With demand for trucks and trailers at record levels this year – and expected to continue into 2005 – manufacturers are trying to come to grips with component shortages, volatile raw material prices, and other issues that may constrain production now and in the future.
For example, Tom Plimpton, president of Seattle, WA-based Paccar, parent of Kenwortha nd, said the company’s new material purchasing system – which electronically links engineering, purchasing and suppliers – is designed to alleviate supply shortages. However, the system isn’t able to completely smooth out Paccar’s supply chain wrinkles.
“The benefits of this investment partially offset the negative impact of increasing material costs due to higher commodity prices,” he said. “A few suppliers are still reluctant to invest in additional capacity and labor due to the cyclical [nature] of the market, resulting in some restricted parts availability.”
Plimpton noted that is partly due to record demand for new trucks. Paccar is forecasting that heavy-duty truck retail sales for the U.S. and Canada during 2004 will be between 225,000 and235,000 units. That would mark an increase of 35% over industry sales in 2003.
“Record freight volume, fleet expansion and improved carrier profitability are driving new truck orders,” he added. “Profits for publicly traded truckload carriers are up nearly 50% versus the same period a year ago [and as a result] U.S. and Canada Class 8 truck sales could increase to 270,000 to 280,000 units in 2005 due to a good economy and fleet growth.”
Trailer makers are also dealing with the same issues as they struggle to keep up with demand for new units, said Bill Greubel, president & CEO of Lafayette, IN-based Wabash National.
“We continue to execute our business plan reporting solid results despite challenging supply conditions. We encountered key raw material price and availability issues that were accentuated by an unanticipated sharp jump in steel pricing mid-way through the [third] quarter that we were unable to pass through to our customers in a timely manner,” he said.
“Manufacturing productivity, while continuing to improve, was somewhat adversely affected due to product mix and supply chain constraints [and] we are becoming more comfortable that our supply chain will be able to support steady growth in this segment,” Greubel added.
Wabash noted that its new trailer unit sales amounted to 13,700 units and 37,500 units for the third quarter and first nine months of 2004, respectively, compared to 9,900 and 29,700 units for the same periods in 2003.