Virtual Realities: Truckmakers driving down global highway

LAS VEGAS — The Asians are coming.

The North American trucking market may be in the dumps, but that doesn’t mean new truckmakers from overseas emerging markets don’t want a piece of it, says one global truck analyst speaking at the Heavy Duty Dialogue in Las Vegas.

At the same time, says Juergen Reers of Roland Berger Strategy Consultants, stateside OEMs continue to compensate for torpid domestic sales by setting up shop and forming development partnerships with foreign commercial vehicle makers for distribution in burgeoning markets like China, India, and South America, which have all recovered more quickly from the global recession than North America. 

The trucking industry is "in the middle of the game" of globalization, says Reers, who manages the international automotive and transportation consultant firm’s North American offices.

Adds Reers: Increasing economies of scale; convergence of market trends and regulations; more interchangeable trucks; and the rise of global fuel and raw material prices indicates that truck manufacturers will become even more virtually integrated over the next decade.

As well, while the truck sales industry remains cyclical, those peaks and valleys are more globally aligned than ever before, which helps mitigate exposure in a downturn while maximizing returns during good times.

To date, compliance with regional standards and regulations has been the biggest stumbling block to market integration, followed by manufacturers’ lack of distribution networks in foreign markets. But that’s quickly changing as governments seek international treaties on things like emissions standards and supply partnerships between companies provide access to each other’s dealer networks.


Where will North American trucks fit in
the global manufacturing picture?

Meanwhile, truck OEMs are sourcing more parts in-house, trending towards the European model of vertical integration. "It’s increasingly difficult to manage new (environmental and safety) regulations if you can’t manage or have control of the technology and (costs) in-house," says Reers.

Still, there will always be a place for reliable suppliers that can differentiate themselves and offer OEMs value on cost and service, as well as advanced technology sharing, ArvinMeritor president and CEO Charles "Chip” McClure told later on at the Vegas event.

McClure says his company remains in a firm position because of its ability to support customers around the world and by continuing to invest in its global footprint, it is able to maintain "cradle-to-the-grave" service on its products.

Part of the reason ArvinMeritor divested its light vehicle business units was because execs like McClure realized the company "couldn’t be all things to all people," and so it reorganized to fully support its core customers in the commercial highway vehicle and off-highway segments.

Though, McClure acknowledges that parts and component suppliers certainly recognize increased insourcing by OEMs "as a possible threat" going forward.

One side effect from top-to-bottom integration is the challenge for OEMs to differentiate their brands. But, says Reers, that suits the slowly changing demands of North American customers who are starting to favor price point over customization.

Conversely, Reers doesn’t think there will be a day when all major trucks are manufactured outside of the U.S. In fact, the high costs of energy and related shipping costs are forcing manufacturers to shorten supply chains and rethink outsourcing strategies for domestic markets.

"Customer proximity and building where you sell still has enormous benefits," says Reers.

Additionally, he says the growing middle class of emerging nations "is shrinking the cost advantage benefits" of offshore building for export to the North American market.

While truck makers travel full speed ahead down the global highway, the world’s largest truckload and intermodal carrier shrugs off intercontinental expansion as far as hauling freight is concerned.

In a separate discussion panel, Jerry Moyes of Arizona-based giant Swift Transportation questioned the overall success of YRC’s and Schneider National’s Chinese endeavors.

He says there is plenty of opportunity at home going forward. While he has 17,000 trucks out on the road, "we’re only doing 1 percent of all the (freight) business that’s out there in North America … especially in (import) containers." 

Once freight volumes recover, coupled with an expected 20 percent trimming of truck capacity through fleet bankruptcies and downscaling, Moyes says there will be more than enough business for him on this side of the pond.


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