Daimler’s Daum Projects Sales Pickup

This story appears in the March. 18 print edition of Transport Topics.

NASHVILLE, Tenn. — The CEO of Daimler Trucks North America said he expects North American truck sales to ramp up by the end of 2013, after a slow start to the year.

Also during the March 11 Heavy Duty Dialogue event here, an economist and trucking industry suppliers said higher fuel costs are leading manufacturers to assemble goods nearer U.S. shores, which should lead to a boom in domestic trucking.

DTNA’s Martin Daum said the industry is producing trucks at a pace well below his original projection of 348,000 sales of Classes 6-8 trucks this year.

“If you would ask me today, I see us back on a 344,000 level, and I’m cautiously optimistic that it might be more,” he said at the event, which was sponsored by the Heavy Duty Manufacturers Association and Transport Topics.

That figure would put 2013 on par with last year’s total.

Taking a broader look at the market, Daum projected that Classes 6-8 sales would average 375,000 between 2010 and 2019, compared with 362,500 in 2000 to 2009.

“The good news is, if this really is true — if 375,000 is the average — that means by now we have about 300,000 deferred trucks,” Daum said.

That would indicate that “good years are ahead,” he said. “The only question is when.”

Ultimately, though, the truck market is subject to significant swings in demand, and manufacturers must be flexible to match shifting trends, Daum said during a panel discussion led by TT Editorial Director Howard Abramson.

“We don’t know which direction it is going, and that is one of the essences of our business,” Daum said. “If you need a stable environment, it’s the wrong industry for you.”

Eric Starks, president of research firm FTR Associates, said new truck orders are near replacement levels but “still not to the point where they’re hitting on all cylinders.”

Starks said he’s become “a little more optimistic that we have finally hit the bottom.”

“We’ll trudge along at this level for a while, and then things will start to move up,” he said.

On the trailer side, Dick Giromini, CEO of Wabash National Corp., said demand is bound to rise, with the age of existing equipment at a record 8.5 years.

“That in itself should be enough incentive to drive strong demand, but it’s not just the extended age, it’s the disproportionate age profile that’s the most important driver of demand in this cycle,” he said.

Buyers purchased about 863,000 trailers from 1998 to 2000, and those trailers would have been targeted for replacement during the 2008 to 2010 period in a typical replacement pattern, Giromini said.

However, “the worst downturn our industry has experienced in decades” resulted in only about 350,000 trailers being shipped — a shortfall of 500,000 units, he said.

“Those remaining, aging units are now into their teenage years and getting older each day,” which will force fleets to replace them to improve uptime, utilization and keep maintenance costs down, Giromini said.

Also during the one-day conference, economist Jeffrey Rosensweig discussed the near-sourcing trend, saying that U.S. manufacturers who had moved production to China are now increasingly looking at relocating factories closer to end markets.

“Suddenly, it’s a lot more attractive to bring [products] in from Mexico, rather than from China,” Rosensweig said.

That change is contributing to a realignment of international trade and supply lines to a north-south orientation rather than east-west across the Pacific, he said.

“We’re moving toward a world of not just off-shoring to China but bringing some [production] back to North America,” said Rosensweig, who is director of the global perspectives program at Emory University’s Goizueta Business School.

Chip McClure, chairman of truck component maker Meritor Inc., said near-shoring makes sense.

“With the cost of fuel, with the cost of inventory . . . I think there’s no question that to build here in North America has become more cost competitive,” said McClure.

To achieve a balance between performance and costs, manufacturers not only have to invest in technology but also to rethink the entire business process.

“This is a cyclical and complex industry that rarely allows the luxury of business as usual. We have to keep asking the questions. How can we manage that better? How can make this more efficient? How can we improve this technology?”

Gary Gerstenslager, CEO of Hendrickson International Corp., maker of suspensions and axles, addressed the challenges that come with manufacturing for different global markets.

Suspensions for overseas markets must be built for the different equipment and widely varying road conditions in those regions, he said.

Daimler’s Daum said whether or not manufacturers choose to build their products in North America or outsource production overseas will have a strong influence on future truck production.

He said manufacturing, more than anything else, boosts trucking because the process can require parts or products to change hands several times before a final product reaches the customer.