AND the survey says …
Quite a lot, actually.
The National Truck Equipment Association (NTEA) conducts a Business Conditions Survey every year involving its members, and the results continue to point to a strong shift in revenue and attitude.
In his presentation, “State of the Truck Equipment Industry: Evolution & Recovery,” NTEA executive director Steve Carey said 87% are reporting higher sales — compared to 50% when the survey was taken a year ago.
Employment is increasing, compared to 2011, with 62% reporting higher employment levels and 33% reporting the same employment level, with 53% planning to hire additional employees.
When asked to characterize business conditions, 78% of respondents said they will improve in 2012, 19% said they will stay the same, and 3% said they will decline.
Plant utilization continues to improve, with 57% at three-quarters to full capacity and 10% at full capacity — a 10% increase over last year.
“People have been quickly putting capacity back in,” Carey said, “but we haven't seen it dramatically increase into the full-capacity area (10%, as opposed to 7% last year). The industry still has room for expansion. Anecdotally from talking to people, it could be more of a personnel issue than a factory issue at this point.”
Lead times are evolving, with the 30-to-60-day backlog going to 39%, compared to 32% a year ago.
“We've actually seen a reduction in companies that are more than 60 days out (28% to 24%),” Carey said.
Ongoing concerns remain: poor sales/economy, 30%; changing industry conditions (changing customer dynamics and marketplace), 26%; lack of qualified employees, 14%; commodity prices, 13%; and increased competition, 7%.
“The big change from last year is under the poor-sales section — last year it was 60%,” he said. “Other categories have started to grow as members have started to address challenges in their business.”
In the Fleet Purchasing Survey, 76% of fleet managers said they will be purchasing trucks in 2012; 58% said they are currently funded for 2012 truck acquisitions, 25% say funding is likely, and 16% say it's questionable.
“These numbers didn't change much,” Carey said. “I expected to see some shift but we really didn't see it.”
He said 65% are making significant changes to their conventional truck specifications to reduce fuel consumption and utilization.
“We're hearing a lot of talk about spec'ing differently, in order to manage and reduce the use of fuel, whether diesel or gasoline,” he said. “This is not a question necessarily of all fuel exclusively. It's looking at all activity.”
Sixty-eight percent are using idle-reduction technology, 60% vehicle weight reduction, 47% improved powertrain efficiency, and 38% improved vehicle aerodynamics.
However, 58% said they will not acquire any green trucks in the next six to 12 months.
“We realized that when we asked about green trucks, we're not sure how they're responding,” he said. “Our definition of green is both alternative fuel and all other technologies that help reduce fuel utilization, whether it's idle reduction, geofencing, driver training, and so forth. We believe fleets are responding from a fuel perspective, but we don't have the data to back it up right now.”
He said 51% do not have a formal green truck program or mandate. Of the ones that said yes, 33% say it's motivated internally and 13% say it's motivated by regulations.
In getting a comparison of fleets over and under 50 trucks, Carey said there were few surprises: both groups reported they didn't have as much money or personnel, stress levels were up, and they weren't very optimistic about the future.
The primary point of contact was slightly higher for the fleets over 50 trucks, with the distributor/upfitter at 41%, compared to 40% for the smaller fleets. The larger fleets also reported a greater increase in workload (79% to 68%).
In compiling fleet managers' common responses, the comments on supplier support that remained constant or declined were: need improved response times; need to meet promised delivery times; need to offer increased parts inventory; need to improve warranty and repair service turnaround; and need to provide more product information/specs and images on website.
Supplier support and reliance has increased due to: improved response and delivery times; faster warranty, repair, and service turnarounds; offering expanded parts inventory and improved web-based product information, specs, and graphics; providing customer training; improved and constant communication; and collaboration on specifications and vehicle design.
What does this all mean?
In analyzing the sales, services, and experience spectrum, Carey distinguished between the companies that sell truck equipment based on price and those who become truck equipment experts.
“We've seen an industry going through an evolution, with companies moving from the scale of transactional relationships to facilitated-transactions relationships to a solution-provider role,” he said.
Characteristics of a pure transaction: everyone can play; price driven; low customer loyalty; demands efficiency; no room for error; continual sales effort; low service cost; product is critical; limited consultation; high advertising cost; and speed is critical.
For a facilitated transaction: many can play; service driven; moderate loyalty; requires efficiency; some flexibility; good follow-up skills; higher service cost; customized product; consultation critical; high marketing cost; speed is important; and work until its right.
For a solution provider: only a few can play; experience driven; high customer loyalty; total transparency; learn together; continual interaction; very high service cost; co-development; partnership; can't lose a client; full understanding; and develop solution.
“We also see lines of communication changing,” Carey said. “Today, with technology, that doesn't mean these aren't important. It means your partners, whether they are a dealer or leasing company, may not be able to define where the inquiry comes from. And it takes all of them to fill a truck to a customer. We think linear connection points are more critical than ever before because expectations are higher. Whether the customer contacts dealers or the leasing company or an NTEA member, they want the same answer. All they want is the truck.”
