Class 8 Orders Slump in December, Down 36% From Same Period in 2014
North American orders for Class 8 trucks slumped in December from the same period a year ago, when the original equipment manufacturers logged their fourth-best volume ever.
ACT Research said that orders in December totaled 28,100, or 36% below the volume of 44,037 last December.
On a sequential basis, however, results climbed 68% from 16,772 in November. That percentage gain was the highest since February and the third-highest this year, analysts said, while still taking note of falling production.
“On one hand, it proves the industry is better than the November net orders suggested. But because November’s orders were so bad, I don’t think you can read a lot of positives above, say, prevailing expectations into that December number,” Kenny Vieth, ACT’s president, told Transport Topics.
Reports on the latest Class 8 orders arrived the same week as Daimler Trucks North America, the parent of market-leader Freightliner Trucks and niche nameplate Western Star, said it would lay off nearly a thousand workers at its Cleveland Truck Manufacturing Plant in North Carolina, where it manufactures the two brands. DTNA cited in a statement “a sustained reduction in orders and a diminished build rate” for what it hoped would be temporary layoffs.
Vieth said the per-day build rate for the Class 8 market for 2015 peaked in the second quarter at more than 1,400 units and “our build expectation for the fourth quarter is closer to about 1,200 units per day, so we are already seeing the decrements in build.”
But going into the first quarter, ACT’s build number is “just over 1,100 units,” he said.
Research company FTR put the December order total at 27,800 units.
“The improved December orders provide some needed stability to what was a shaky Class 8 market,” FTR analyst Don Ake said, but he noted the improvements were not enough to stave off the layoffs and production cuts.
“Orders should retreat some next month, with the industry in a more balanced state once the planned production cuts are complete,” Ake said.
Michael Baudendistel, an analyst with Stifel Transportation & Logistics Research Group, called the December orders a rebound and “a reassuring signal that production should not fall off a cliff this year and will likely still remain above or within the range of replacement demand levels despite the overbuild in 2015.”
That said, Baudendistel does not expect “the industry will soon be off to the races again like last year.”
He forecast in a note that the industry will not be able to sustain orders at the December levels as 2016 progresses. “As such, we are maintaining our 2016 Class 8 production estimate of 250,000.”
Vieth said ACT’s production forecast is just above replacement levels.
“On a North American basis, we believe replacement levels are around 235,000 units a year. Our forecast for this year is right around 250,000,” he said.
He added that those levels will come in “what is supposed to be a 2% GDP economy.”
David Leiker, an analyst with R.W. Baird & Co., said in a note that he suspected the November orders were “artificially low to overcorrect for imbalances in the channel, both elevated inventories at dealers and ‘shadow’ orders at customers and dealers that needed cancellation.”
Looking at 2016, Leiker suggested Navistar International Corp.’s launch of its ultra-aerodynamic Project Horizon Class 8 truck could provide a “meaningful inflection” in orders in the back half of 2016.
Leiker said he believes “past [Navistar] customers are waiting for this truck-fleet refresh in fiscal 2017, orders books open earlier, before making major purchases.”
But Lawrence De Maria, an analyst with William Blair & Co., said overall difficulties remained.
“Dealers are seeing fewer multiunit quotes, and inventories are high, as well,” De Maria said in a note.
