canada may not yet be feeling the drop in retail truck sales that are affecting the U.S., but truck plants located here are beginning to feel the affect of lagging Class 8 truck orders...

Sterling production maintained.
Sterling production maintained.

CHATHAM, Ont. – Canada may not yet be feeling the drop in retail truck sales that are affecting the U.S., but truck plants located here are beginning to feel the affect of lagging Class 8 truck orders across North America.

Both International’s Chatham, Ont. facility and Western Star’s plant in Kelowna, B.C. have scaled back production and laid off staff. Sterling Trucks in St. Thomas, Ont. and Paccar’s site in Ste. Therese, Que. are saying its business as usual, but each plant is also building medium-duty trucks, which are enjoying a healthier market.

Across North America, it now takes an average of 145 days to sell a heavy-duty truck, compared to the 90 to 100 days that they used to sit on lots. (While Canadian sales are still up, orders have been dropping like a stone. It isn’t expected to be long before the northern sales dry up, too.) Orders for new trucks within the industry are down at least 50 per cent in comparison to the same time last year, making adjustments at the manufacturing stage inevitable.

Back in April, Kelowna, B.C.-based Western Star Trucks laid off 160 hourly workers and scaled back production to 25 units per day. Another 200 layoffs came last month, when it announced plans to extend its normal two-week July shut down period to three weeks and to drop daily production levels by a further five units when it reopens on July 24. The company has also curtailed plans to ramp up production at its new South Carolina facility, where it is currently making four to six trucks per day.

“It’s a culmination of factors out there in the North American market,” says company spokesman Doug Shand. Truck inventories are high, used truck values have dropped, and there is a lack of drivers and financial pressures such as high fuel prices to deal with, he says, “We expect the market may take another three or four months until inventory (improves).”

“It’s a bit of a paradox we’re in,” Shand adds. “The economy is strong, freight is up, and hence, you’d think the demand (for trucks) would be there.”

The story is the same at International’s Chatham, Ont., plant. According to Roy Wiley, the Chicago-based head of corporate communications, the daily production level at the Chatham plant is scheduled to drop to 80 units per day following the traditional July shutdown, down from 117 per day before that. The company has also announced it is laying off about 400 workers at the plant.

“We forecasted at the end of last year that the volume in 2000 would decline, and we are coming out of the second quarter and we haven’t changed that forecast,” Wiley says. “We also forecasted that most of the decline would come in the second half of the year, and that is what’s happening now.”

On the other hand, argues Wiley, the fact the demand for Class 8 trucks is down this year from 1999 doesn’t mean the bottom has fallen out of the Class 8 market. He points out that International’s yearly production rose from 170,000 heavy units in 1996 to 178,000 in 1997, 209,000 in 1998, and 262,000 in 1999. The company expects to produce about 245,000 heavy units this year.

“The thing people fail to realize is 245,000 heavy units several years ago would have been great,” Wiley says.

Jim McNamara of Sterling Trucks says no changes in production levels or layoffs have been announced for the company’s St. Thomas, Ont. plant, but he admits the company is feeling the effects of the soft Class 8 market.

“Obviously, there has been a slowdown in orders,” McNamara says. “But we are at a stable level of production right now.”

One thing insulating the St. Thomas truck plant from the changes taking place at the truck plants in Kelowna and Chatham is the fact Sterling manufactures all its conventional trucks there, from highway tractors to vocational trucks and the new Acterra Class 5 to 8 line.

“With the introduction of more medium-duty trucks, it should offset some, if not all, of the decline in heavy-duty trucks,” says McNamara.

In fact, he says, Sterling has had to ramp up production of its medium-duty trucks to meet growing demand. “The demand is still strong in the construction market, the distribution market, day cabs and vocational trucks.”

The strength of the medium-duty market seems to be confirmed by the situation at the Paccar plant in St. Therese, Que. That plant employs about 600 people and focuses exclusively on the manufacture of Class 6 and 7 Peterbilt and Kenworth trucks. And according to Paccar spokesman Glen Morie, there are no plans to alter production levels there.

“I know other manufacturers are taking action, but we don’t have any plans for a reduction,” Morie says. n

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