Trailer Registrations Dive

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

Registrations of new trailers plummeted 62.5% in the first quarter as the economy weakened, and industry executives and analysts said trailer manufacturing was headed for its worst year since 1975.

Trailer manufacturers currently are using only about 15% to 25% of their production capacity, industry participants and analysts said.

“We estimate the industry is using only 15% of its capacity,” said Brian Prall, sales and marketing vice president for Stoughton Trailers, Stoughton, Wis. “This is unprecedented.”

“It’s pretty ugly out there now,” said Buck Buchanan, vice president of sales and marketing for Fontaine Trailer Co., Haleyville, Ala. “Like most companies, we’ve gone through a right-sizing over the last year, and the order situation is pretty tough.”

Fontaine makes flatbeds and other platform trailers.

U.S. trailer makers are expected to make around 70,000 units this year, the lowest production level since 1975, said Eric Starks, president of FTR Associates, who briefed members of the Truck

Trailer Manufacturers Association at their annual meeting on May 1.

Data from R.L. Polk & Co. said U.S. businesses registered 14,913 new trailers during the first three months of this year, down more than 62% from 39,777 units — full-size and pups — during the first quarter of 2008. The Southfield, Mich., research firm also said full-year trailer registrations for 2008 were 31.5% below the 2007 level.

The best recent year was 2006, when 261,107 new U.S. trailers were registered, Polk said.

The problems of Wabash National Corp. — which said on May 13 that its first-quarter loss more than quadrupled to $28.2 million — have been most obvious as the Lafayette, Ind., OEM is the industry’s only public company (5-11, p. 4).

“There’s no freight to move out there now, so the underlying demand for replacement trailers is not there. Everyone’s hurting out there,” said Starks, “but the dry-van segment is doing worse now than specialty trailers.”

The most obvious issue for trailer makers caused by the current, lengthy recession is the lack of freight to haul. Most people interviewed cited the decline in truck tonnage as measured by American Trucking Associations (5-4, p. 1).

In addition to the freight recession, Prall mentioned two issues that have exacerbated the problem. Trailers built this decade are usually more durable, so fleets don’t need to replace them as often as in the past, and advances in trailer-tracking technology mean that fleets can reduce their trailer-to-tractor ratios.

“Trailers-to-tractors are down substantially. Not too long ago, you would often see five trailers per tractor, but now it’s moving toward 1.5, where I think it will settle,” Prall said.

Another factor mentioned for depressed sales of new units is the poor market for used equipment. The echo of booming production a decade ago is now glutting the secondary market.

“From 1998 to 2000, there were three very good years for sales, with about 850,000 trailers built in total,” said Chris Hammond, vice president of dealer sales for Great Dane Trailers.

Wabash and Great Dane are the nation’s two largest trailer makers and have had a see-saw battle in recent years for market-share lead.

“Trailer fleets are aging because trailers are lasting longer. Liners aren’t being replaced like they used to. All of these eight-to-10-year-old trailers are trying to get traded now,” Hammond said.

“There’s a very soft secondary market for trailers, and this is hurting the balance sheets of companies,” he said.

Fontaine’s Buchanan agreed.

“I’ve seen examples where used trailer prices are holding back some deals,” he said. “Carriers can’t refresh their trailer fleets because they can’t get the trade values they need.”

The trailer business started to decline in 2007, said Glenn Harney, chief operating officer of Hyundai Translead, San Diego.

“But it got really nasty in the fourth quarter,” he said. The company’s experience with dry and refrigerated vans was similar to other OEMs, but Harney added that even the business of domestic intermodal containers “has ground to a halt.”

All of this means that trailer factories have been quiet places. Stoughton’s Prall gave the bleakest estimate, saying that current orders would put only 15% of plant capacity to work. Starks of FTR said 15% to 20% sounded right to him.

Buchanan declined to offer a figure for the industry but said Fontaine is now producing at a 30% clip. Hammond of Wabash said industrywide production of 20% to 25% was his best guess, while Hyundai’s Harney said 25% was a good estimate.

Trail King Industries, Mitchell, S.D., said May 13 it will shut down its West Fargo, N.D., plant from June to August and its Brookville, Pa., factory from June to September. Remaining production, the company said, will be run out of its Mitchell factory.

Trailmobile Canada Ltd., Mississauga, Ontario, filed for bankruptcy in January. Its U.S. counterpart went bankrupt and closed down in 2002.

The Great Dane and Fontaine executives said their companies are fortunate to have deep-pockets ownership to help them weather the recession. Great Dane is a part of Henry Crown & Co., while Fontaine is a division of Berkshire Hathaway Inc. They said the backing has allowed their respective companies to continue with research and development so they can bring improved products to market.