Boost in Truck Prices Will Not Change Purchasing Plans, Fleet Executives Say

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Truckload fleet executives said not even the certainty of truck prices rising up to 10% next year will cause them to alter their current purchasing plans.

Daimler Trucks and Navistar Inc. recently joined Volvo Group in specifying price increases for 2010 diesel engines with new federally mandated pollution controls. Price increases range from $8,000 to $9,600 per new tractor, with Paccar Inc. still to be heard from, but low freight volumes are dominating carrier planning.

“We’re still unsure of our 2010 buying plans. The bigger factor is the economic climate,” said Robert Ragan, chief financial officer of Tulsa, Okla., flatbed carrier Melton Truck Lines.

“If it gets to the point where we’re comfortable with business levels next year, we’ll buy 2010 tractors at 2010 prices. But this is not like the 2007 change when companies pre-bought a lot of trucks. It would be difficult to do that now,” Ragan said.

Steve Duley of Schneider National Inc. said the price increases are at “the high end of what we thought they would be, but it doesn’t change much . . . That’s three really good price hikes since 2002, but when the freight market is this bad, it does not allow for a pre-buy.”

“We’ll buy a small number of the early units, and if they do well, we’ll buy more later in the year,” said Duley, who is vice president of purchasing for the nation’s largest truckload carrier.

Con-way Truckload will not alter its tractor buying plans, said Bruce Stockton, vice president of maintenance and asset management.

“We learned from what happened in 2002 and ’07. It was $3,500 to $5,000 in October 2002 and $7,000 to $8,000 in January 2007, so this doesn’t surprise us, but we won’t pre-buy a bunch of trucks,” Stockton said.

Volvo Trucks North America moved first, saying in March its 2010 trucks will include a $9,600-a-truck surcharge. That increase would cover both its in-house D11, D13 and D16 engines, as well as the Cummins ISX option. Sister company Mack Trucks said the $9,600 applies to most of its models but $10,800 for its TerraPros.

On July 28, Navistar said the MaxxForce 11- and 13-liter engines in its International brand tractors would have an $8,000 bump, which the company described as “a nondiscountable surcharge applied to each vehicle’s base price.”

Daimler said Aug. 6 its Detroit Diesel Corp. DD13, DD15 and DD16 engines would carry a $9,000 surcharge.

Paccar, the parent of Kenworth Trucks and Peterbilt Motors, said that while it has not yet issued guidance on 2010 pricing, it will do so in the future.

Schneider’s Duley said a new tractor costs “in the neighborhood” of $100,000, meaning the surcharges amount to an 8% to 10% increase.

Diesel engines made after this year and sold in the United States must meet tighter standards for nitrogen oxide emissions. Similar mandates for NOx and particulate matter emissions also were imposed in October 2002 and January 2007. Those changes led many fleets to accelerate their tractor purchases ahead of the change dates and were referred to as pre-buys.

Navistar is using a third generation of EGR, exhaust gas recirculation, to meet the 2010 requirement, while other manufacturers are using a combination of scaled-back EGR and selective catalytic reduction, or SCR, as of January.

The recession, the poor freight environment accompanying it and the deterioration in credit and lending apparently have eliminated a once-anticipated 2009-10 pre-buy, though. Melton’s Ragan, who also is chairman of the National Accounting & Finance Council of American Trucking Associations, said tractor purchases were rarely discussed by trucking CFOs at NAFC’s June meeting in Nevada.

“It was not nearly as prevalent as three or four years ago. We talked about the economy and credit markets,” Ragan said of the June conference.

“Many of our members have shrunk their fleets. In 2006, you could do a pre-buy. Things are not occurring now as they previously did,” Ragan said.