February Trailer Orders Surge

This story appears in the April 5 print edition of Transport Topics.

Trailer orders in February reached the highest level in two years, fueling manufacturers’ hopes that their business momentum is improving after 2009 production sank to a 34-year low, industry officials said.

ACT Research reported late last month that February net trailer orders more than doubled to 13,580, from 5,059 a year earlier, and nearly doubled the 7,154 reported in January 2010.

“The question, of course, is February the proverbial one-hit wonder?” said Kenny Vieth, senior analyst at ACT, Columbus, Ind., who noted that multiple trailer manufacturers had reported their best order month in two years. “Since we have seen the uptick on a broad base, it is a more encouraging sign.”

One of those trailer manufacturers was Wabash National, which announced an order for 3,100 trailers from Swift Transportation during mid-February.

Stronger order trends also were reported at Great Dane Trailers, Stoughton Trailers, Vanguard Trailers, Utility Trailer Manufacturing and Hyundai Translead.

Dry van orders skyrocketed to 9,100 from 1,700 in February 2009, leading the increase, Vieth said. Orders for refrigerated trailers moved up nearly 50% to 2,600 from 1,800, and other trailers such as flatbeds and tanks logged 1,900 orders, compared with 1,600.

“There is an uptick across the board,” said Craig Bennett, senior vice president of sales and marketing for Utility, who said that his order backlog is double what it was a year ago. “Orders, backlogs and tonnage are moving in the right direction.”

“Over the last couple of months we have seen a pretty good increase in sales,” said Chris Hammond, vice president of dealer sales at Great Dane. “We have the best backlog that we have had in more than two years.”

Hammond cautioned, however, that the U.S. economy cannot sustain the 5% plus fourth quarter growth rate. As a result, he said, trailer manufacturing won’t “blast off” in 2010, though business will be measurably better than it was last year.

Ken Wahlin, president of Stoughton Trailers, had a similar assessment.

“The market will continue to improve, but it will be choppy,” he said. “Some months freight and rates will pick up, but not others.

“We are seeing an increase in quoting and an increase in orders relative to last year,” Wahlin said. “Several months ago, most of the orders were from private fleets or from specialties in larger fleets. Now, it is more broad-based.”

Glen Harney, chief sales officer at Hyundai Translead, shared Wahlin’s view.

“The dry van segment that is important for us is pretty significantly improved for the first time in two years,” Harney said.

“It is comforting to see that [orders] are not all isolated with one account or two or three, but this doesn’t mean that we may not have another downturn,” he added.

Harney said production for the first five months of 2010 will double last year’s, he said.

Harney and Wahlin also agreed on the reasons the market is rebounding.

“There are a number of factors at work,” Harney said. “There have been an awful lot of deferred purchases, as equipment has gotten older. The biggest fact sequentially is that freight is picking up a little bit.”

“Certainly part of it is the fact that trailers are getting a little older,” Wahlin said. “More important, freight has rebounded a little bit. It still has a long way to go, but it is improving.”

Charles Mudd, president of Vanguard Trailers, said business began to pick up last summer after a period of intense quoting activity, when fleets sought new equipment prices in case they secured new business after submitting bids to shippers.

“Now, more carriers are making the decision that they have to buy new equipment,” he said, noting that the company will increase production next month. “The maintenance cost on older equipment is killing them. Our build is steady and increasing.”

Bennett said the industry needs more credit for small and midsize buyers and steps such as investment tax credits and increased road spending to stimulate demand.

Vieth noted that despite the recent pickup, the trailer market “is still pretty soft.”

“Truckers are certainly becoming more positive about the amount of freight and what’s happening to freight rates,” Vieth said. “If profitability rises, that will make it easier for them to purchase new equipment.”

ACT forecasts production of 103,000 units this year, nearly 30% above the 2009 total of 80,000 and similar to 2008 manufacturing levels.

Vieth noted that the largest order month ever reported was 37,600 in March 2006.

“If we had had 14,000 orders anytime from the middle of 2004 through the middle of 2006, there would have been a general sense of disappointment,” he said.