December Truck Orders Up 17%

Class 8 orders were 21,835 in December, up 17% year-over-year (vs. up 9% year-over-year in November), according to A.C.T. December marked the third consecutive month of over 20,000 Class 8 orders.

“Coming into the preliminary data, our sense was that some investors were expecting orders as low as 10,000,” Bear Stearns said. “Accordingly, we believe December’s orders were meaningfully better-than-expected -- particularly given the current freight environment.”

Class 5-7 orders were 18,358 in December, 82% year-over-year (vs. up 44% year-over-year in November).

“Our checks suggest that much of the strength seen in December was due to one large order,” Bear Stearns said. “While the origin of the order is still unclear, we believe it was likely placed by a large leasing company. Accordingly, December’s Class 5-7 strength seems unlikely to continue.”

Class 8 and Class 5-7 net new orders were both revised up 5%. Class 5-8 builds remain weak (as expected), down 36% year-over-year in December, with weakness reflected across all four major OEMs.

“We acknowledge there are fewer and fewer Class 8 optimists left, and clearly our own pre-buy expectations have been coming down,” Bear Stearns said. “However, we believe there are some interesting dynamics lining up: (1) Freight’s already been bad for a year or more, so our sense is that we are incrementally closer to a bottom; (2) A.C.T.’s lowered forecast implies two years of production at or below replacement demand in both ‘07 and ‘08. While this did occur during the ‘01-’03 downturn, bad freight fundamentals were further exacerbated by an implosion in used truck prices; (3) Normal trade cycles will likely put upward pressure on replacement demand for the next 3 years; (4) The only thing that seems clear about 2010 is that prices are going up; and (5) Seasonally-adjusted, the last three months' order intake is roughly 230,000 annualized vs. A.C.T.’s ’08 build forecast of 216,000. Once tepid fourth-quarter reports are out of the way, we think the group feels like it could bottom out.”

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