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Rolling forward: Trailer sales to grow

TORONTO, Ont. - Canadian fleets are expected to order a growing number of new trailers in the coming year as they look to update equipment bought in the late '90s. That's welcomed news for trailer man...


TORONTO, Ont. – Canadian fleets are expected to order a growing number of new trailers in the coming year as they look to update equipment bought in the late ’90s. That’s welcomed news for trailer manufacturers who suffered through about four years of anemic sales before spotting the first signs of a recovery in 2004.

“There’s a large pent-up demand,” said Bert Clay, vice president of sales and marketing for Trailmobile Canada.

The manufacturer expects to build about 9,000 trailers in 2005, Clay said, “and we’re projecting continuous growth for the foreseeable future.”

Still, there are challenges for fleets planning to buy. Last year’s surge in the price of steel has led to higher sticker prices, growing demand for related components appears to be affecting delivery times, and cross-border carriers continue to face new economic challenges associated with the strong Canadian dollar.

Even so, trailer manufacturers remain optimistic about increasing sales, and have expanded production capacities to meet growing demands. Consider:

* Great Dane launched a second shift at its Arkansas plant last April. During a meeting of the local Chamber of Commerce, company vice-president Tom Czapka said the company expects to double the site’s production of dry vans to 136 units per week.

* Manac president Charles Dutil reported company sales were up in 2004, and confirmed the company has added employees and shifts to meet the pent-up demand. (Exact figures aren’t being publicly disclosed, since the operation became a privately held company last spring.)

* Wabash National sold 37,500 trailers during the first nine months of 2004, compared to 29,700 trailers in 2003.

The optimism of trailer manufacturers is not unfounded. Buyers have shown every indication that the growth in demand should continue into 2005. Almost 60 per cent of fleets and 30 per cent of owner/operators who participated in the annual Truck News/Motortruck Buying Trends Survey expected to buy new trailers between July 2004 and July 2005 – a brisker pace than previous years.

And it’s not just the big manufacturers who are reaping the benefits.

Smaller manufacturers have been enjoying growth as well.

“It’s busted loose,” said HaulTec president Craig Cadenhead, noting how he’s already increased production levels of dump trailers by 50 per cent over last year, increased staff by 20 per cent, and expects to run a second shift throughout the year. This even though the latter tactic is usually limited to the needs of seasonal demands.

Cadenhead said he usually sees sales soften in November and December, but new orders continued right through early January this year. “Yesterday I sold eight in one day. Today I sold five,” he said when he spoke to Truck News during the first week of 2005. “I haven’t had to leave my desk to take the orders.”

Still, the increase in business hasn’t been without its challenges. An industry-wide call for more components has led HaulTec to stock an eight-week supply of many parts, while it has traditionally kept a four-week inventory on hand. “It’s taking some very careful scheduling on our part,” Cadenhead added.

“Currently, the most pressing issue is tires,” Clay said. “Some (other components) are worse than others.”

But Dutil didn’t expect a return to the six-month waits for van trailers and four-month waits for flatbeds experienced during booming sales periods in 1999. Suppliers are simply being cautious about adding too much capacity to their production lines, after being taken by surprise by the sudden plunge in demand in 2000.

And suppliers weren’t the only ones who learned the hard way.

Fleets are more likely to be replacing existing units that were added to inventories during the boom times of the late ’90s, Dutil said. “There is more discipline in our client base as far as managing their growth…in the long term it’s good.”

Canadian fleets typically hold on to trailers for six to 10 years before passing them on to secondary buyers, said Glasvan Great Dane CEO George Cobham. That’s about twice the length of time that a U.S. fleet will typically hold on to a new trailer, despite the fact Canadian equipment is subject to heavier weights and the corroding effects of wintry weather.

Some cross-border fleets may also be reluctant to buy equipment in light of a high Canadian dollar, which is in turn reducing the number of backhauls from the U.S. and southern customers who are reluctant to adjust contracts despite the shift in the exchange rate, said Cobham. Still other fleets, such as those serving the construction trade, may be worried that the boom in housing sales will eventually come to an end, he added. “A lot of that part of the economy drives (the need for) platform trailers – lumber, timber, drywall and so on,” he said. “It’s like mercury. Everything keeps shifting around on you.”

High steel prices, meanwhile, could lead to sticker shock for those who haven’t ordered a trailer since 2003.

When the “unanticipated sharp jump” in prices first hit the market last spring, manufacturers were forced to absorb the initial costs, Wabash National president and CEO Bill Greubel pointed out recently.

Once the cost was passed on to buyers, many fleets delayed plans to replace trailers between May and July, hoping that the price of steel would drop back down, Dutil added.

It didn’t.

“It has leveled off at a high level,” he said. “It did not go back down. It just stopped increasing.”

The price of hot- and cold-rolled steel more than doubled last year, and with about 4.5 tons of steel in an average trailer, prices of the final products have increased about 20 per cent over those charged in late 2003, Cobham said, noting parts makers trapped in price wars in 1999 are now trying to recover some of their own margins.

And steel isn’t the only commodity that increased in price. Aluminum, for instance, has also experienced its own double-digit gain.

Still, the narrowing gap between the price of aluminum and steel could lead more buyers to consider the use of aluminum flatbed trailers, said Dutil. “It’s still a significant (price) gap, but it is smaller than it was.”

Either way, the baseline need for aluminum trailers won’t change, said Cobham, adding those who needed or wanted them in the past will be the same ones who buy them in the near future.

Meanwhile, legislation has had its own impact on trailer sales. For example, noted Cadenhead, fleets are beginning to replace dump trailers, as the Ontario Ministry of Transportation phases out the use of non-steering lift axles.

It isn’t the only change expected in future trailer configurations. More buyers of van trailers will be turning away from traditional plywood interiors that are easily battered by forklifts, and account for one of the industry’s highest maintenance costs, said Clay.

About 53 per cent of today’s new van trailers now incorporate plate designs, or have polymer or steel interiors. In comparison, about three in every four of the interiors built just five years ago were coated in plywood, he said.

“We see more upgraded wiring systems coming into utilization, with more automotive-type sealed plugs. We also see more LEDs,” he said, adding incandescent light bulbs will continue to fade away with the recent introduction of single-diode LEDs.

For now, Canadian fleets alone use an estimated 370,000 trailers.


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