North American market remains weak for OEMs, suppliers
May 1, 2008
By James Menzies LOUISVILLE, Ky. - These are turbulent times for the trucking industry. Soft freight volumes, record diesel prices and a housing market collapse in the US have provided a three-punch c...
By James Menzies LOUISVILLE, Ky. –These are turbulent times for the trucking industry. Soft freight volumes, record diesel prices and a housing market collapse in the US have provided a three-punch combination that has staggered the industry.
Forecasts from OEMs at the Mid-America Trucking Show varied significantly, depending on who you were talking to.
Bill Jackson, Peterbilt general manager and vice-president of PACCAR, predicted 2008 Class 8 sales in the US alone will come in somewhere between 175,000 and 215,000 units. That compares to 322,500 units in 2006, but it could represent a modest increase from 2007. He also predicted mediumduty sales in the US will suffer, totaling between 80,000 and 95,000 units, which he said is “at the low end of its traditional range.”
Carsten Reinhardt, president of ArvinMeritor Commercial Vehicle Systems, predicted North American Class 8 sales (including Canada and Mexico) will be between 220,000 and 240,000 units in 2008.
“You could talk yourself into a bit of a doom and gloom situation if you look at gas prices, the housing starts that are dropping in significant numbers and still continuing to drop, and if you look at retail sales,” Reinhardt said. “We, I would say, are a little bit more bullish. We do believe this industry is going to come back and we do believe we see signs of sales, production volumes and our results coming back.”
ArvinMeritor agrees that medium-duty sales will continue to fall, totaling about 165,000 units in North America this year.
“Some of the trends we see out there are not quite as positive as on the Class 8 side,” Reinhardt said. Trailers also remain a challenging market. Reinhardt said ArvinMeritor expects to see between 190,000 and 195,000 trailers sold in North America this year, “which is considerably down from guidance we gave before.”
While Mack did not make any predictions at the Mid-America Trucking Show, its outgoing president and CEO Paul Vikner admitted the industry downturn has exceeded the company’s expectations.
“We thought the market would be improving by now,” he admitted, adding the company sees “no bright light immediately around the corner.”
Vikner said the current downturn is no longer attributable to the 2006 pre-buy, but rather to economic conditions in the US.
Chris Patterson, president and CEO of Daimler Trucks North America, agreed the downturn has surpassed the expectations of his group.
“While OEMs expected a decline because of EPA07 and the resultant pre-buy in 2006, we could not anticipate the extent to which freight conditions and the overall economy worsened as the year progressed,” he said during a press conference. “The housing downturn and related mortgage crisis significantly affected truck tonnage…Our large fleet customers have been severely impacted by this weak freight environment.”
Patterson pointed out that ACT Research is projecting a decline in tonnage for 2008. The research group recently adjusted its 2008 freight forecast to reflect a 2-3% decline from previous levels through the first two quarters of 2008.
Having said all of that, Patterson said his group predicts a rebound beginning later this year.
“The economy should be moving toward recovery by the second half of the year, but there are clearly no guarantees,” Patterson said.
FCC Equipment Financing, a subsidiary of Caterpillar Financial Services, issue a report at the show that also painted a bleak picture for the industry. FCC 2008 Economic Insight: An Annual Outlook on the Transportation Industry made the following observations:
•That the US economy will grow only 1.5% in 2008;
•That freight will be flat to down about 1% in 2008;
• That US heavy-duty truck purchases will total about 140,000 vehicles, mostly for replacement, slightly up from 2007;
• That demand for mid-range trucks will drop 10% in 2008;
• And that continued weakness in the housing sector will decrease demand for transportation-related services.
International Truck president Dee Kapur, was more optimistic. He said his company has observed an increase in tonnage and in orders over the past four months. “We think it’s time to look at the trucking business again,” he said.
Despite the North American downturn, global manufacturers have been able to survive, and in some cases thrive, by focusing on emerging markets such as China, India and Russia.
“If you’re global in nature, you’ve got the ability to weather a lot of that,” said ArvinMeritor CEO, Chip McClure, noting about half of his company’s business comes from markets outside North America.
Joe Mejaly, vice-president, aftermarket with ArvinMeritor agreed. “If you don’t have a global footprint, the headwinds we see today in North America would be significantly more difficult (to overcome).”