U.S. heavy truck orders post worst September in 7 years

[kscarbel2]

Why it’s harder to keep on trucking — maybe even for Paccar

The Seattle Times  /  October 7, 2016

A stunning fall in big-rig orders puts the spotlight on Bellevue's Paccar. But it has many ways to avoid today's slowdown. What about tomorrow?

This week’s bombshell: Heavy truck orders slid 27 percent to 13,791 in September compared with a year earlier, according to FTR Transportation Intelligence. It’s the worst showing since the recession-ending year of 2009.

The worldwide trade slump is a big immediate problem, and in addition to affecting container lines such as Hanjin Shipping, which sought bankruptcy protection in August, it’s hitting railroads and trucking. With Paccar headquartered in Bellevue, attention must be paid.

The trucking industry is also a victim of misplaced bets and overcapacity. In 2014, nearly 300,000 of the heavy rigs (or Class 8 trucks) were built. Despite initial optimism for even better performance in 2015, orders ended at 284,000 as the shipping slump took hold. Cheaper fuel has been offset by the deep slowdown in the Oil Patch and its effect on demand for freight hauling.

According to financial blogger Wolf Richter, “This year has turned out to be outright ugly. So far, manufacturers have received only 130,305 orders … a 39 percent collapse from the same period in 2015.”

As I write, the news has had little effect on Paccar shares, which are down only slightly around $59.74. And no wonder: Paccar is very well run — 77 years of consecutive net profits and dividends every year since 1941. It sells exceptional products (Kenworth and Peterbilt among them), especially prized by owner-operators, as well as having a global footprint.

Last year, with 1.6 million units built worldwide, Paccar was the No. 4 large-truck manufacturer behind Daimler, Volvo and Volkswagen. According to Bloomberg, it had the second-largest market share in North America, behind Daimler.

The harshest analysis I’ve come across on Paccar is an article on Seeking Alpha. It likens the company to a red giant star likely to burn out because of self-driving trucks. Maybe. But autonomous trucks will take years to incorporate into an atomized transportation system. Earlier this year, Steve Gordon, who recently retired as chief operating officer of Pacific-based Gordon Trucking, said the next step is likely manned automated trucking, with humans to mind the rig. In any event, the disruption will affect every truck-maker and Paccar is famously innovative.

Is September’s number an early warning of recession? One retired executive told me, yes. It’s true that adding enough sectoral slowdowns can eventually bring down an elderly expansion (although historically the Federal Reserve is more likely to do so). But trucking has enough sector-specific headwinds that this may be a manageable slowdown. Also, September is always one of the slowest months for big-truck orders.

[kscarbel2]

Things are getting ugly in the US trucking industry

Business Insider  /  October 6, 2016

Orders for Class 8 trucks – the rigs crisscrossing the US highway system that keep the nation supplied – plunged 27% in September to 13,791, according to FTR Transportation Intelligence. It was the worst September since 2009.

The year 2014 had been great. Nearly 300,000 Class 8 trucks were built. 2015 started out even stronger, and the industry anticipated – in what has become a series of false hopes inspired by QE-nurtured optimism about capital expenditures – that 327,000 heavy trucks would be ordered, which would have been a record.

But then the trucking industry began to sputter as the goods producing economy was swooning, and soon trucking companies, beset by overcapacity, began to curtail their purchases from heavy-truck dealers, and dealers with inventories piling up, began to cut orders to manufacturers. As 2015 wore on, orders continued to fall. Despite the strong beginning, orders ended the year down 5.3% from 2014, to 284,000 trucks.

This year has turned out to be outright ugly. So far, manufacturers have received only 130,305 orders, according to FTR, a 39% collapse from the same period in 2015. This chart shows orders for Class 8 trucks in 2015 and 2016 through September:

“Fleets are cautious due to an uncertain economy and slow freight growth,”explained Don Ake, vice president of commercial vehicles at FTR. “Class 8 inventories also remain high and this also restrains new orders.”

But as in 2014 and in 2015, hopes rule the day.

“Large fleets are expected to begin ordering replacement units for 2017,” Ake said. “If the economy does improve and the trucking outlook brightens, then medium-sized fleets and others should feel confident enough to order also in coming months.”

Struggling with plunging orders and under pressure to cut costs, truck manufacturers have been laying off people all year. Volvo Trucks North America has gone through two rounds of layoffs this year, 500 folks in February and another 300 in July.

“[W]e operate in a cyclical market, and we have to adapt to market demand,” Volvo/Mack spokesman John Mies wrote in an email in July to The Roanoke Times, Roanoke, VA, not far from Pulaski County, where the Volvo plant is located. Layoffs always hit surrounding communities the hardest.

Freightliner, a unit of Daimler Trucks North America, announced nearly 1,000 layoffs in January and another 1,250 layoffs in February, blaming “a sustained reduction in orders.” Then in June, it added another round of layoffs, this time 800 workers.

Navistar cut 10% of its workforce, or 1,400 people, in late 2015. Paccar, which produces Kenworth and Peterbilt trucks, also announced layoffs at some of its plants, along with suppliers of truck manufacturers, including diesel engine maker Cummins.

Heavy trucks play a crucial role in the US economy. In 2015, they transported 64.3% by value of total freight, with the other modes being rail, pipeline, air, and vessel. The trucking business, even more so than railroads, is an important thermometer for the goods producing economy. And that’s where part of the problem lies.

“Overall shipment volumes (and pricing) are persistently weak, with increased levels of volatility as all levels of the supply chain (manufacturing, wholesale, retail) continue to try and work down inventory levels,” explained Donald Broughton, Chief Market Strategist at Avondale Partners.

