Freightliner to hit peak production levels in second quarter of 2005

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Freightliner continues to ramp up production for its heavy duty vehicles to keep up with the strong demand for new iron and should hit its peak capacity by the second quarter of next year, according to Mark Lampert, senior vice president, sales and marketing.

But getting there won’t be without its challenges.

Freightliner’s order board is full till year end and its Portland truck facility added a second shift during the summer to boost build rates but suppliers to Freightliner and the other main truck makers are still struggling to respond to the fast rebound in the North American economy. And both OEMs and their suppliers are still being challenged by sharp increases in steel and other metals.

To indicate the magnitude of the price increases truck makers are dealing with, Lampert pointed to the price of scrap steel over the past year: it has climbed from $90/ton to $395/ton.

“We are still a long way from being out of the woods with the steel situation,” Lampert warned. “We hope that world-wide demand has peaked and will fall back down to 7-8% growth (from more than 10-12%) but that’s more hope than certainty.”

Lampert says Freightliner has raised its prices as a result “but I can’t say there are any customers who feel we are gouging them.”

Lampert also commented on the recent market share dip for the perennial market share leader in the heavy duty truck market.

“We have lost a few market share points, we recognize that. But it was part of our strategy. We are interested in maintaining market share leadership but we are being more selective in how we price for our accounts,” he said.

He added that such selectivity also extends to truck buyers. The demand for their services may be the strongest it has been in four years but carriers are proving particularly conservative in adding new capacity. Lampert estimated that up to 99% of the new trucks being bought are for replacement purposes.

“Very few carriers have trucks on order with us that are intended for growth,” he said. “”Rather than adding capacity I think you will see carriers buying carriers. Growth will come through acquisition.”

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