That was Steven Latin-Kasper's message in his annual presentation, “Truck Equipment Market Outlook: Domestic and International.”
And he wasn't talking about the Green Bay Packers, Philadelphia Eagles, or Tulane University Green Wave.
Latin-Kasper said that the bad news delivered by energy activist and entrepreneur T Boone Pickens in the keynote address at the Green Truck Summit — that the price of a barrel of oil likely will increase to $70 by the end of the year and in five years will be between $200 and $300 — actually is good news for those in this industry.
As the price of diesel goes up, fleets will increasingly look for fuel-efficient trucks with alternative technology.
“That means that any company in the commercial truck industry that can tie itself into the green-truck idea is going to be in a good position to see an increase in sales it wouldn't see otherwise,” said Latin-Kasper, the NTEA's market data and research director. “If nothing else happens in this industry, there are going to be more and more green trucks on the road. You can be part of that and grow along with that segment of the market or ignore it, pretend it doesn't make a difference, and go your own way. But the percent growth in the green-truck segment is going to be way higher than the rest of the industry.”
Latin-Kasper said the truck industry can take a hint from the automobile industry, where US sales of hybrid electric cars went from 20,282 in 2001 to 252,636 in 2006.
“There's no reason to believe the percent growth in the sales of green trucks isn't going to be a vector of 10-plus in the next five years,” he said. “If you're not already thinking green, you need to start thinking that way. That's where the growth is going to be.”
Export market an avenue
He said that industry companies also must get aggressive or continue to be aggressive in attacking the export market, which kept increasing in 2008 while imports fell 35.6%. He said China continues to be a strong market two years after breaking into the top-five countries to which the US ships trucks.
“That's a market you should still be aiming at,” he said. “China and India are two large economies that are still growing and expected to keep growing in 2009. Their Department of Treasury secretary equivalents are complaining because they're not growing at 10% a year anymore — they're only growing 5-6%. But that's a heckuva lot better than declining by 6%. So where do you want to try increase sales? In the market where sales are plummeting? Or where they're still growing by 6% a year? For those who are doing it, diversify it.”
Latin-Kasper also had some good news on the overall economic front: The worst probably is over.
Real GDP, which was revised down 6.2% in the fourth quarter of 2008, is expected to be down 5% in the first quarter of this year, down 1.8% in the second quarter, and then up nearly 1% in the third quarter.
“We're in the deepest part of the pit,” he said. “This is as bad as it's likely to get. The really nasty news that keeps coming out is going to slow down. We're going to stabilize in the third and fourth quarters.”
Latin Kasper said the industry size was $83.5 billion in 2008, with trucks and truck chassis accounting for $53.4 billion and truck equipment $6.2 billion. Commercial chassis shipments were down 18.9% and truck-equipment shipments down 11%.
The Detroit Three accounted for 69.1% of all Class 3-7 chassis in 2007 and 69.4% in 2008.
“This is something we have a huge vested interest in,” he said. “As much as some of you may think GM and Chrysler and maybe Ford deserve to go bankrupt, it's probably not in the long run in the best interest of the industry.”
In the production index, the heavy-duty segment did much better than medium duty, with heavy duty about 7% down year-over-year at the end of 2008, compared to medium duty's 18%.
“We expect that to remain going forward in 2009,” he said.
He said the ATA freight index is usually a good indicator of trailer production in any given year, but with trailer production trending down to a 40% decline in the middle of 2008, ATA already had split off in the middle of 2007 and headed up.
“For some reason, there was a disconnect there in 2008, and we're seeing the reality of it now,” he said. “It's finally turning down the way most thought it would. We don't expect to see freight shipments increase at all in 2009.”
He said that as bad as things have been, there has not been a lot of inventory buildup in commercial truck chassis.
He said that state and local government expenditures increased in 2008, with equipment (minus computers) up 3%.
“Into 2009, especially as a result of money from the stimulus bill, that will allow them to keep spending beyond what they would have otherwise,” he said. “That's one place where you will see some of the 375,000 or so new trucks being sold in 2009. It's one kind of bright spot moving forward.”
He said that state and local government construction spending was up 6% in 2008 and should remain steady this year.
“We expect to continue to see pretty significant expenditures on highways and streets, not so much new but a lot of maintenance and repair going on all over the nation's interstate system and highways,” he said. “If you're not doing something aimed at highway and street applications or anything that has to do with local and municipal governments, that's something you need to be paying attention to.
“The bottom fell out in the private construction market. Roughly 25% of all commercial truck sales — complete trucks, including the body — is in the various construction industries. When we see private construction turn up, that will be a clear sign that there's light at the end of the tunnel. But that fell, from down 7% at the end of 2007 to down 14% a year later.”
He said that while companies in this industry don't use a lot of carbon steel scrap, that market tends to lead prices. Carbon steel scrap was down 41% in 2008. When prices stop falling and start increasing, that's obviously not good from a balance-sheet point of view, but it would indicate that the global demand for steel has gone up again.
“And that means that global demand for everything else is likely to go back up,” he said. “As much as we don't want to see steel prices increase, that is a good indicator of a healthy economy. It will give us a clue as to whether we should start buying more steel and building more product.”