Taking the plywood off the windows

JUNE 1 is a significant day for those living along the Atlantic Coast or the Gulf of Mexico. It's the official start of hurricane season.

But as forward-thinking beach residents inventory their flashlight batteries and stock up on bottled water, it may be time for those of us in the commercial truck and trailer industry to start taking the plywood off the windows.

For two years now, the industry has been buffeted by “the perfect storm,” which is how ArvinMeritor's Tom Gosnell describes the multiple factors that converged at the worst time and in the worst way to give the trucking industry its worst pummeling in decades.

Despite the continued presence of threatening skies and rumbling thunder, however, it appears the perfect storm is beginning to break up.

Two of the most respected analysts of the trailer manufacturing industry recently have pointed to improving conditions and are convinced that we are at or near the bottom of the decline in trailer shipments. And the truck manufacturers and component suppliers at the Mid-America Trucking Show were seeing patches of blue and rays of sunshine. Even Gosnell, who coined the “perfect storm” image, said he was “cautiously optimistic” in spite of some underlying problems in the industry.

“The modest rebound in U S economic fortunes has allowed trailer orders to improve and backlogs to rise,” Kenny Vieth III with A C T Research told us recently. “Looking ahead, the data suggest that (the first quarter of 2002) will mark the bottom for trailer production this cycle. While the trailer market isn't as buoyant as the emissions-frenzied Class 8 market, the industry is improving in a more sustainable fashion.”

Peter Toja, president of Economic Planning Associates, expects trailer shipments to begin accelerating through the second half of this year and into 2003.

Chassis manufacturers who spoke at Mid-America were predicting better times ahead for truck sales — even if the tone of the forecast resembled the voice of combat-hardened veterans who had fought a tough war and won.

Ed Caudill, general manager of Kenworth, cited a variety of reasons for optimism, including improving economic conditions, expected increases in truck tonnage, a strong housing market, low interest rates, and lower fuel prices.

Peterbilt's Nick Panza reported that truck sales have been increasing. The glut of used trucks is beginning to shrink, he said, and some used Peterbilts are even in short supply.

The big controversy at Mid-America this year involved the tighter diesel emissions limits scheduled to take effect October 1. Would diesel manufacturers be ready for the tighter regulations, and would truck customers want to save money by purchasing trucks ahead of schedule in order to beat the deadline? The answers appear to be “yes” and “yes,” respectively.

According to Panza, there is a good balance in the truck market today. Much of the sales are replacement vehicles sold to customers who ran down their old trucks while riding out the storm. Some of the sales, though, are to fleets that are trying to avoid paying an estimated additional $5,000 for an engine that meets October's tougher emission rules.

However, the rate of pre-buying since the Mid-America show may have accelerated — which may be affecting the anticipated growth in trailer sales. Fleets, conventional wisdom has it, are concentrating their equipment purchases on power units right now. Once the October deadline is passed, some analysts expect the spending will focus on the purchase of new trailers.

After a hurricane, the first thing people do is assess the damage.

“Seven thousand trucking companies have gone out of business the last two years,” Gosnell said at Mid-America.

Not surprisingly, the same ill winds that caused these casualties among the people who buy trailers also took their toll on those who sell them — most recently the closing of production at the HPA Monon plant May 10.

During this storm, we have seen plants close, plants sold, management changes, and production sliced in half. More painfully, the lives of many employees and their families have been uprooted with layoffs, recalls, and rumors of layoffs.

We still have some unsettled air, as meteorologists are inclined to say. And while no one expects the trailer market to get hot immediately after the passage of the storm, it's reasonable to look for fair and mild conditions.

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