Truck market should rebound late in 2007

Though Class 8 domestic truck demand in 2007 is weaker than many expected entering the year, most participants in Bear Stearns' recent annual Global Transportation Conference reported international strength and expect domestic demand to rebound toward late 2007 or early 2008.

While directionally this feels pushed out about a quarter from expectations six months ago, literally all of the panelists — auto parts manufacturers, transportation equipment OEMs, truck dealers, and rail equipment manufacturers — still expect to see a significant Class 8 pre-buy in 2008 and 2009 (with an emphasis on 2009) ahead of the 2010 emissions standards.

In contrast, trailer demand remains soft, and directionally most panelists said they were unsure if trailer demand could rebound without the industry first seeing a rebound in freight.

Demand for tank cars and covered hoppers continues to be robust, driven in large part by continued demand for ethanol, while demand for intermodal and coal cars remains soft. Most of the panelists expect to see demand rebound for both intermodal and coal cars in 2008, although much of this seemed macro-dependent.

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