Survey Finds Parts Makers ‘A Little More Optimistic’

This story appears in the April 20 print edition of Transport Topics.

Companies that manufacture heavy-duty truck parts have become “a little more optimistic” about their industry after the first quarter of 2009, despite the fact that 85% are still experiencing sales declines and only 45% of their customers are paying on time, according a survey by the Heavy Duty Manufacturers Association.

The quarterly survey, known as the Heavy Duty Barometer, queries HDMA members, 42 of which responded at the end of March for the report, released in early April.

“The overall outlook has become a little more optimistic,” the Barometer said. “The proportion of those who were optimistic grew by 12% [over the fourth quarter of 2008]. Those who are significantly more pessimistic lost 10% . . . [and] 47% said that the 12-month outlook for their businesses was positive.”

However, the report said that “pessimists accounted for 60% of this quarter’s participants.”

“Personally, I would agree with the Barometer’s conclusion,” said Dennis Michels, chief executive officer of Link Manufacturing Ltd., which produces cab and chassis air suspension systems. “I am more optimistic now that I was 90 days ago, especially from last fall when it seemed we were in free fall,” Michels told Transport Topics.

Michels compared the industry to a hospital patient whose vital signs have now stabilized.

“I don’t think that we’ve hit bottom yet, but the uncertainty and fear factor have subsided quite a lot, though it’s not shown in the order book today,” Michels said.

“The survey reflects what people are feeling about their businesses, because at this time, there are few facts to support optimism,” Jack Shaffer, president of Bergstrom Inc., a supplier of climate systems to the commercial vehicle industry, told TT.“People who fill out these surveys are presidents and chief executive officers and they have the best view of where their companies are going,” he added.

Shaffer said the optimistic companies were mostly involved in innovative technologies, and though they were still experiencing sales declines, “they see the light at the end of the tunnel.”

“I absolutely do as well,” Shaffer said. “But slight optimism is the maximum you’re going to get out of me.”

“I see little glimmers of increases,” Robert Phillips, chief executive officer of Phillips Industries, Santa Fe Springs, Calif., told TT. “Our sales people have the best pulse of current events, and they’re seeing more activity, more orders that haven’t yet showed up on the sales side.”

Phillips develops and manufactures a wide range of products for commercial vehicles for both OEMs and the aftermarket.

Several HDMA board members were not even that confident.

“This has been a long slowdown for the trucking sector that began in 2007, and I haven’t seen any firm measurable indicators of a market improvement,” Gary Smalley, chief executive officer of Dayton Parts, Harrisburg, Pa., told TT. Dayton builds leaf springs and other undercarriage parts for light, medium- and heavy-duty trucks, mainly for the aftermarket.

“Truck builds are estimated to be in the low one hundreds this year, and I’ve seen trailer build estimates as low as 85,000 . . . and truck tonnage is way off,” Smalley said. “I can’t find much reason to believe we’re starting to head up.”

Joe McAleese, chief executive officer of Bendix Commercial Vehicle Systems, agreed. “We’re looking at the fourth quarter before a turnaround starts, and well into next year until we see a recovery in revenues,” McAleese told TT.

Bendix, Elyria, Ohio, is a supplier of air brake systems and components to original equipment manufacturers as well as to the aftermarket.

A majority — 74% of those surveyed — said they would reject “access to emergency government guaranteed financing,” even though 42% said they would be directly affected by a bankruptcy by one or more of the big three automakers.

The Treasury Department, working with General Motors and Chrysler, has set up a program worth at least $3.5 billion that will guarantee the receivables for the companies’ suppliers or give parts makers the opportunity to obtain immediate payment for a 3% fee.

“No one wants to have strings attached to their businesses,” said Pedro Ferro, president of CV Undercarriage and an HDMA board member, as were all the executives who talked to TT for this story.

“Everyone feels it wouldn’t be a commercial-type relationship if you took government money. There is a general aversion to losing control,” Ferro said.

Ferro oversees five companies that produce brakes, axles and suspensions for commercial vehicles, 60% to the after market and 40% to OEMs. It is part of Marmon Highway Technologies, a subsidiary of Berkshire Hathaway Inc.