Daimler, Volvo Truck Units’ 2Q Profits Up, Led by Growth in North American Market

This story appears in the July 28 print edition of Transport Topics.

The truck divisions of Daimler AG and Volvo AB reported stronger financial results for the second quarter, driven in large part by growth in the North American market.

Daimler, headquartered in Stuttgart, Germany, said its global truck division’s operating income rose 5% to 455 million euros ($612 million) from 434 million euros ($584 million) a year earlier.

Daimler Trucks, which sells Freightliner and Western Star vehicles in North America, said second-quarter sales in the region rose 18% to 41,142 units — part of a 2% gain in worldwide sales to 126,066 trucks. In the United States alone, unit sales climbed 19% to 35,803.

“For now, North America is the biggest driver of growth,” CEO Dieter Zetsche said on the company’s July 23 earnings call.

Wolfgang Bernhard, head of Daimler’s global truck and bus unit, also cited “better than expected market development and business development” in North America despite “a number of headwinds” in other regions.

Volvo AB, based in Gothenburg, Sweden, said worldwide operating income at its truck segment climbed 17% to 2.17 billion Swedish kronor ($318 million) from 1.85 billion kronor ($271 million) a year earlier, excluding restructuring charges.

Volvo, which owns Volvo Trucks and Mack Trucks, said North American quarterly deliveries rose 13% from a year ago to 14,983 vehicles — contributing to a 2% gain in the company’s worldwide deliveries to 53,223.

CEO Olof Persson said on the company’s July 18 earnings call that mature markets experienced growth during the quarter while emerging markets declined. “We see that the [North American] freight environment is good and improving and, for the first time in a long time, we now start to see that it’s not only replacement, it’s actually moving into expansions by our customers,” he said.

Paccar, the parent company of Kenworth Truck Co. and Peterbilt Motors Co., is due to report second-quarter earnings July 29.

In June, Lisle, Illinois-based Navistar International Corp. reported on its fiscal second quarter, ended April 30. The truck and engine maker lost $297 million, or $3.65 per share, during that period but cited improvement in its market share and order intake.

Navistar is scheduled to report during September on the three- and nine-month periods ending July 31.

Daimler Trucks said its worldwide revenue was virtually flat at 7.97 billion euros ($10.7 billion) in the second quarter.

Daimler said its North American market share for Classes 6-8 trucks slipped to 36% from 38.3% a year earlier, but added that it was “able to clearly defend [its] market leadership once again.”

Daimler finance chief Bodo Uebber said the decline in share was due primarily to not being able to raise capacity fast enough to keep up with the market.

“In the first and the second quarter of this year, we built up additional capacity by adding shifts in our U.S. plants,” he said. “With those additional capacities, we will be able to reduce the backlog over the next couple of quarters. With that, we expect our market share to grow in [North America].”

In its outlook for the rest of the year, Daimler Trucks said its North American sales “should develop positively, in view of the expected market growth, and should be significantly higher than in the year 2013.”

Zetsche said Daimler expects the North American truck market to grow by about 10% in 2014.

“We are well-positioned with products such as the Freightliner Cascadia Evolution to turn growing demand for efficient trucks into growing sales for us,” he said.

Volvo said revenue for its North American truck business rose 15% to 13.3 billion kronor ($1.95 billion), part of a worldwide increase of 4% to 48.2 billion kronor ($7.06 billion).

Volvo said the total North American heavy-duty truck market grew to 122,989 vehicles in the first half of 2014, up 10% from a year earlier.

“Customer confidence in the U.S. economy continued to grow, as did freight demand and construction activity,” the company said.

Volvo maintained its full-year forecast of 260,000 new truck registrations in North America.

Daimler said incoming orders for its trucks in North America surged 26% in the quarter to 39,899, including a 30% jump to 34,993 in the United States.

Meanwhile, Volvo said North American order intake for Volvo brand trucks jumped 21% to 8,267 in the quarter, while Mack orders rose 9% to 4,626.

Persson said order intake during the fourth and first quarters was “quite high,” leading the company to increase production rates at Mack’s vehicle assembly facility in Macungie, Pennsylvania, and Volvo’s New River Valley truck assembly plant in Dublin, Virginia.