North America produced 385,829 truck bodies that accounted for $6.57 billion in sales in 2006 and 2007.
But that's not what fascinated Jeremy Brahm and his researchers during the nine months it took them to investigate and produce their report, “The Truck Body Manufacturing Industry in North America,” an analysis and evaluation of the size, segmentation, channels, and competitive structure of the industry underlying the manufacture of truck bodies for specialized/vocational uses.
Brahm, general manager of SpecialtyVehicles.net (SVN), was particularly interested in the difference between standardized (easily replicated) and customized (hard to replicate) products.
Van bodies occupy the top spot in terms of total units (127,880) and sales ($1.3 billion). Meanwhile, concrete mixer trucks, which are seventh in units (8070), are second in sales ($1.01 billion) — a testament to their second-ranked average price of $126,344 per unit. And concrete pumper trucks, which rank last among the 14 truck body types in total units (904), are eighth in sales ($361.6 million) — largely because they are the most expensive unit at $400,000.
“Van bodies, which everybody needs and which are relatively easy to produce, are the fourth-cheapest ($10,211 average price) and there are the most of them,” Brahm says. “Flatbeds are the easiest product to make other than dump or van bodies. It's just a flatbed unit. The profit margins are very low because there's not that much engineering you need to do to them.
“For the bodies that are more complicated, there aren't many units produced but the dollar value is very high because of the complexity. Pumper trucks are pretty complex. With an average price of $400,000, there aren't many on the road. People don't want to buy them unless they need to. So they will rent them from a company that does want to purchase them. But what they find is that if they're spending $400,000, that thing has to be in use constantly. So it has to really take the pounding.
“Same with the street sweeper and refuse trucks. Just for the body, there is a lot of work in there. Side-loading refuse trucks have articulating arms that are not required by other products. Furthermore, refuse trucks have more hydraulics in use for the loading and compaction of trash. This complexity gives the refuse market a high sales value. When you look at a dump truck, you can have a small dump truck or a big dump truck, but the amount of manufacturing needed for a dump truck is exactly the same, no matter what size.”
TECHNOLOGY CHANGES APPROACH
Brahm says that because of the technology required in high-end products, there aren't many manufacturers. And, he says, most of them are national markets, whereas the markets for van, dump, flatbed, and utility bodies are more often regional.
“There are still national players in vans, flatbeds, dumps, and utilities, but regional players can survive because they know their local markets better than possibly the big guys,” he said. “The Morgans and Supremes are targeting large fleets.”
He says one of the trends that surprised him is the low number of manufacturers producing multiple body types.
“McNeilus is a great example,” he said. “You only see them in refuse and concrete mixers. You don't see them getting into simple products like van bodies. And likewise for Morgan and Supreme: They're in van bodies and flatbeds. You don't see them going to concrete pumps. They may do a crane body once in awhile, but you don't see somebody who does a standardized product getting into the high high-end customized market.”
He says the geographic location of production facilities is a key aspect of the report because the manufacturers of the products analyzed here are highly local or region-centric. In the majority of the types of bodies analyzed, manufacturers have no more than about a 1,000-mile radius, beyond which the transportation cost factors adversely into the final delivery price to the customer.
The leading region (87,798 units) is the East North Central, home to Supreme, Utilimaster, Knapheide, and Stahl, who are leaders in the van body and service/utility truck categories. The West North Central region, with McNeilus, Crysteel, Iowa Mold Tooling, and Omaha Standard headquarters, is second with 62,404 units.
“Surprisingly no single region produces every single product type,” Brahm says. “The East North Central region is closest to producing all product types, only missing beverage truck bodies. Mexico only produces refuse trucks for a single manufacturer, and the New England region is usually serviced by manufacturers in the Middle Atlantic market, such as Reading and Morgan.”
The leading sales region is the East North Central with $1.62 billion, which he says is due to Supreme, Utilimaster, Knapheide, Hi-Vac, Vactor, Guzzler, and Stahl, who are leaders in the van body, vacuum tank truck, and service/utility truck categories. Then comes the West North Central region ($1.55 billion), home to McNeilus refuse and concrete mixer trucks and Rugby and Crysteel dump trucks.
The East South Central ($621 million) features Heil's refuse trucks and dump trucks (Heil by TBEI) and one of Miller Industries' tow-truck factories. The Middle Atlantic ($614 million) is a home for standardized products in service/utility and van bodies with Morgan and Reading, keeping the region from having higher dollar sales.
