Hebe’s Take on the Reasons Behind the Truck Market Crash
March 1, 2001
Blaming the crash of the Class 8 truck market in North America on the overproduction of heavy-duty trucks by the OEMs is an "idiot's perception of the industry," according to Jim Hebe, president and C...
Blaming the crash of the Class 8 truck market in North America on the overproduction of heavy-duty trucks by the OEMs is an “idiot’s perception of the industry,” according to Jim Hebe, president and CEO of Freightliner LLC.
As the North American market share leader, Freightliner has been the focus of much of the blame for flooding the truck market and subsequently precipitating the crash of new truck sales. But during a press conference held at the Mid-America Trucking Show, Hebe fought back with his view of the situation.
“Did manufacturers flood the market? No. We built trucks for orders not inventory. That was real demand,” Hebe said, pointing out that the record truck sales that were posted in the last years of the 1990s went hand-in-hand with the most impressive economic expansion experienced in the U.S. and Canada. He added that the trucking industry had gone through high production years before without bringing about a significant drop in demand.
According to Hebe it was a variety of interrelated forces which combined to bring the Class 8 truck market from its glory to its knees in a little over a year.
He said that just as the used truck inventory on the continent was starting to build up, the industry was hit by high fuel prices, which caused a 26 per cent increase in fuel costs for U.S. truckers in 2000. Freight volumes, which had grown year after year in the late 1990s, also began to drop. In fact, there was a 13.8 per cent drop from January to April 2000 in the U.S. In retrospect, that was probably one of the first warning signs of the collapse of the U.S. economy.
The combination of these factors led to massive bankruptcies among owner/operators and fleets, which caused an increase in repossessions of trucks. As all those repossessed trucks suddenly entered the used truck market, used truck values plummeted, which meant that owner/operators and fleets that wanted to get into a new truck couldn’t because the price of the iron they would be trading in had dropped too significantly. And to make matters worse, those brave enough to want to get into a new truck, or even a good used one, were thwarted by the disappearance of available credit. The spate of repossessions drove a lot of lenders out of business and the ones that remained became a lot stricter about who they extended credit to.
“This is perhaps the most serious situation this industry has faced since deregulation.” Hebe said. “Today used truck values are at record low levels…There will not be a significant recovery until we resolve this used truck crisis.”
He called on the U.S. government to take an active role in reducing fuel prices, further lowering interest rates, and in creating incentives for truckers to take older trucks off the road. And he also said the trucking industry itself must make significant internal changes.
“We must increase financing options and we must support the used truck customer. We can’t just put people in the business. We must keep them in business,” Hebe said.
He also called on the industry to improve its distribution channels for used trucks, and to become more creative with the use of the used truck inventory by, for example, refurbishing and reconfiguring the less popular used truck models.
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