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Heavy Duty Truck & Trailer Executive Summary

The North American Trucking industry continued to struggle through November. Ton miles for trucking continued to decline with heavy truck freight off 2.2% according to the ATA for the first ten months. Several large carriers stated the normal autumn pick up did not occur this year. Additionally, several fleets lead by Swift continued to downsize by selling off their 2003-2004 model year trucks. Truck OEM’s continued to downsize their build forecast for 2008. Led by International most are not forecasting build rate improvements until the second half of 2008.

The U.S. and Canadian economies though still strong continued signs of slowing. The Purchasing Managers Index fell to 50.8 from 50.9. Of the ten critical factors measured relating to manufacturing, growth in five were declining. The ISM (who keeps the index) feels that manufacturing is still growing but at a slower pace. The Federal Reserve index of leading economic indicators declined .5% in October. Worries about fuel costs, credit availability, a weak American dollar, wages and rising prices are concerns of businessmen and consumers equally. The outlook according to many economists is for a continued slowing through the winter 2008 first quarter. There is no general consensus supporting recession in either the U.S. or Canada, but on continuing pressure to reduce oil prices and strengthen the American dollar.

The consolidation trend in the U.S. and Canadian truck transportation supply chain continues. The acquisition of logistics firms by trucking companies and the acquisition of logistics and trucking companies by private equity firms were among transactions recently reported. Interestingly, shippers are continuing to attempt to unbundle these services to reduce their costs. Several ocean and land ports continue to report robust activities and business volumes. Heavy expansion investments have recently been announced at Houston, Savannah, Jacksonville and Tacoma.

Overall the outlook for trucking is for continued lower freight volumes as the economy slows. The recent bright spots are the unexpectedly high consumer spending for the holidays and the recent efforts to stabilize the credit and mortgage markets. These factors and lower oil prices should keep the economy from recession.

Our assessment remains the same. Until housing starts improve, driving truck fleet utilization, we see no pick up in new truck or trailer demand. With current conditions, a pick up may not occur until the end of 2008 or the beginning of 2009.

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