January 8, 2020 11:00 AM, EST

Meritor Sees Equipment Downturn Coming After Prosperous 2019

MeritorA Meritor MT-14X axle on display at an industry show. (John Sommers II for Transport Topics)

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Commercial vehicle equipment supplier Meritor Inc. forecast North American Class 8 production is primed for a steep decline in 2020 on the heels of last year’s exceptional market, the strongest in 13 years.

Meritor forecast Class 8 production will drop to 240,000 to 250,000 units compared with 359,000 in 2019, according to the company’s latest earnings report.

Factors expected to contribute to the predicted decline include softer ordering activity combined with higher current dealer inventory, according to the Troy, Mich.-based company.

Meritor noted production of medium-duty trucks and trailers is in line to fall, too.

It expects Class 5 through Class 7 North American production will be 245,000 to 255,000, down from 288,000 last year. It predicts U.S. trailer production will come in at 270,000 to 280,000 trailers compared with 355,000 in 2019.



Heading into 2020, the company is “looking to hold the vast majority of our North American Class 8 penetration increase at or above seven out of 10 trucks now running our axles in the Class 8 market,” Meritor CEO Jay Craig said during its fiscal year-end earnings call. Meritor noted new products in its lineup include front and rear axles for medium- and heavy-duty applications, linehaul, construction, buses and trailers, in addition to an optimized air disc brake and a transfer case for the medium-duty all-wheel drive market.

Meritor’s latest acquisitions are intended to diversify its revenue streams to help it offset the cyclicality of the linehaul markets, Craig said.

“These acquisitions expanded our portfolio and customer base with new technology and products in off-highway, severe service and defense. AxleTech is the most recent acquisition that we completed in July,” he said.

AxleTech’s offerings include a full product line of independent suspensions, axles, braking solutions and drivetrain components. AxleTech generated $248 million in revenue in calendar year 2018. Meritor acquired it last year for about $175 million.

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Meritor reported net income for the quarter ended Sept. 30 jumped to $43 million, or 51 cents per diluted share, compared with $32 million, or 36 cents, in the prior year.

Quarterly revenue slipped to $1.02 billion, down $52 million or about 5% compared with the year earlier period — following lower production in India, Europe and China, partially offset by revenue from AxleTech.

Fiscal-year net income climbed to $291 million, or $3.37, compared with $117 million, or $1.28, in the same 2018 period.

Fiscal-year revenue increased to $4.3 billion compared with $4.17 billion in the prior period.

Meritor’s principal products are axles, suspension systems, drivelines and brakes. It employs 9,100 people and operates in 19 countries.

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