Heavy Duty Truck & Trailer
April economic news was better
than expected with first quarter GNP growth measuring .6%.
Though it technically showed that the economy was not in
recession those elements related to trucking continued to
decline. Residential construction and home sales, automotive
production as well as heavy truck production all continued to
slow. The Purchasing Managers Index (PMI) was flat at 48.6
continuing to indicate a contraction of the manufacturing
sector. Key indicators measured by the Federal Reserve and the
Conference Board remained generally declining but at a rate less
than expected. The outlook for the second calendar quarter is
mixed but shows some signs for improvement indicating the
economic slowdown may not be as deep as feared.
Factors affecting carrier profitability continue to remain
negative. High fuel cost and reduced ton miles of highway
freight (down 3.2% from a year ago) have hit the bottom line.
Publically traded carriers such as Werner, J.B. Hunt, Heartland
and Knight all showed reduced earnings. Many carriers are
forecasting an improved earnings outlook as shippers are
accepting more of the fuel costs through additional surcharges.
Additionally the “over the road” fleet has contracted over the
last year to more reflect demand. Several hundred smaller fleets
and several thousand independent contractors exited the industry
in the first calendar quarter. This with actions taken by major
carriers to downsize has led to much higher utilization and
pressure on shippers as some are beginning to see issue with
availability of trucks to move their freight. This improved
utilization and tighter availability has led some carriers to
begin to raise rates on some lanes.
The extended downturn in truck orders has taken its toll on
heavy duty tractor and trailer manufacturers. Freightliner,
Volvo and Wabash announced layoffs in April. Paccar continues to
downsize through attrition. Navistar remains the only OEM who is
adding workers and increasing build rates. The outlook for
increased new truck and trailer orders for the balance of the
year is not promising. Several major fleets interviewed said
they would only make small or no purchases in 2008 , many
project returning to a 3 ˝ to 4 year replacement cycle in 2009.
Class 8 truck build is forecast at 170,000 to 185,000 for 2008.
Early projections estimate the build for 2009 could range from
250,000 to 300,000 units. Overall issues for trucking appear to
have stabilized and appear to be looking up for 2009
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