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North American Class 8 orders in September cleared 12,000 units, ACT Research reported, citing preliminary data, but the volume remained just a faint shadow of what occurred a year earlier.
At the same time, Daimler Trucks North America became the latest original equipment manufacturer to announce production cuts at its truck plants. Two key suppliers also took steps, separately, to reduce costs amid slipping demand.
The Class 8 market is moving from 2019 peak activity in sales and build into a significant correction next year. #Transportation #HeavyDuty #Economics— ACT Research (@actresearch) October 4, 2019
Read more coverage of ACT Research's recently released Transportation Digest from @monitordaily. https://t.co/cFWFeBPNyj pic.twitter.com/MpXdlxkZJx
Preliminary September orders were 12,600, well below replacement levels of about 19,000 to 20,000 per month, according to ACT, which will revise the figure when truck makers release their final numbers later in October. Orders fell 71% compared with a year earlier when Class 8 orders hit 42,781.
“What we continue to focus on in the commercial vehicle space is freight. And the story has not changed,” ACT Vice President Steve Tam told Transport Topics. “We are still seeing freight slowing, and we are really, as an industry, still in a position where we are continuing to add capacity. And so we exacerbate the imbalance and hasten the downturn.”
Analyst Jamie Cook with Credit Suisse wrote in a note the latest orders reached the high end of expectations that had been in the 11,000 to 13,000 range.
Orders, though, may not improve much until 2020, she added.
“The freight market and rates continue to affect order dynamics, as do persistent trade and tariff uncertainties,” she wrote, noting utilization is slipping amid overcapacity at the fleets.
The macroeconomic news is “awash with conundrums,” Tam said.
U.S. hiring missed projections in September and wage gains cooled, offering a warning that the record expansion is poised to slow further even as the jobless rate fell to a half-century low, Bloomberg News reported.
FTR pegged orders at 12,100.
“It feels like things are slowing more than what FTR expected,” Don Ake, ATR’s vice president of commercial vehicles, told TT. “I sense, not just in our industry but overall, that companies are being extremely cautious. So they are not investing their money.”
Tam said private fleets seem to be doing better than for-hire fleets.
Vocational and construction truck orders continue to arrive.
“[They] will hold up considerably better than the freight market, regardless of whether it is the private or the for-hire side,” he said.
One carrier executive pointed to the strength of its dedicated carriage operations, a segment that straddles the private and for-hire sectors.
“In 2019, dedicated has placed into service a net increase of 75 tractors,” said Frank Granieri, chief operating officer for supply chain solutions at A. Duie Pyle.
“Our current order forecast for 2020 is to increase this amount by 38%. This is subject to change based upon our sales performance,” he said. “We maintain a premier quality and service product and, as such, upon securing new business, we order new equipment to the specification required for the customer’s unique operation.
“Our growth has been extraordinary in the previous few years and, as a result, the average age of our dedicated fleet is 2.2 years.”
A. Duie Pyle Inc. ranks No. 75 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
The ordered trucks come with collision mitigation, lane-departure warning and automatic braking systems — plus the latest aerodynamic and drivetrain specifications to achieve maximum fuel economy, Granieri said.
Assembly line workers at the Mount Holly, N.C., manufacturing plant. (Freightliner Trucks via YouTube)
Meanwhile, Daimler Trucks North America announced, effective Oct. 14, it will adjust its current build rate down, and release about 450 production workers at its truck plant in Cleveland, N.C., and about 450 workers at the Mount Holly plant.
The move follows the slowing in what DTNA’s statement referred to as “a red-hot North American truck market of record sales and production volumes over the past 12 months.”
In September, Navistar Inc., Volvo Trucks North America and Mack Trucks announced they were taking steps to manage production amid reduced demand. VTNA and Mack are brands of Volvo Group.
Two major commercial vehicle suppliers also recently announced restructurings related to softening demand.
Meritor Inc. announced it would reduce salaried and hourly headcount globally to cut labor costs in response to an anticipated decline in most global truck and trailer market volumes. Meritor supplies drivetrain, mobility, braking and aftermarket products for commercial vehicle and industrial markets.
SAF-Holland announced it has stepped-up cost controls, and, in the short term, flexed work hours to stabilize its operating result.
“Our market environment continued to deteriorate considerably in August,” particularly in Europe, China and India, SAF-Holland CEO Alexander Geis said in a release. Those declines could not be offset by significant gains in the Americas markets.
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