[kscarbel2]

U.S. heavy truck orders post worst September in seven years: FTR

Reuters  /  October 4, 2016

U.S. heavy-duty truck orders fell 27 percent last month versus the same period a year ago, marking the worst September since 2009 amid ongoing uncertainty over the economy among truck firms, according to preliminary data from industry forecaster FTR.

"Fleets are cautious due to an uncertain economy and slow freight growth," Don Ake, vice president of commercial vehicles at FTR, said in a statement. "Class 8 (truck) inventories also remain high and this also restrains new orders."

FTR said orders for large trucks hit 13,800 units in September, a number not reached for that month since the height of the Great Recession.

Class 8 trucks are the workhorse of America's economy, hauling around 70 percent of the country's freight.

Sales have been weak this year amid lackluster retail sales and industrial output. Industry officials and analysts predict sales will start to rebound in 2017 as long as the U.S. economy grows at a more stable rate.

"Large fleets are expected to begin ordering replacement units for 2017," Ake said. "If the economy does improve and the trucking outlook brightens, then medium-sized fleets and others should feel confident enough to order also in coming months."

[kscarbel2]

Heavy truck sales slip in U.S., Canada

Wards Auto  /  October 13. 2016

Heavy-duty truck sales in the U.S. fell 13.7% in September, and four of the five medium- and heavy-duty weight classes in Canada recorded double-digit losses for the month.

In the U.S., deliveries of medium- and heavy-duty trucks hit 32,357 in September compared to 37,514 the previous year.

Losses in Classes 4 and 8 outweighed the gains in the rest of the segments.

Class 8 continued to be the primary downfall, dropping 28.6% on 14,968 units vs. 20,978 year-ago.

Daimler’s Freightliner and Western Star were off 36.1% and 11.2%, respectively.

Kenworth (-17.7%) and Peterbilt (-23.5%) brought PACCAR down 20.3%.

Through nine months, Class 8 was 21.2% below like-2015 on volume of 149,473 units.

Overall medium-duty sales fell 5.2% on 17,389 units delivered in September. Year-to-date, the group fell 7.7% versus the first nine months of 2015.

In Canada, Class 8 sales totaled 2,124 vehicles, 26.9% less than prior-year, as all brands saw declines. Freightliner (-36.4%) and Western Star (-17.9%) brought their parent company, Daimler, down 32.5%. PACCAR’s Kenworth and Peterbilt undersold like-2015 by 20.3% and 32.6%, respectively. Mack and Volvo, combined, fell 31.2%.

[grayhair]

On 10/9/2016 at 0:25 AM, kscarbel2 said:

U.S. heavy-duty truck orders fell 27 percent last month versus the same period a year ago, marking the worst September since 2009 amid ongoing uncertainty over the economy among truck firms, according to preliminary data from industry forecaster FTR.

"Fleets are cautious due to an uncertain economy and slow freight growth," Don Ake, vice president of commercial vehicles at FTR, said in a statement. "Class 8 (truck) inventories also remain high and this also restrains new orders."

See Family Formation chart below.  Family formation down about the same 27% as 2016 Class 8 sales decline.  Certainly not a direct correlation, but another sign that the times are a changin' in the U.S.  10,000 people a day retiring and many of them transitioning to fixed income and aren't buying "stuff."  The majority of jobs being created are part time low paying service industry jobs.  People just getting by aren't buying stuff either.

    

Edited October 14, 2016 by grayhair

[TeamsterGrrrl]

Warren Buffet has cited family formation as a driver of the economy too, and it's been dropping for years as young folks marry later and have smaller families. This is a worldwide trend, with key predictors like birth rate dropping on almost every continent. This is essentially "the end of growth", or at least pure population increase driven growth. The markets will take a while to sort this out, as commodity markets ranging from grains to metals adapt to steady and even reduced demand for their products. But in the end it'll be good for economies, as smaller families will have to spend less on necessities and thus have more disposable income to spend on more profitable homes, vehicles, electronics, etc.. 

[BillyT]

Anyone who remembers Overdrive magazines slogan " always changing never changing"  can apply it to trends in the economy. As usual only the big companies are in a position to survive lower demand( freight and otherwise) and will survive when their smaller competitors fail! As I always say "do niche freight that the big guys can't handle due to its requirements for skilled operators and low volume! As usual I have an anecdote! The company I was leased to around 1990 had an account to haul sheet foam insulation for Owens  Corning in Connecticut.very fragile load as those of you who have hauled it know,also often tight delivery schedules with (at the time 150dollar an hour crane appts.)  Well it paid us 1.40 cpm a good rate then. Well at the time JB Hunt had a flatbed division and they cut the rate to .88cpm! Jbh had a log policy "out of hrs,park the truck" We had a log policy "turn in a legal log" You otr guys chuckling yet!? Well Owens Corning couldn't turn down .88cpm! The JB newbies started dropping loads with crane apps.in the yard the 1st week! (Out of hrs)😁 The contractors with five union roofers and a 150$ Hr crane sitting weren't happy!😣 Add all the corner damage from careless tie downs,and 30 days later we were once again hauling undamaged foam on time!😁 Cheap ain't always cheap!lol

[kscarbel2]

Medium-Duty Orders Rise 19% in September

Heavy Duty Trucking  /  October 18, 2016

Customers ordered 20,400 medium-duty vehicles in Classes 5 to 7 in September, which represents a 19% increase from August.

Medium-duty ordering strength continues in contrast with a softening Class 8 market, which booked 13,900 units during the same period.

Analyst say that because of its limited exposure to the freight economy, the Classes 5-7 market continues to distinguish itself from the Class 8 market.

Rising 2% year-to-date, medium duty net orders are exemplifying the solid, sustainable growth that has been typical of the consumer during this economic cycle.

.