Trailer Registrations Down 24.7%

Production Decline Accelerates
By Jonathan S. Reiskin, Associate News Editor
This story appears in the Dec. 17 print edition of Transport Topics.

Truck trailer sales and production continued to lag through the third quarter, with U.S. registrations of new units down 24.7%, year-over-year, and the decline of industrywide production levels accelerating.
Wabash National Corp., the nation’s largest trailer maker, said it does not see resurgence in the market until the second half of 2008. However, an executive of Utility Trailer Manufacturing Co. said the refrigerated segment could see a surge in demand if California is allowed to tighten its air pollution standards.
Through Sept. 30, U.S. businesses have registered 156,125 new trailers this year, down 24.7% from the 207,398 units registered during the first nine months of 2006, said R.L. Polk & Co. in its quarterly report. Through the first half of the year, the rate of decline for trailers at least 24 feet long was 29.1% (10-8, p. 1).
In assessing the industry’s production, investment bank Bear, Stearns & Co. cited findings from A.C.T. Research Co. that said original equipment manufacturers of trailers made 34% fewer boxes in October than they did during the same month in 2006. Such comparisons have been in decline all year, but the October figure is the greatest fall-off yet.
Wabash, the only publicly traded trailer OEM, was profitable during the third quarter but at a lower level than the year before.
“A continuing soft freight market, related in part to the ongoing residential construction slump, is adversely impacting trucking companies’ profitability and their need for new equipment,” said Dick Giromini, Wabash’s chief executive officer.
He added that Wabash management has engaged in “plant idling, head-count reductions and spending restrictions. We continue to believe that we are well into the downturn of the cycle, and expect to begin seeing improving order rates for the second half of 2008,” Giromini said.
Kenny Vieth, a partner at A.C.T., said in an interview that, while he has seen a rebound in heavy-duty truck orders, there has been nothing similar for trailers.
“In October, there was a 1%, year-over-year, increase in truck orders — off of a very low comparable period. But in November, it looks like it will be a 10% increase,” Vieth said.
As for trailers, though, Vieth said new orders remain below production levels, meaning that the backlog of units to be built is falling. He did suggest, though, that there could be a lag between tractor orders and trailer orders.
Vieth said it is often the case there is about a three-month period between an order for a tractor and its delivery. For trailers, though, the processing time is only about six weeks. Therefore, if a trucking fleet wants to match tractors and trailers, the buyer could hold off on trailer orders and still get both types of equipment simultaneously.
Craig Bennett, senior vice president of Utility Trailers, told Transport Topics that his business has “stabilized at a lower level over the last six to seven weeks” and that his backlog level is the lowest it has been in three years. However, he said slumps such as this one are part of the usual business cycle in trailer making.
Bennett said his company’s best customers now are private fleets and leasing companies rather than for-hire carriers.
“The for-hire truckers are very selective. I think they’re sitting on the sideline for the next 90 days, or so,” Bennett said. For-hire fleet managers will pay vehicle registrations during the first quarter and check on tonnage volumes before committing to trailer buys, Bennett predicted.
Utility’s biggest chance for new business, he said, will come about if the California Air Resources Board can tighten regulations on the diesel emissions from trailer refrigeration units. The federal Environmental Protection Agency is scheduled to rule on this issue by the end of the year, he said.
“Reefer units made now can meet those potential new standards, but units that are seven years old and more cannot. This new regulation, if it happens, would make all of those older trailers noncompliant overnight for business in California — and that’s a lot of trailers,” Bennett said, adding that refrigerated trailers are one of Utility’s strongest lines.
Although fleets could retrofit old trailers with new reefer units, Bennett said such an approach is problematic.
“As a trailer ages, it’s less able to maintain temperature because gaskets and insulation wear out, so the reefer unit has to work harder to do its job,” he said.
Bennett added that it is a questionable financial decision to spend $5,000 to $6,000 to retrofit a seven-year-old trailer that might only be worth $18,000 to $20,000 on the used-equipment market.
In commenting on refrigerated truckload carrier Marten Transport Ltd., stock analyst Thom Albrecht of Stephens Inc. observed Dec. 4 that “orders for new refrigerated trailers continue to be weak.” Albrecht said he anticipates scrappage rates for old trailers could exceed shipment rates for new units, leading to a substantial capacity crunch for refrigerated carriage at a later date.