Truck builders weathering short-term setback
Nov 1, 2007 12:00 PM, By Charles E Wilson
Calling 2007 a disappointing year for commercial truck sales would be an understatement at best. This was a dismal year for most — if not all — of the truck builders serving the US market. Further, there are indications that 2008 may not be much better.
Production of Class 8 trucks may not exceed 185,000 in 2007, according to some trucking industry estimates. That's a significant drop from the 300,000-plus Class 8 trucks that were built in 2006. Medium-duty truck production also has been sluggish this year.
A whole host of factors contributed to the severe drop in truck production. Topping the list was the rollout of new engines that were mandated by the Environmental Protection Agency to meet significantly lower diesel emissions.
Concerned about the reliability, performance, and higher cost of the new engines, many truck fleets chose to skip the 2007-model-year trucks with the new engines. They bought extra vehicles in 2006, which contributed to the record sales for that year, and they extended the trade cycle for the trucks they already were running. Some fleets are refurbishing older tractors to get an extra two to three years out of them.
Most of the truck builders reported plant shutdowns and production delays tied to falling sales. Installation problems with the 2007 engines also reportedly contributed to production line delays at some plants.
Some of the drop in truck sales can be attributed to a softening economy. Without question, the truck market was hurt by the meltdown in the residential construction sector. That is part of the reason that truck tonnage for the year was down 2.2% through September.
Enough of the gloom and doom, though. The commercial truck market in the United States remains fundamentally sound. A few years from now, 2007 probably will be remembered as a minor hiccup in the market.
Here is why. Even if the industry only builds 185,000 Class 7 trucks in 2007, that's a lot of trucks. In fact, it would have been record output back in the 1980s, and the average for the current decade remains around 250,000 trucks.
Military orders have remained strong this year, which have helped keep the truck plants busy. Many fleets with scheduled buying programs continued to buy new trucks during 2007. These buyers included a wide range of vocational fleets, such as tank truck operators.
Manufacturers will fine tune the 2007 engines over the next few months, and customers will gain more confidence in the product. Setting aside sticker shock (the 2007 engines certainly are more expensive), fleets are reporting reasonably good mileage (five to six miles per gallon) with the new engines.
In addition, manufacturers already are busy at work on the next round of new engines that will be required for the 2010 emission requirements. In fact the builders are wasting no time in rolling out their new products. Detroit Diesel held a press conference in mid-October to show off its 2010 engines, and that was followed by a PACCAR engine press conference at the end of the month.
Industry experts are expressing guarded optimism that the 2010 engines will have much-improved performance. Most will incorporate selective catalytic reduction and other technology enhancements that should address performance and reliability issues.
Finally, the trucking industry accounts for nearly 85% of transportation sector revenue, and it is a vital part of the US economy. Keeping up with US economic growth means that trucking companies have to continually renew their truck fleets. That's why the truck manufacturing sector will rebound sooner, rather than later.
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