“As gas prices are getting higher, companies that don't have multiple manufacturing facilities are going to get creamed when they're trying to ship product from one part of the country to another,” he says. “Reading, for example, does all manufacturing at one facility in Pennsylvania. Right now, say they're trying to get product to the West Coast. It's going to cost them a lot of money, whereas Knapheide, which is a little more central in Illinois, will be able to beat Reading to some degree on distribution costs.
“Somebody who is located on the West Coast can undercut both of them. It just depends on what the person wants. The sad thing is, that's still going to be out there in the future, so businesses will really watch distribution costs. The leading players do have multiple facilities. But you still have regional players who have that one facility in one location and can still be a success, but they know what their limits are for distribution. The big boys, because they're big, can buy raw materials at a cheaper cost than smaller players. It's one of those Catch-22s.”
ACQUISITIONS INCREASING
He says big players in some markets, such as Oshkosh and Morgan, are “dominant and always seeking opportunities to expand.” In the past few years, Oshkosh has acquired Jerr-Dan (tow trucks), Iowa Mold Tooling (utility trucks), London Machinery (concrete mixers), and others.
“For example, Jerr-Dan was one of the dominant players in wreckers/tow trucks,” he says. “On the other hand, London Machinery was acquired because it was the leading Canadian manufacturer of concrete mixer trucks. Morgan, which was already a leader in van bodies, acquired Commercial Babcock in Canada. This purchase gave Morgan a solid foothold into the Canadian market. Other examples include Godwin Group's purchase of smaller dump truck manufacturers, R&S and Galion, to create the second-leading group in the dump truck market.”
He says that not only are existing large manufacturers on the acquisition trail, but so are private equity players with a significant role in the industry. Ox Bodies and Rugby (dump trucks) were purchased by an investment group, Kirtland Capital Partners, in 2005. The new holding company for these two companies was called Truck Bodies & Equipment International Inc (TBEI). TBEI has since acquired the two leading dump truck manufacturers, Crysteel and Heil, in 2006.
“Within a single year, the company has solidified its market share as a group, as well as becoming the leader in dump trucks,” he says. “Another investment group, Insight Equity, has been acquiring specialized manufacturers in the tank truck and trailer industry. It appears that Insight sees this specialization as a way to build a leading company in a hard-to-enter market. Private equity groups will still be the leading method by which family-owned or regional businesses can exit this market.”
In addition, the van body and beverage industry has experienced what he calls an unexpected entry from an overseas buyer within the last two years: Singapore Technologies' Land Systems Division purchased Kidron and Hackney in August 2005. He says Singapore Technologies' primary business is military vehicles, but the company is looking to diversify into the commercial vehicle market in Asia.
He says SVN will not be surprised if other foreign entities attempt to purchase North American companies in the future, for the purpose of owning and transferring technology to faster-growing, emerging markets.
Other trends mentioned in the report:
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Effects of driver shortage: “There will be a shortage in the number of drivers with a Class A commercial driver license in the future. The shortage will greatly affect the heavy-duty truck body products because anything under 26,000 pounds does not require a Class A commercial driver license. This means that businesses (such as garbage collection agencies, concrete delivery companies, and towing agencies) will need to either train new drivers or provide them with higher salaries because of their specialized skills. Manufacturers of heavy-duty units will need to determine whether it makes economic sense to build smaller units for the medium or light-heavy market to enable more drivers to be available for all product categories.”
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Hybrids: “Gasoline and diesel prices will continue to remain a factor in all product categories for the future. Businesses have been feeling the pinch and are trying to find ways to save money on their gas expenditures. Some product categories are testing hybrid units at this time, such as refuse trucks and van products. Still, it will be a couple of years before these products will be officially released into the marketplace. Businesses will be interested in these products, but may not want to pay a premium for the new engines unless they are replacing old equipment. For the refuse market, the change would be immediate because these trucks are known to be the least fuel-efficient trucks on the road, due to their constant starting and stopping. Some outside vendors will continue to create alternative fuel powered engines, but it will still not make a dent into the diesel or gasoline market for the foreseeable future.”
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Vans: “The growth in cutaway vans will be due to the increasing use of the Sprinter chassis. Insulated/refrigerated van growth will be from the increase in prepared foods for supermarkets. The demand for walk-in vans will more or less remain stagnant for the next couple of years as cutaways in many cases are replacing walk-in bodies.”
