Last year put the "sick" in cyclicality. As we moved into 2000, initial market signs pointed to more good times for the industry. At the beginning of the year, the data supported the notion that 2000 could be as strong as 1999. Despite higher fuel costs and falling Class 8 valuations, the economy was booming. Trailers are purchased to haul the freight that the economy generates. Industry expectations were for a continuation of good times. In 1999, the US trailer industry shipped a record 359,126 units consisting of 305,869 complete trailers, 40,024 other axled products, and 13,233 domestic containers.
Total industry factory shipments managed a still high 325,212 units in 2000, 9.4% below 1999's record volume. Unfortunately, the slope of the demand decline fell sharply as the year progressed. Shipments fell by 21%, or nearly 40,000 units from the first to the second half of the year. Only 18% of the year's shipments were recorded in the fourth quarter.
Looking at just trailers (no containers, chassis, dollies, etc), year-over-year performance was even worse than that of the total industry. Complete trailer factory shipments declined 35,000 units year-over-year to 270,817 units. Of that volume, 57% of the units were shipped in the first half of 2000 versus 43% in the second half. Conditions deteriorated through the year as strong production and very weak orders cut industry backlogs in half by the end of the third quarter, precipitating even sharper production cuts in the fourth quarter. Of the 35,000 unit year-over-year decline, 27,200 units of that decline occurred in the fourth quarter.
A quick read of recently released 10Q reports from publicly traded truckload carriers provides a pretty good summary of what caused the negative market conditions in 2000. In short, revenues have not risen as rapidly as costs: fuel prices spiked twice during the year, insurance costs rose sharply, and freight rates were unable to keep pace. In addition, Class 8 tractor valuations fell through the year. The resulting profitability crisis created a wave of trucker business failures that has virtually eliminated access to capital. No cash and no credit are a difficult place from which to grow a business. On top of the profitability crisis, the freight market softened considerably in the fourth quarter.
The current economic correction is expected to put additional pressure on marginally profitable fleets in the first half of 2001. Looking forward, improved freight conditions, returning profitability, and positive cash flow will be required before demand improves.Besides the overall health of the economy, lower fuel prices remain as the quickest route to improved trucker profitability and improved trailer industry product demand. An improvement in US trailer industry shipments above current levels does not appear likely before the second half of 2001, with the fourth quarter a more likely target. Industry factory shipments are currently running at about a 230,000 unit annual rate.
Americas Commercial Transportation Research Company, LLC (ACTR), has become the leading private source of US trailer industry statistics. The data presented in this article was sourced from ACTR's copyrighted trailer industry database. The database was started in 1990 to provide a forward look at industry direction by measuring order and cancellation activity, backlog size and current production rates as well as the more traditional measure of factory shipments. This is the first time in 15 years of business that ACTR has prepared an article for an outside publication. ACTR's operating policy remains to work confidentially and privately within our own member base.
If you have any questions about this article, or ACTR's body of work that covers the US Trailer and North American Classes 5-8 vehicle markets, feel free to contact us: Telephone: 812-379-2085, E-mail: [email protected], or visit our website at www.actresearch.net.
Census Discontinues Trailer Report For the past 25 years, Trailer/Body Builders has published Truck-tistics, a monthly column built around preliminary reports of trailer shipments.The reports were compiled by the U S Bureau of Census, with financial assistance provided over the years by the Truck Trailer Manufacturers Association and/or affiliated industry sponsors.
Because no one currently is sponsoring the Census survey, the Bureau is no longer offering it.According to Chris Savage, the Census analyst responsible for compiling the trailer shipment figures, the survey could be resumed as shortly as three months after a sponsor has been found.Until then, the Census will publish final trailer shipment figures when it publishes its summary for 2000 in July.