Numbers on the rise
Carey analyzed new-truck registrations, saying that you'd have to go back to 1998 to see the kind of increase the industry experienced in 2010 and 2011. There were just over 300,000 new Class 3-8 trucks registered in 2009, increasing over 60,000 and 100,000 in the next two years.
“We've come a long way, but we certainly have a long way to go,” he said, noting that there were 800,000 new registrations in 2006. The projection is to reach 600,000 in 2014 and 640,000 in 2015 and 2016.
“Our recovery is going to be much longer than a stair-step approach it has been in the past,” he said.
In Class 4-8, the NAFTA totals are just 100,000 more than the US-only totals.
Looking ahead, the industry has a number of factors working in its favor:
Leading indicators have increased for seven consecutive months.
The dollar is still relatively weak — a positive for exports.
Pent-up consumer demand, “although we don't see people taking action yet.”
The savings rate is falling.
Consumers and businesses continue to hold cash reserves. “You see record profits being reported. We feel those cash reserves are sitting there, and they're waiting to reinvest in capital expenditures.”
Higher inflation could accelerate consumer spending. “We feel inflation pressure can actually accelerate purchasing decisions because people feel goods will only get more expensive.”
The average age of trucks remains high. “We don't see that trend stopping.”
And the cons:
Commercial and residential construction remains stagnant. “We don't see that really gaining activity for a couple of years yet. We know that's a big catalyst for the industry, but still think we have a ways to go in that vocational segment.”
State and local government spending constraints. “They tend to be a lagging indicator in the recovery period, and we are still sorting the impacts on a reduced tax base as it relates to their ability to spend on trucks.”
The labor market imbalance continues. “Although we are in a historical high of unemployment, we are seeing quite a shift. Although there are a higher percentage of people out of work, a lot of member companies are saying, ‘We can't find qualified people to work in our shops and factories.’”
Political and election uncertainty. “Certainly everything we're seeing through the primaries is causing a lot of uncertainty in the US economy. We see that continuing through the election.”
Consumer confidence remains low. “I don't think this is surprising. People just don't feel good about the economic state and to some extent are reining back their purchasing decisions.”
Eurozone and Middle East uncertainty.
Tim Campbell, managing director of Campbell's Commercial Vehicle Marketing Group in Leyland, England, said many US companies might be tempted to believe that what happens outside the country is of no concern to them.
But they'd be mistaken.
“If you're into commercial vehicles in the US, then you will get more globally acknowledged because of global platforms,” he said. “It's simple economics. Major manufacturers, the Big Detroit Three, as well as manufacturers globally, said, ‘Hey, we cannot compete and keep making separate vehicles for every market. We have to maximize the billions we spend outside the US and start making it worthwhile and influencing what we do inside the US.’”
He pointed to the recent announcement that General Motors and PSA Peugeot Citroen will form a global alliance targeting a cut in annual costs of at least $2 billion without plant closings or job cuts in Europe. GM will take a 7% stake in Peugeot, Europe's second-biggest automaker.
The alliance will include pooled purchasing and research and development, as well as building vehicles on shared platforms to bring down costs. GM and Peugeot will continue to separately market and sell their vehicles.
GM is banking on the deal to help it reverse 12 years of losses in Europe, mainly on its Opel brand, totaling more than $12 billion. Peugeot, which relies heavily on the European market, hopes to increase sales in other markets. The agreement calls for GM to buy into a roughly $1.34 billion capital increase by Peugeot, becoming the French automaker's #2 shareholder.
He said the volatile cost of fuel will be an increasingly large factor.
“It's not getting cheaper,” he said. “They're going to have to look at the cost. If they can get a 5-, 20-, 30-cent savings on fuel, that's going to have a major effect on the bottom line. If I have 10, 15, or 20 trucks or vans and I'm competing against another competitor, I can have an economical advantage, a pricing advantage. The reason it's called a ‘commercial vehicle’ is because you use it for commercial purposes. It's about the value you have for sales people: ‘Show me you make me more money,’ or ‘Show me you can save me more money, and you're worth talking to.’ Fuel economy is an area you might be interested in.”
He said the Transit Connect was “the beginning — it's not the end,” because Ford will inject $1.7 billion into producing the new Ford Transit T-Series light commercial vehicle in Kansas and Gölcük, Turkey.
The new Transit model is expected to reach global markets in 2013 and will be sold across all major continents.
The current model, manufactured in Gölcük, is based on the one Ford has been producing since 1950. It has already been sold almost everywhere in the world except for the US. Ford is now getting ready to launch the new T-Series model in the US and is test driving the vehicle to prepare it for American consumers and road conditions. The Transit is expected to be 25% more fuel efficient.
“If you're in work trucks or involved in bodybuilding, this is the future for you in the next few years — these new vehicles from the European side,” Campbell said.
Find the NTEA Work Truck Show Report archive with articles from 2012 to present