Truck makers struggle as equipment demand bottoms
Another truck parts supplier files bankruptcy
Dave Hannon -- Purchasing, 10/12/2009 11:16:21 AM
What are your logistics contracting priorities heading into 2010?
While the slump in demand for trucking services during the recession has certainly had an impact on trucking carriers, it has also made things difficult for the companies that make trucks and truck parts. The most recent casualty is parts supplier Accuride, which filed Chapter 11 bankruptcy last week. Accuride's CFO James Woodward said demand for new commercial vehicles in 2009 is expected to fall for a third year to its lowest level since 1982.
Just how bad is demand for trucks right now? In a recent report, KeyBanc analysts said Class 8 truck production has been below historical normalized replacement levels for two years, but "production stabilized in August, surpassing 8,000 units for the second time in eight months, and net orders improved sequentially for the fourth consecutive month to their highest level since December 2008...With no sign of meaningful improvement in freight demand, we anticipate production levels to remain below historical levels."
Mack Trucks, which is owned by Volvo, in June announced a plan to consolidate production of its entire product line at a facility in Macungie, Penn., transferring assembly of Mack highway vehicles from the plant in Virginia's New River Valley by the end of November.
Also chipping away at some of the truck makers' balance sheets is the leniency their finance arms may be giving to carriers that have bought equipment. In a recent report from Stifel, Nicolaus & Co, analysts point out that "With collateral having lost 25% to 40% of its value in 2009, lenders, lessors, and the finance arms of the class 8 tractor manufacturers are reluctant to liquidate companies that are burning cash and operating with unsustainable metrics or are reluctant to repossess rolling stock."
But not all market watchers are so gloomy. Martin Daum, president and CEO of Daimler Trucks North America, said recently that the bottom has been reached in the demand plunge for trucking and there are signs of an increase in the North American truck equipment market. Daimler, which earlier this year unveiled plans to close plants in Ontario and Oregon to reduce costs, recently reversed the decision to close the Oregon truck plant, citing prospects for a large U.S. military order and an uptick in demand.
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