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Dumps: “Companies are building new painting facilities that reduce the number of problems with the EPA. These new paint booths are not cheap, but they have improved the quality of the body before it is upfitted to the chassis, to a point where there are almost no defects. This provides a longer-lasting unit for customers, because damaged paint invites further deterioration of the body. Without the paint, the aluminum or steel of the body directly interacts with rocks, sand and gravel, which can damage the metal permanently and eventually force the body out of use. Higher-end steel such as Hardox 450 has been entering the market. As raw material prices have increased for aluminum and steel, higher-end steel products have been an attractive alternative for the regular units. Even though these units are more expensive, they are more durable that the other units. When faced with longevity or price concerns, companies tend to choose price, but the durability has shifted the focus to these longer lasting bodies.”
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Service/utility: “Replacement demand for utility/service trucks has been particularly strong in the recent past, spurred by new emissions regulations and improved quality of equipment that reduces operating costs. Further key underlying growth indicators are investment by the utility, service, and telecommunication industries. Going forward, the latter two industries are expected to continue to be the subject of heavy capital outlays to service growing power demand and telecom needs. Service trucks, on the other hand, are equally important at the small business level service industry typified by trades such as carpenters, plumbers, electricians, and contractors.”
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Flatbeds: “The demand to a large extent depends upon the activities in the construction industry, since the product is predominantly used by them for transportation of construction items. It is also common for these units to be used with agriculture, so any growth in agricultural production will lead to more of these units being sold. Furthermore, with such an inexpensive product, demand needs are easy to meet, because for this product all you need is a pick-up truck chassis and a body to match the chassis specs.”
TOP MANUFACTURERS
Top manufacturers of the top five body types in units:
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Vans (127,880): Morgan is the top player, followed by Supreme and Utilimaster.
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Dumps (85,735): TBEI, which owns Crysteel, Heil, J-Craft, Ox Bodies, and Rugby, holds the top four positions in production. The combined production market share for TBEI accounts for roughly 31% of all dump trucks produced in North America.
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Service/utility (70,975): Knapheide was the leading producer, followed by Stahl and Reading.
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Flatbeds (35,385): Morgan is the top player, followed by Supreme and Knapheide.
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Tank trucks: dry bulk, liquids, and gases (11,215): Walinga Corp, based in Canada, leads, but it manufactures only tank truck bodies for hauling dry bulk commodities such as grain, feed and seed, and does not manufacture products in the other categories in this segment. Ledwell & Son Enterprises, second, manufactures dry bulk tank trucks used for hauling feed, as well as water tank trucks. Amthor, Trans-Tech, and Heil International round out the top five.
BIRTH OF A BIG BABY
When Brahm and SVN's researchers finished their nine months of work and released the report in November, it was almost like giving birth. The delivery wasn't quite as painful, but they're pretty proud of their baby.
“This is something you wouldn't need to buy every year, nor something we could create every year,” he says. “It would be too much work, and commercial markets don't change annually. It's usually a two-, three-, four-year cycle. Somebody could purchase this and easily use it for three, four, or five years just from the general corporate strategy standpoint. If you're a private investor and want a quick snapshot of what categories you might want to look at, this report would be perfect. If you're a supplier and you just happen to supply more than one product category, this report will cover categories you may not even thought about.”
SVN is a boutique consultancy and business publications firm that specializes in providing proprietary business analysis and databases to the medium/heavy vehicular, body, engine, equipment, trailer, and component manufacturing industries worldwide.
The truck body types that are covered in this report are: beverage trucks, concrete mixers, concrete pumpers, crane trucks, curtainside vans, dump trucks, flatbeds, refuse trucks, service/utility trucks, street sweepers, liquid and dry bulk tank trucks, tow trucks and auto carriers, vacuum tank trucks, and vans.
SVN has estimated unit production, production market shares, dollar sales, regional manufacturing breakouts, key demand drivers, developments, and future outlook for all of these products. The information was gathered from both primary and secondary information sources, such as personal interviews, trade shows, industry associations, local newspapers, industry magazines, databases, product literature, etc.
“We went to the Vehicle Inventory and Use Survey (VIUS) from 2002 and looked at truck bodies they selected, and we said, ‘We're not going to do armored trucks because we don't know enough about them,' ” Brahm says. “But most everything else we knew. We thought, ‘If we're going to do it, we should do it in a comprehensive report.' Service, utility, crane, dump, and vans were done on previous reports, but some of them needed to be updated. So we did some categories we had done in the past but just haven't done in awhile.”
To order the report, go to www.SpecialtyVehicles.net and click on the link “The Truck Body Manufacturing Industry in North America.” There is a 30% discount for those who use the coupon code TB30 or mention Trailer/Body Builders magazine. For more information on the SVN report, call 209-576-8021 or e-mail [email protected].