Just shy of the penthouse

Trailer/Body Builders February 2014 editorial

WHEN we get on an elevator, we have two basic questions to answer: Which direction (up or down), and how far (which floor do we choose).

In a way, trailer forecasters have to ask themselves the same two questions. Throughout the history of modern trailer manufacturing, trailer shipments have gone up—usually for several consecutive years. They also have fallen into multi-year declines. Most of the time the rise and fall can be dramatic. Trailer demand skyrockets. Trailer demand plummets. If you get motion sickness, the trailer business is not for you.

Elevators don’t travel sideways—lateral moves are not an option. And until recently, trailer demand didn’t travel sideways, either. For example, during the past 10 years, trailer shipments have changed by double digits nine times when compared with the previous year. The sharpest increase: up 78% (2011 vs 2010). Most severe decline: down 46% (2009 vs 2008).

Of course, the single year-over-year changes only tell part of the story. The 78% increase a couple of years ago is part of four consecutive years of growth. That is how long it is taking to recover from the market bust that reached its low point in 2009. Likewise, 2009 marked the end of a three-year bust cycle that saw trailer shipments fall by 72%.

Basically the past decade has been spent surging, dropping, and recovering from the worst collapse in trailer shipments in more than a generation. It’s been either the thrill of victory or the agony of empty order books.

That’s why we were pretty surprised as the returns began coming in for the annual Trailer/Body Builders Trailer Output Report for 2013 (see story, Page 22). Yes, industry analysts have been predicting a year that would be very similar to the 2012 totals. Yes, trailer manufacturers throughout 2013 were saying that business was good and steady. But there’s nothing like crunching the numbers and seeing the results unfold.

Paul Schenck, our senior editor, added up the production numbers from North America’s largest trailer manufacturers and came up with a total of 244,864 trailers shipped last year. Not record territory, but a much better year than average.

The real surprise was how closely 2013 totals came to matching 2012. The difference: 678 more trailers this year than last, or roughly one quarter of one percent. If you like your industry’s 2012 performance, you get to keep it.

So what’s the big deal about stability in trailer demand? After all, it’s just that 2013 looked a lot like 2012. That hardly counts as a trend.

Yes, but…Remember the stat about double-digit changes in trailer shipments nine of the past 10 years? The one year of a single-digit increase occurred in 2012. Combined with the 2013 report, we have not had a double-digit change in trailer shipments since 2011 after having nothing but double-digit changes for right at a decade.

Additionally, there seems to be a shared belief among manufacturers and industry analysts that 2014 will look a lot like 2013. Backlogs are healthy, materials are manageable, and the recovery from the 2009 disaster has been going on long enough for the supply pipeline to be reliable. No economic threats (or opportunities) appear on the horizon, and no regulatory proposals are out there that would artificially stimulate or restrain demand.

Several manufacturers shared thoughts similar to these: “We had a very good year, and it is continuing,” says Jon Jeffries, vice-president and general sales manager for Great Dane. “We think 2014 will be very similar to 2013. We have a solid backlog, slightly better than last year at this time. We are in a very happy quiet.”

So is 245,000 trailers the new normal? After watching wild swings for decades now, stability is probably the new abnormal. Like everything else, stable trailer production will change.

But is the 245,000 level sustainable? The industry shipped more than 303,000 complete trailers in 1999 and immediately went into a multi-year decline. Production topped out at 282,750 in 2006. That peak immediately fizzed, and trailer shipments dropped 72% in three years. But with low inflation, low interest rates, and a slow-growth economy, the industry seems to be able to supply the market with 244,000 trailers per year fairly comfortably.

Who knows? For right now, let’s just enjoy a little predictability and some pretty nice production rates. It’s as if someone rode the elevator almost to the penthouse and left it there. Plateauing at a fairly high level can produce “a very happy quiet.” ♦

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