LOUISVILLE, KY – Manufacturers and suppliers here at thesay they are starting to see some positive economic signs indicating better days may not be so far off. However, that doesn’t mean major business challenges – especially high fuel prices – are going away any time soon.
“It’s not smooth sailing in the economy right now, with fuel prices at $4 a gallon for diesel and housing starts down,” said Carsten Reinhardt, president of the commercial vehicle systems division at ArvinMeritor. “But there are signs the industry is coming back. We’re more bullish than most about that.”
In terms of truck sales, ArvinMeritor projects 220,000 to 240,000 Class 8 trucks will be produced for the U.S., Mexico and Canada this year. Reinhardt said Class 8 sales totaled just under 50,000 units for the first quarter. He expects sales to reach the mid-50s by the second quarter and climb into the low to mid-60s for the balance of 2008.
Reinhardt noted, however, that medium-duty sales trends aren’t as positive. Total sales for the U.S., Mexico and Canada reached 30,000 units in the first quarter, should grow to 40,000 for the second quarter and reach the high 40s for the balance of the year, finishing 2008 with 165,000 medium-duty units sold.
Trailer sales, while strong for now, will most likely be lower than what ArvinMeritor previously projected, he observed. After sales of 24,000 units in February, sales should taper off, totaling only 190,000 to 200,000 overall for 2008.
Bill Jackson, general manager of Peterbilt Motors Co., said that for the U.S. in particular, significant challenges still face trucking. He pointed out that the trucking business is expected to be volatile in 2008 and 2009, noting that the Federal Reserve recently cut its economic growth forecast by ½%, to 1.3 to 2%, for the balance of the year.
projects Class 8 sales in the U.S. should total 175,000 to 215,000 units for 2008, after falling to 176,000 units in 2007 from a record 322,580 in 2006. Medium-duty Class 5-7 sales should total between 80,000 and 95,000 units for the year, Jackson added.
However, Bob Christensen, general manager of Kenworth Truck Co., stressed that 176,000 Class 8 sales is a pretty good market by historical standards. “That’s not a bad market at all, and we expect to see a new truck sales uptick in the second half of the year,” he said. “We’re finally starting to see an equalization between supply and demand in terms of freight capacity.”
Chris Patterson, president & CEO of Daimler Trucks North America, is more cautious in his outlook. “Is there light at the end of the tunnel? We hesitate to say freight is on the rebound,” he said, noting that while there was some pick-up in tonnage at the end of 2007, freight is still not expected to fully recover this year. He pointed out that ACT Research, for one, is projecting a tonnage decline in 2008.
“Housing, for example, has a significant impact on freight, and housing starts were off 25% in 2007, while new-home sales are at their lowest level in 14 years,” Patterson noted. “That’s carried over into 2008, as housing starts were down 28.4% in February, meaning demand for building materials is also heavily affected.”
Yet things seem to be picking up now, according to Dee Kapur, president of the truck group at International Truck & Engine Corp. “Over the last four months, activity has picked up, both in trucking tonnage and in new-truck orders,” he said. “It might be a good time to start looking at buying new trucks this year. It’s time to look at the trucking business again.”That’s why ArvinMeritor’s Reinhardt remains upbeat. “Sure, if you look at any economic indicator, you could talk yourself into a doom-and-gloom situation, as fuel costs are up and housing is down,” he said. “But the economy we feel is coming back. There’s not all that much reason for doom and gloom. In fact, we think the opposite is true now.”