US heavy truck sales are set to grow more slowly than expected due to economic uncertainty and bottlenecks at parts suppliers.
Indiana-based ACT Research, an industry consultancy, has cut its estimate of North American production of big Class 8 rigs to about 300,000 units in 2012, up from 251,000 this year, but below its previous forecast of 330,000. ACT expects that the US will account for almost all the reduction.
Chris Kemmer, publisher of the Fleet Sentiment Report, told investors last week that she expects 2012 Class 8 sales as low as 250,000 units. The industry is starting to see “a little bit of pullback”, she said. The extent will depend on freight demand over the next few months.
Truck freight activity is normally considered one of the most reliable indicators of overall economic activity, because of the quantity and variety of goods transported by truck.
Kenny Vieth, an ACT partner, said that the upheavals of the past few weeks in financial markets would undoubtedly damage industry sentiment. “The question is, does it go on for one, three, six or 12 months?” he added.
Kristine Kubacki, analyst at Avondale Partners, said that credit availability would play a big role in future truck orders. “Only big fleets can use their balance sheets right now.”
The 2008-09 crisis among Detroit carmakers, which share suppliers with the truck industry, forced some critical suppliers to scale back operations. They have subsequently struggled to meet the surge in demand since production bottomed at just 118,400 units in 2009.
Paccar, the Seattle-based maker of Kenworth and Peterbilt trucks, singled out tyres and chassis components among those in short supply. It declined to identify suppliers, but said that the problems involved “not just one or two”.
Paccar recently lowered its estimate of 2011 sales, but said it was too early to assess demand next year: “We’re not going to know till we see how September pans out.” Pascar said that operations in Europe, centred on its DAF brand, had not been affected by supply constraints.
Hopes for robust orders had been buoyed by an abnormally old fleet, resulting from slow replacement of vehicles during the recession. Used truck prices are unusually high, reflecting growing replacement demand.
Fleet operators have posted better second-quarter earnings. The American Trucking Association’s truck-tonnage index, which measures truck freight volumes, was 6.8 per cent higher in June than a year earlier.
Even so, many truckers remain in fragile financial condition. Judy McReynolds, chief executive of Arkansas Best, which swung to a $5.3m second-quarter profit from a year-earlier loss and boosted revenues by 21 per cent, cautioned that “the progress made so far does not produce sufficient returns for our shareholders nor does it allow us to adequately recapitalise our business”.
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