North American truck orders plummeted by almost two-thirds in December on the year, with weakening US business reinforced by slowing exports and the abrupt reversal of Canada’s oil sands boom.
The unexpectedly severe fall has further darkened prospects not only for truckmakers and their suppliers, but also the wider US economy. Trucking is widely viewed as a key leading indicator of broader economic activity.
“The industry is going to be forced to slash build rates or to take significant downtime in the first quarter”, says Kenny Vieth, analyst at Indiana-based ACT Re-search. “Customer demand is not there.”
Analysts at UBS predicted in a report on Wednesday that Volvo, the world’s second-biggest truckmaker, would cut its dividend in response to disappointing orders, margin pressure and a worsening outlook.
However, Tim Kraus, director of the US Heavy Duty Manufacturers Association, which represents parts makers, said that his members were better equipped to weather the downturn than their counterparts in the car industry.
According to Mr Kraus, the truck sector has grown accustomed to “spike-and-cliff” conditions, and can adjust to some extent by shedding temporary workers, cutting overtime and reducing shifts. Truck parts makers are also shielded by a big market in replacement components.
ACT estimates heavy Class 8 orders at 9,000 units in December, down 59 per cent for a year earlier and more than a fifth lower than November. Orders for medium-duty Class 5-7 vehicles were 65 per cent lower.
The 2009 forecast for Class 8 retail sales, including exports, has been scaled back to 170,000 units, down from 205,000 in 2008 and 238,000 the previous year.
Mr Vieth said that hopes had largely evaporated that truck operators would order briskly this year in advance of stricter emissions regulations due to take effect in 2010.
Instead, high manufacturing inventories, disappointing retail sales and a slide in imports are all set to depress freight volumes, dampening truck demand. Furthermore, a slump in used truck prices has discouraged trade-ins.
Exports of new and used trucks had been an important prop for North American truckmakers over the past two years.
On the brighter side, Mr Vieth said that many vehicles bought during the industry’s last boom in 2006 are likely to be replaced this year.
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