Will trailer OEMs hit a homer in 2013?

A homerun hitter's dream — fastball, over the heart of the plate, timed perfectly.

It's great when conditions all fall into place. And that seems to be what's been happening in the commercial trailer market.

Truck trailer manufacturers posted their best year since 2006, according to Trailer/Body Builders' annual survey of North America's largest trailer manufacturers. (See our report on Page 16). Even so, there appears to be room for the industry to continue to grow.

In our estimation, 2012 was a very good but not spectacular year. If you want spectacular, look back at 1999. Somehow, manufacturers managed to shove more than 300,000 trailers out the door that year — a feat that the industry has not come close to matching before or since.

It appears that things came together nicely in 2012. It was one of those years when demand was strong, yet not so intense that accepting one more order meant jeopardizing delivery dates or overloading production personnel. Companies had room to maneuver. Some manufacturers took advantage of the market in 2012 by upgrading facilities, confident that they could spare the time that these projects require and the cap ex needed to pay for them.

As 2013 begins, trailer manufacturers find themselves in a curious position — needing to fill ample orders for trailers at a time when the overall economy is still pretty shaky.

Historically, trailer shipments tend to correlate fairly closely with the overall strength of the economy. Yet here we are amid lingering high unemployment rates, unsustainable federal deficits, and anemic economic growth. And people are buying trailers.

Trailer manufacturers could out-perform the economy again this year. Here's why:

Since the economy (along with the trailer market) bottomed out in 2009, trailer production has bounced back sharply. According to Trailer/Body Builders' annual survey, manufacturers produced three times the number of trailers in 2012 than they did in 2009. But keep the corks in the champagne bottle. We are comparing last year with 2009, the weakest year of trailer production since 1975.

If we lay out every Trailer/Body Builders survey report since 2000 side by side, we notice two periods during which trailer production declined for three consecutive years. Those two downturns are separated by four consecutive years of growth — 2003-2006.

We have since begun another period of increased demand that is now three years old. Does that mean we have one more year of increased demand for trailers? Not at all, but consider this:

  • In the first three-year downturn (2000-2002), the industry produced an average of just over 180,000 trailers per year. The second three-year downturn (2007-2009) was 30,000 trailers per year worse than the last time business was lousy.

  • By contrast, the industry produced an average of just over 233,000 trailers each year from 2003 through 2006. Trailer manufacturers have been trying to catch up for three straight years now. Even so, our best year so far in this recovery — 2012 — just barely exceeds an average year during the four-year expansion that ended in 2006.

Another way of looking at it: Between 2003 and 2006, manufacturing plants produced an average just over 233,000 trailers per year. That average dropped by almost 83,000 trailers per year during the past downturn. The difference amounts to a loss of almost 249,000 trailers over the course of three years. That's more than the industry built for all of 2012.

No wonder the average age of a trailer rolling down the highway is so high. And no wonder customers are ordering trailers. Beyond the pent-up demand, other factors are also falling into place. In response to the acute shortage of drivers, some fleets are hoping that new equipment will help attract applicants. Plus, federal regulations on fleet are also helping to drive demand (see March 2011 TBB or visit www.trailer-bodybuilders.com and search for CSA 2010 for details.) Of course, there are no guarantees that 2013 will be a banner year. Chaos in the Middle East could throw us a curve by driving up diesel prices. The economy might toss us a change-up. And the government is known for throwing nasty sliders. But if all the other stuff stays out of the way and we can just play ball, we may hit one deep in 2013.

(To crunch your own numbers and reach your own conclusions about what's in store for trailer manufacturing, check out archives of our annual Trailer Output reports. Simply click the “Trailer Production Figures” link on our home page).

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