PORTLAND, Ore. – A “virtual crisis” in North America’s used truck market could shake the very foundation of the trucking industry, Freightliner president Jim Hebe warns. And to solve it, he’s calling for everything from a doubling of driver wages, to an end of the no-money-down owner/operator.
“Fuel prices, driver pay, nothing compares to this one,” he said, referring to the magnitude of the crisis. “First, no one is making enough money in the business, and a used truck buyer is not able today to generate enough revenue to allow himself a decent lifestyle and make payments on the truck,” he said, calling for significant rate increases to support the wage hikes.
“Our customers aren’t getting enough for what they do… They’vegot to get a hell of a lot more in terms of rate increases than what they’re going to do in the next few months.”
Gone are the days when carriers could squeeze the difference out of improvements in productivity, he added, in a briefing to a select group of truck writers.
While the industry has enjoyed two successive years of record Class 8 truck sales, those numbers are starting to slump. And the dropping value of used equipment that’s coming with it spells trouble, he said.
“Once used truck values deteriorate, this is not going to be a fun business,” Hebe said. In the end, it means that truck owners will hold on to older technology for longer periods of time, and won’t be able to adapt as quickly to technology that would improve safety or meet tightening environmental controls.
In fact, there may simply be too many new trucks on the road.
“What’s the total truck market (in Canada and the U.S.)? Probably 2.5 million trucks. But 1.1 million of them have been introduced to the market since 1995. My friends, we’ve got a very new fleet of trucks out there.”
Truck makers were “over populating” the industry in 1999, as it reacted to an initial burst in demand, Hebe said. While 262,319 were built in the U.S., the industry would have been better off if it built 215,000 trucks, he said.
Part of the industry’s problem is self-inflicted, from the practice of allowing drivers to buy their way into their own equipment as a recruitment incentive, he added. “The marginal buyer who buys a new truck with no money down has got to stop. We have put far too many people in new trucks who should have been put into used trucks.
“We’ve got to go back to building equity in the business, and making long-term, sound owner/operators.”
There’s nothing wrong with the traditional process of buying two used trucks before owning your first new model, he added. “We’ve got to build a used truck market again.”
In the meantime, buyers need to brace for higher prices attached to new trucks as they roll out of the factory.
“The spread between new truck prices and used truck prices is not great enough,” Hebe said, noting that the increases will be needed because of everything from tightening safety and emission standards to rising inflation.
Used trucks even need to be thought of in a new way, he said of how late-model trucks should be refurbished before they’re re-sold. And component suppliers need to recognize their role in the second life of a used truck, backing up their parts, he said.
“This is not Freightliner’s issue,” he added. “It’s the industry’s.”
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