OEMs Ship 281,000 Trailers in ’06
While much of the heavy-duty truck sales hoopla during 2006 focused on truck makers as they set new monthly and yearly sales records, trailer makers were quietly posting their third-best sales year ever, according to new data from ACT Research.
However, industry executives said they expect trailer sales to decline 8% to 10% this year because of lower freight demand, especially in the housing sector, despite strong sales of trailers in recent months. Original equipment manufacturers shipped 281,000 trailers last year, up 9.8% from 256,000 in 2005, said Kenny Vieth, a partner at ACT.
The record was 307,000 units set in 1999; the second-best year in terms of shipments was 284,000 in 1998. Vieth said he expects 254,000 trailers to be shipped in 2007, down from last year’s mark, but near the 2005 figure.
Heavy-duty tractor makers are bracing for a much larger decline in sales in 2007, with many officials predicting a drop of 40% from the ’06 record levels. “A drop in sales was bound to happen after the industry had four solid years of growth,” Craig Bennett, senior vice president of sales at Utility Trailer Manufacturing Co., told Transport Topics.
For Vieth, though, the issue of lower demand for freight hauling is crucial. “There’s only one reason to buy a trailer — because there is freight to be hauled,” he said. Great Dane Trailers said it shipped a record of more than 60,000 trailers last year. Utility also sold a record number, but Bennett declined to provide specific figures.
Most trailer manufacturers measure their volume by shipments of finished units, which are counted when an order is picked up from an assembly plant. Shipments at Wabash National Corp. were 59,400 units for 2006, said Dick Giromini, the company’s chief executive officer. While that total was about 7% higher than 2005, it was not a record for the Lafayette, Ind., manufacturer.
Giromini said Wabash expects to ship 52,000 to 53,000 trailers in 2007. “Many fleets continued to buy trailers and trucks in 2006 due to their strong financial positions,” he said, but demand for flatbeds “has been hit hard” because of softness in the housing and construction markets. Wabash and Great Dane generally are considered the two largest U.S. trailer makers, although there are disagreements as to which company is larger.
Tracey Maynor, Great Dane’s vice president for branch sales and operations, said the company has seen a drop in demand from for-hire motor carriers in response to soft tonnage volumes, but it has been “somewhat insulated from the downturn” because the decrease has been less at private fleets.
All three trailer makers said demand for refrigerated trailers is stronger than it is for dry vans.
Even when other sectors may be slow, the refrigerated market is consistent “because people still need to eat,” Maynor said. Wabash said its order backlog was worth $512 million at the end of last year, down slightly from $516 million in 2005. However, Giromini said, this decline “was in line with seasonal patterns.”
A company’s order backlog of unfulfilled shipments is considered a good measure of a firm’s long-term outlook. Great Dane’s Maynor and Utility’s Bennett also said backlogs at their respective firms were lower than at the same period in 2006, but not much lower when compared with the slowdown in truck demand. They did not provide exact figures.
“At this point, we’re still comfortable with what’s happening in 2007,” Maynor said. ACT’s Vieth said increased use of automated trailer-tracking was another reason trailer shipments would be lower in 2007.
The technology allows fleet managers to locate their equipment and use it more efficiently, so they can reduce their inventory of trailers, he said. Not all trailer firms expect a decline from 2006 shipment levels.
Jordan Owens, president of Vanguard Trailer Corp., said his company hopes to sell at least 10,000 units this year, compared with 8,000 in 2006. Owens said he based the estimate on “a heavy backload of orders during the fourth quarter.”
Owens said Vanguard hopes to increase sales by taking a different approach to marketing. The company previously would rely on trailer dealers to sell products, “but this year, we’re focusing more on selling directly to fleets.” Scott Semlinger, general manager of Lufkin Corp.’s trailer division, said he expects unit sales to be 8% to 10% lower, compared with 2006.
\“The slowdown in residential and light commercial construction is definitely having a negative impact on us,” Semlinger said. The Commerce Department said there were 1.41 million housing starts in January, 37.9% below the January 2006 figure of 2.27 million.
Housing permits, which provide a long-term outlook, were 1.57 million, down 28.6% from the January 2006 figure of 2.2 million.