Bear Stearns’ seasonally adjusted bankruptcy index increased modestly to 42 in January from an all-time low of less than 25 in November 2005 and 115 in January 2005. Healthy filings over the last three months followed sharp deterioration in September/October 2005. Strength was across the board at the OEMs and was consistent with improved loss provisions in 4Q.
Bear Stearns continues to attribute the spike in filings in September and October to the timing of bankruptcy law changes, not fundamentals.
Trucker filings spiked in the weeks leading up to the new October 17 bankruptcy regulations, then dropped off materially after more restrictive bankruptcy laws took effect. In contrast, filings were generally unchanged after diesel prices dropped 18% toward mid-November.
The data remains bullish for near-term orders. Bear Stearns estimates the industry Class 8 backlog was 193,000 trucks at Jan. 31. Assuming 355,000 slots for 2006, that implies there are 162,000 orders yet to come. If we further assume 40,000 orders/month, that would imply four more months of order strength before the cycle rolls over. Risk is toward higher monthly orders and an earlier roll.