IF YOU are in the trailer or truck body and equipment business, there is a good chance that you are in the process now of returning to normal.
The phrase "returning to normal" was one that was repeated by several of the speakers at the National Truck Equipment Association's Economic Outlook Conference in Dearborn, Michigan. The speakers used it to summarize what is happening in the economy now - a slowdown in the trailer and commercial truck business following years of unprecedented prosperity.
The conference, held September 17 and 18, included presentations by the chief economist for Standard & Poor's Data Resources Inc, the managing director of H C Wainwright & Company, an associate with America's Commercial Trucking Research Company, along with analyses of several truck industry niches.
Those attending the conference agreed with the speakers - that things definitely are slowing down. Here are some of the facts, figures, and forecasts from the conference:
- Higher interest rates are taking their toll in the construction industry. Eli Lustgarten with H C Wainwright predicted that a 2% increase in construction spending during 2000 will give way to a 2-3% decline during 2001.
- Medium-duty truck sales will be impacted by higher interest rates, Lustgarten said. In addition, the much anticipated increase in medium-duty truck use resulting from e-commerce is rocky. E-commerce will continue to grow, Lustgarten said, but recent failures of dot.com companies are a source of concern. A bright spot is the school bus industry, where the demographics of the U S are creating increased need to transport school children.
- Class 8 trucks have had a wild ride in recent years - one that Daniel Lukas with America's Commercial Truck Research says is unsustainable. Perhaps the most striking statistic that Lukas had to offer involved a comparison between what truck manufacturers built and what customers ordered during the past six months. Until recently, plants were cranking out Class 8 trucks at an annual rate of 316,000. But during the same period, customers were ordering at a rate of 162,000 per year. Add to that the inordinately high number of low-mileage used trucks on the market, and it is not surprising that cancellation rate of orders for Class 8 trucks is in the neighborhood of 17%.
- Truck trailer shipments are softening (see Truck-tistics, Page 28). Lukas, however, believes trailer builders are in a much better position than their counterparts who manufacture tractors. He cites the productivity enhancements that trailer manufacturers have instituted in recent years, along with the possibility that driver issues could increase demand for trailers. But like tractor manufacturers, trailer manufacturers are being affected by rising fuel prices that cut into the profitability of their customers. Lukas pointed out that for every eight cents diesel fuel increases, profits of truckload carriers are cut 1%.
Although the speakers generally anticipate a decline in the commercial truck and trailer industries in the second half of 2000 and into 2001, they don't expect to see major declines. The economy is too good, they point out. Interest and inflation rates are too low, and the employment rate is too high for anything other than a "soft landing." Instead, we are beginning to see the end of the unsustainable.
Where will the industry softly land? The lighter the GVW rating of the truck, the better its sales prospects. Looking at the truck market as a whole, Stephen Latin-Kasper, NTEA's director of market data and research, expects a 5-10% decline in trucks until 2002.
One segment of the truck equipment industry remains particularly bullish about the immediate future. In preparing for this year's Snow & Ice Control Issue, we asked manufacturers what they expect from the 2000-2001 snow season. Here is what they told us:
- Snowplows for light-duty trucks expect an 18% increase in sales this season. This is based on input from seven manufacturers.
- Snowplows for heavy-duty trucks should increase 12% from last year, according to the average forecasts from seven manufacturers of heavy-duty plows.
- Hopper spreaders were up 9% last season and are expected to grow another 12% in 2000-2001, according to the average sales forecast from six hopper spreader manufacturers.
- Tailgate spreaders should edge up 6% this season, according to the combined input from six companies that supply these products.
Generally speaking, however, the overall direction of the commercial truck and trailer market is down. The analysts say things simply are returning to normal. Given the way our industry is changing, even a return to normalcy is out of the ordinary.