The changing trailer business
Nov 1, 2011 12:00 PM, BY RICK WEBER
In the trailer industry, the only thing that's constant is change.
That's the message delivered by Stu MacKay, president of MacKay & Company, in his presentation, “The Trailer Industry: Yesterday, Today and Tomorrow.”
He said that 30 or 40 years ago, goods were moved primarily from the manufacturer (using Class 8 trucks and trailers) to the wholesaler (using Class 6-8 trucks and trailers) to the jobber (using Class 6-7 trucks) to the retailer. Now, they move primarily from the manufacturer or importer (using Class 8 trucks and trailers) direct to Wal-Mart or a similar company.
“That's really changed how equipment is used,” he said. “There are far fewer straight trucks and many more trailers.”
In the last four years, the market share of long haul (550 or more miles) dry van freight — total intermodal (international plus domestic) is up 16%, and domestic intermodal only has increased 8%.
“In the last four years, as railroads consolidated, they cleaned up their act and are running more on schedule and doing a better job of moving freight,” he said, “and that has shifted highway business to rail. Railroads are becoming more competitive hauling equipment shorter distances.”
He said complete trailer production and US retail Class 8 truck sales have always moved in tandem, but there are much higher swings in trailers than in trucks. After falling for three straight years (with a 40% decline in 2009), complete trailer production rose 56% in 2010, while trucks had less than half of that increase.
In 1980, there were 1.5 trailers per Class 8 tractor. Since then, it's been the reverse. The ratio dipped to 1.1 in 2009 before rising to 1.3 in 2010.
“People who operate trailers use them much more efficiently today, and as a result, the demand for this equipment shifts,” he said. “The relationship has changed significantly.”
The 2010 trailer universe had 3.7 million units divided by vocation like this: 40% lease/rental, 30% for-hire, 11% private fleets, 7% construction/refuse, 6% government/utility, 4% owner-operator, and 2% agriculture.
The breakdown by age: 36% five to 10 years old, 36% 10 years or older, and 28% five years old or newer.
The heavy-duty aftermarket was $21.9 billion, divided like this: power generation 30%, undercarriage 24%, power transmission 13%, cab/chassis 13%, electrical 8%, and all other parts 12%.
The parts replacement demand for Class 6 - 8, trailers & chassis was $15 million in 2006 and $21.9 in 2011.
He said that while trailers aren't a huge part of the heavy-duty aftermarket, they are a “significant part,” with $1.8 billion divided like this: brakes 29%, suspension 21%, wheels, hubs, and seals 11%, electrical 3%, and all other parts 36%.
The OE dealer accounts for 42% of the parts replacement demand for Class 6-8 trucks, trailers and chassis, followed by heavy-duty distributors (18%), independent garages (13%), specialists (9%), auto parts stores (6%), and engine distributors (6%).
Five years ago, the OE dealers were accounting for 43% and the heavy-duty distributors 17%.
“There has been a lot of consolidation in the heavy-duty aftermarket on the independent side and certainly on the dealer side,” he said.
The 2007 trailer service labor market generated 76 million hours, with 29% in paint and body, 28% preventive maintenance, 19% brakes, 10% electrical, 5% suspension and steering, 3% wheel seals and bearings, and 6% all other components.
The truck operator service market share exclusive of warranty work: preventive maintenance 89%, air brakes 88%, electrical components 86%, wheel seals and bearings 84%, steering and suspension 82%, all service 75%, engine external components 73%, other components 71%, drivetrain 70%, paint and body 49%, and engine overhaul 43%.
In the service area, he said that trailers, unlike tractors, often sit. Maintainers want to outsource service. There are two options: in-house and mobile. Seventy-six million hours at $75 per hour equals $5.7 billion, and a 1% share is $57 million.
What should we expect going forward? He said he expects a slow economic recovery, customer-base consolidation, trailer-manufacturer consolidation, dealer-competition consolidation, longer trade cycles, equipment longevity, increasing regulation, increasing intermodal activity, selective driver shortages, and reconfigured demand.
In terms of average annual new trailer production, his forecast is 230,000 forecast for 2011 through 2015 — which is 3,000 below the 1990s average.
“I think there are some major opportunities in this business,” he said. “There are going to be opportunities going after specific customers on the new trailer side, service side, parts side, going after the truck customers on the service side and parts side.
“It's a good ballgame. It's an interesting ballgame.”
For more information on MacKay & Company, visit www.mackayco.com.
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