ALTHOUGH Class 8 truck total net orders for all major North American OEMs were down 3% in December over November, the market trends are encouraging, and truck-equipment distributors seem confident that 2011 will be a strong year.
“Things are starting to heat up,” FTR Associates president Eric Starks says. “We're seeing some strong order activity of late, and that will spur additional production early this year. The fundamentals are decent. We had a sluggish late third quarter and early fourth quarter in the freight environment, but it's been doing better recently. It's an environment where truckers are starting to make money and are parting with that money and buying equipment.”
Starks says the decline in Class 8 December orders meant little in the big picture: “Those are still very good numbers from where we been.”
Medium and heavy truck sales (trucks with GVW ratings above 10,000 pounds) were up 23% in November over the same period a year ago and projections were for a 22% increase for 2010. Only Class 4 and Class 7 were down for the year.
He said the numbers in Classes 4-7 are “not fantastic” but they are enough to spark the belief that something good is happening.
“Some of the fundamentals are improving,” he said. ”One, underlying businesses that buy equipment on the private-sector side are doing better. They lot have cash and are figuring out what to do with that. On the flip side, local and state governments are struggling. People buying buses and dump trucks are going to be on the sidelines. Any uptick will be primarily from the private sector.
“People are talking about aging equipment, but that is more a function of, ‘Are you wearing out the equipment?’ And they are starting to finally wear out equipment, so age is not as much of an important factor. It's whether or not equipment is set up for your application. That's starting to get to the point where application-wise, they need to get rid of some of pieces of equipment within the next year.”
Larry McGee, service manager for PalFleet Truck Equipment in Nashville, Tennessee, says business is 40% to 50% ahead of last year at this time.
“We've been up from where had been,” he said. “We had a reasonably good December. It will drop off again, but that's typical of this time of year. Business is much better than last year.”
John Madigan, president of JC Madigan Truck Equipment in Harvard, Massachusetts, said snow and ice business always keeps the company busy this time of year, but he also has noticed an uptick in demand for smaller trucks from the private sector.
“People probably went as far as they could without cashing what they had. They finally have to go out and buy new stuff,” he said.
Optimism flowing
He's particularly encouraged because his company will be opening a new facility in nearby Lancaster that will feature 78,000 square feet, 22 bays, a paint booth that is double the size of the current one (75 feet, which can be divided into two booths), and twice the storage in the parts department.
“I'm optimistic,” Madigan says. “Even if business just planes out and stays steady, it'll be better than last summer. The new facility will satisfy customers' needs and we will be able to turn product around faster, and hopefully that will be good for business.”
Madigan said lead times “seemed to be pushed out a little bit, but they're not bad. I've got trucks rolling in now that were ordered eight weeks ago. If the economy keeps going, it seems like we're moving in the right direction. A lot of truck manufacturers are starting to get a small backlog, so that might get moved up.”
McGee said PalFleet's lead times are around eight weeks, with Freightliner, Ford, and General Motor all within eight to 10 weeks.
Starks said concerns remain about the shortages of components.
“We do think there will be issues as manufacturers struggle to meet demand,” he says. “The trailer guys are already starting to see that, and I think that will happen on the power-unit side. We're worried that stifle growth. We're already having problems with tires. The probability of that continuing this year is high.”
Overall, though, the picture is so good that many distributors have boosted personnel. PalFleet has increased employment 25% since November. Truck Equipment Inc of Des Moines, Iowa, a company that never did lay off employees, hired some part-timers in October, according to general manager Terry Wieseler. Madigan hired one full-time employee in November and two in December.
Dan Rowland, general sales manager of NBC Truck Equipment in Roseville, Michigan, said he has rehired some mechanics.
“We're also working to adjust to the ups and downs of the influx of orders,” he said. “We've gone to some creative processes in the shop to get the throughput we need with the manpower we have.”