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Truck exec predicts quick rebound from ’07

CHATHAM, Ont. - The storm cloud hovering over truck and engine manufacturers in 2007 may give way to clear skies, Thomas Baughman, vice-president and general manager of International's Heavy Vehicle C...

CHATHAM, Ont. – The storm cloud hovering over truck and engine manufacturers in 2007 may give way to clear skies, Thomas Baughman, vice-president and general manager of International’s Heavy Vehicle Center, recently hinted. Baughman said there’s reason to believe the fallout from the current pre-buy may not be as severe as some industry analysts have suggested.

The International exec recently predicted 229,000 linehaul units will be sold in North America this year. While he expects that number to dwindle to just 161,000 units in 2007, he pointed out the significant drop may not be as devastating as it sounds.

Baughman points out that projections still pit 2007 as one of the top seven years for Class 8 truck sales over the past 35 years.

“That’s certainly nothing to be all doom and gloom about,” Baughman said.

International Truck and Engine Corp. is expecting a slowdown during the May-July time frame, as dealers sell off the trucks sitting on their lots. However, Baughman noted they will have to begin restocking as fleets settle back into their traditional buying cycles.

“The fleets will have to get back in the game before 2010 and most fleets don’t like turning over all their trucks at once,” pointed out Baughman.

Baughman rationalizes his optimism this way: During the last round of EPA emissions standards (2002-2006), 760,128 Class 8 trucks will have been sold amounting to 15,203 per month over a 50-month time period.

“If the economic growth of North America continues at the same pace and the number of trucks replaced is about the same,” then Baughman estimates 551,700 units will be sold over the 36-month time frame between January, 2007 and the next round of EPA emissions standards in 2010.

That amounts to 15,325 trucks per month – slightly better than between 2002-2006.

“Between 2007 and 2009, business may actually on average be better than it was over the past 50-month cycle,” he reasons. “That’s my reason for hope that the downturn in the marketplace is not going to be as severe as people think…Once we come out of the downturn, you have a really nice steady return leading into a couple of really good years.”

That’s music to the ears of workers at International’s Chatham assembly plant, who were put on notice in August that layoffs may be necessary as a result of the current pre-buy. Baughman pointed out the notice was given in accordance with Ontario labour laws and the layoffs may not be necessary.

“It was provisional in nature,” he pointed out. “If we get to that point in time and discover we don’t need it, we won’t do it.”

International hopes it can offset some of the price spikes associated with each round of EPA emissions standards by introducing its own big bore engine, the MaxxForce, slated for introduction in 2008.

“Our engine partners, Cummins and Caterpillar, have massive investments to develop the (new emissions) technology and they want to recover the expense they put in. They amortize that in the piece price and prices of our components are going out of sight,” Baughman said “We don’t see good value in that. We think there’s better value in taking control of our own destiny, developing our own engines with our own technology and figuring out how to do it smarter and cheaper and quicker and then not carrying some of the expenses we’re forced to carry with our outsourced engine strategy.”

He added that engine choice is important to International and customers will continue to have the option of choosing non-International powertrains in the future.

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