Editorial: Supplying the Trucking Industry

This is shaping up as one of those “interesting years” for the trucking supply industry, with demand likely to at least match capacity in several key areas, including tractors, trailers and tires.

Already, truck makers are predicting they will barely be able to meet demand, on the assumption that their projections for a modest increase in the replacement rate for older tractors are on track.

We’ve seen several original equipment manufacturers add shifts to their existing plants, call back workers they furloughed over the past few lean years and search for new assembly line personnel.

December’s 78% burst of growth in sales year-over-year caused a ripple of concern in portions of the industry, however, as at least a few executives worried about their ability to meet orders if economic growth moves to the higher end of economists’ estimates.

Business was good enough last year to put a significant strain on the supply of various components, led by axles, drivetrains, tires and castings.

Truck makers are going so far as to create their own subsidiaries in these vital areas such as Daimler Trucks North America adding axles and drivetrains to its Detroit brand (1-23, p. 5), and Navistar reopening a foundry to produce castings (1-2, p. 27).

Similarly, trailer manufacturers are preparing for a banner year, after recovering reasonably during 2011 as well, adding shifts and even doing some brick-and-mortar expansion.

Trailer sales during 2011 grew 69% from the low level of 2010.

While trailer manufacturers ramped up as their order books swelled, rubber, wood and steel supplies were strained.

On the tire side, shortages were so severe that OEMs reported they were actually having shipments rationed from their primary suppliers, which sent them hunting for alternative makers.

While a booming truck supply business generally is a good thing for fleets, there are growing concerns that this flush business climate could lead to steep price increases, just as fleets are beginning to recover from the lean recession years.

There have already been several rounds of increases in tire prices, while truck and trailer makers are apparently trying to hold the line on prices, at least for now.

While we certainly won’t be encouraging suppliers to over expand as happened early last decade, it’s imperative that suppliers ensure they have the capacity to meet anticipated demand, to help trucking continue to deliver the nation’s freight, without setting off a new price spiral.