THE FREIGHT RECESSION

Clouding the 2010 emissions picture further is the long-term “freight recession” in the U.S. — a trend that keeps worsening, dampening demand for trucks. “The recession in the freight market started almost three years ago, when U.S. economic growth slowed from 3 to 4% a year down to between zero and 1%,” explains Noel Perry, managing director and senior consultant at FTR Consulting Group.

Formerly chief economist with Green Bay, WI-based truckload carrier Schneider National, Perry says the freight market is now in true collapse — possibly contracting a further 10% in 2009.

As a result, new-truck sales are plummeting to new lows, reports Eric Starks, president of FTR Associates. FTR projects Class 8 sales in 2009 to be about 135,000 but could dip to about 95,000 under a “worst-case” scenario; however, Starks believes it might go even lower. In the fourth quarter last year, monthly Class 8 orders indicated an annual sales rate of 119,000 to a low of 104,000 units using just December's numbers as a guide, so it's very conceivable sales could continue to drop.

“The average age of vehicles is increasing and could overtake the all-time high from 1992 sometime between 2010 and 2012,” Starks notes. “Also, the size of fleets is shrinking, down 8% in 2008, so some old trucks are just not being replaced at all. “

That might make the higher sticker prices for trucks equipped with 2010 emissions reduction technology an almost impossible sell, which is why Navistar and OOIDA requested an “economic exemption” to the 2010 deadline. The EPA, however, flatly rejected any such exemption earlier this year.

“We finalized the rule several years ago [and] it is on track to have the final phase kick in by 2010,” says Catherine Milbourn, EPA's senior press officer. “We do not plan to alter the rule.”

Still, Navistar remains hopeful that the EPA may reconsider its decision in light of continued economic difficulties, says Tim Schick, director of business and product development for the company's engine group. “The EPA's decision was elicited as a final response, but as the economy is still in the doldrums, it may be those conditions could resonate more strongly,” he points out. “We'd like the trucking market to have options, because 2010 technology is going to bring added charges for everyone.”

The rest of the engine-making community, however, believes altering the 2010 timetable would create only more uncertainty and trouble. “We recommend that customers try to maintain their equipment replacement cycles and not disrupt their business and capital expense plans,” Mack's McKenna notes. “Our industry is still experiencing the impact of pre-buying ahead of the U.S. '07 [emissions rules]. The trucks Mack is bringing to market next year will have the same MP engines we offer today — the only difference being one more year of real-world experience backing them up.”

“All of this is pushing the benefits of 2010 technology back by many years,” DTF's Schaeffer says. “We're delaying the benefit of cleaner technology because no one can afford it due to the economy. That also means the industry will be passing up the economic advantages, too, leaving fuel economy benefits on the shelf. Instead, we'll be burning extra gallons of fuel.”