Truck Makers’ Exports Climb

Domestic Sales Decline in Latest Tally

By Frederick Kiel, Staff Reporter
This story appears in the June 11 print edition of Transport Topics.

Exports of heavy trucks built in North America have risen to 35% of overall output this year, helping to sustain truck, engine and component makers in a year when domestic sales have plunged, analysts and manufacturers said.
Exports traditionally have accounted for about 10% of heavy trucks manufactured in North America, but various factors that include the dollar’s weakness, booming foreign economies and the prospect of tighter emission rules in other countries have boosted sales.
Through the first four months of 2007, a total of 9,771 heavy trucks were exported to countries other than Mexico, ahead of the pace last year, when exports totaled 20,089, Kenny Vieth, co-owner of A.C.T. Research, told Transport Topics.
“Much of North American truck exports are sent to Australia, New Zealand, South Africa, the Middle East and South America,” Vieth said.
“What is even more crucial is that new orders in the United States were down 72% in the first quarter, versus orders in ’06, and were down 76% in Canada,” Vieth said. “In that same period, new orders in Mexico were up 120% over 2006 and 65% in other export markets.”
Vieth said that, in numbers, U.S. orders of heavy trucks totaled 20,000 in the first quarter this year, with 2,700 orders in Canada, 11,000 in Mexico and 4,450 export orders for countries other than Mexico.
During the first four months of 2007, Mexico bought 8,298 U.S. trucks, ahead of the pace in 2006, when sales to Mexico totaled 19,981 for the year, A.C.T. Research shows.
The biggest factor in exports’ share of truck output this year is the sharp drop in U.S. sales, which have fallen 28.2% in the first four months of 2007 from the same period last year, reported (5-21, p. 1).
“North American trucks really started to sell in large numbers abroad beginning in 2005, and that is the story,” Chris Brady, president of Commercial Motor Vehicle Consulting, told TT.
“Sales to Mexico and overseas are running near the same absolute numbers of 2005 and 2006,” Brady said. “Their percentage is so high now, compared to total sales, because the huge pre-buy of last year and reluctance to spend $12,000 extra for the untried 2007 engine technology have cut local sales to extremely low levels.”
Satish Jindel, president of SJ Consulting Group, agreed.
“There’s been a very large drop-off in sales in the United States and Canada,” Jindel told TT. “Mexican sales are running about the same level as 2006, while exports to other markets are rising over last year’s sales.”
“The U.S. dollar has fallen 40% against the euro over the past few years,” Martin Labbe, of trucking consulting firm Martin Labbe Associates, told TT. “That’s given American trucks a huge price edge over European trucks in many markets.”
Also, Brady said, “strong global economic growth has been pushed especially by rising commodity prices in countries that buy U.S. trucks and now need many more, like Australia, Mexico, South Africa, New Zealand and Saudi Arabia.”
“The Mexican economy has been experiencing a constant growth and stability during the last few years,” Carlos Pacheco, president of Volvo Trucks Mexico, told TT. “Most economic sectors — such as home construction and infrastructure, food and beverage, as well as industrial goods — are growing and making a strong contribution to the truck sales business in Mexico.”
Volvo trucks sold in Mexico are built in the United States and Belgium, a Volvo Trucks Mexico spokesman told TT.
Companies such as Mack Trucks attributed their growing exports to the same reasons.
“The growth in our international business is attributable to an intensified focus on growing this part of our business, healthier and more stable economies in many parts of the world, a weaker U.S. dollar, and, in our particular case, becoming part of the Volvo Group, which has given us access to markets and resources we simply didn’t have before,” John Walsh, Mack Trucks spokesman, told TT.
Parent company Volvo AB decides how to operate in conjunction with Mack on a “market-by-market consideration,” Walsh said. “A good example is Mexico.”
He explained that “Mack does not build trucks in Mexico, but we decided the optimal approach was to offer Mack products through the existing Volvo distribution system already in place there.”
On the other hand, Walsh said that the majority of trucks Mack sells in Australia are assembled there, with most major components built and put into kits in the U.S. Mack sales in Australia are up 44% to date this year.
David Geraghty, executive director of commercial vehicle business for Cummins Inc., told TT that the company produces nearly all its heavy-duty engines for both domestic and export sales at its Jamestown, N.Y., plant.
“We have the strongest export share of any engine maker, so that the increase in sales abroad has really helped us to overcome low domestic sales,” Geraghty said.