Here’s hoping Leif Johansson, president of AB Volvo and CEO of the Volvo Group, has a nose for financial prognostication.
Johansson comes to North America every four to six weeks and he believes that for the first time there is “a smell, at least, of a bottoming out and an improvement” to the North American economy.
Johansson was in Boston meeting with customers and clients recently and made a bet that truck sales in the fourth quarter of 2009 will prove stronger than in the fourth quarter of 2008.
Per Carlsson, president and CEO of Volvo Trucks North America, and Scott Kress, senior vice-president of sales and marketing, concurred with Johansson’s cautious optimism while speaking with media at the same event. Both said there is a good deal of “window shopping” going on.
“We see, in general, a higher activity level in terms of quotations and customer contacts,” Carlsson said. He conceded, however, that the starting point is from a very low level of sales historically.
(The first quarter of 2009 in Canada has proven to be the quietest first quarter in terms of Class 8 truck sales of the past decade, coming in about 100 units below the 2002 total. Sales are more than 2,000 off last year’s YTD pace, hardly a banner year in itself, about 3,000 off the five-year YTD average and about 5,000 off the banner year of 2006.)
Another challenge is the number of trucks currently sitting idle. Kress surmised that perhaps 20% of the fleet is sitting idle and this will affect how quickly fleets are ready to buy new iron. As Carlsson noted, the truck population is getting older, and in fact, at seven or eight years, the age of the average truck may be the highest it has been in some time.
Getting access to credit could be another obstacle. Traditionally, during economic swings, much of the growth has come from smaller and medium-sized fleets making significant additions to their operations. This time around, with trucking companies having lost upwards of 40% of their value and financing institutions too reticent to take chances, will the necessary credit be available?
“I think its going to be a timing issue,” Kress said. “There is a heck of a lot of trucks sitting out there. I could take 18 to 24 months to burn those trucks up. And with some customers, it could come down to when they are actually able to go from a company with a bad credit rating to one that can stand on its feet.”
But Carlsson urged truck buyers considering new purchases to get on with their decisions because the availability of the 2007-emissions compliant engines will be scarce by the end of 2009.
“That’s one message we have for customers: If you would like to buy current technology, you can’t wait too long to buy, because there won’t be availability,” he said. “Customers will have to make up their mind pretty soon or we will be moving on to the 2010 technology…We are already starting to place orders for the 2010 components.”
Volvo, like all North American truck manufacturers with the exception of Navistar, has hitched its wagon to the viability of SCR (selective catalytic reduction) technology to meet the US Environmental Protection Agency’s 2010 emission standards. Kress and Carlsson were quick to dismiss any concerns that the SCR vs. EGR debate may be sowing confusion in the marketplace and causing buyers to delay their purchases.
“If there was any confusion out there, by the end of January this year the confusion was being cleared up. If I had the top trucking CEOs in a room, they would say the SCR approach is the way to go. The confusion and chatter is behind us,” Kress said.
To which Carlsson added that the fact that the majority of truck makers selling trucks into the North American, European and Japanese markets have all opted to go with the SCR option must say something for the viability of that technology.
When fleets and owner/operators are ready to buy, Carlsson and Kress said they will find a Volvo dealer network that has adapted to the challenging economic situation remarkably well. Kress linked the durability of Volvo dealerships to the decision made eight years ago to turn them into dual brand Volvo-Mack dealerships.
“The dual dealer we knew would be the strongest dealer in the marketplace and I would say we have a pretty good dealer network right now,” Kress aid.
Carlsson also noted that their dealers are doing a good job of hanging on to key staff such as technicians and sales people.