Exports Boosting Truck Sales for North American Makers

This story appears in the June 6 print edition of Transport Topics.

Fed by the international economic recovery and a weak U.S. dollar, North American truck makers are enjoying a sharp upturn in sales of heavy-duty trucks to the rest of the world, particularly Central and South America, Africa, the Middle East and Australia.

Original equipment manufacturers said the export business helps compensate for the weakness lingering in their home market.

From January through April, OEMs in the United States, Canada and Mexico exported a combined 6,574 Class 8 trucks, more than doubling the 2,799 units sold during the same time in 2010, according to a report from ACT Research Co., Columbus, Ind. U.S. Class 8 retail sales for the first four months of this year were 44,131 vehicles, up 35.9% from 2010.

“These are new trucks, but, by and large, with EPA ’98 engine technology. It’s not a $120,000 truck, but a $90,000 truck with no SCR, no DPF or variable-geometry turbochargers,” said Kenny Vieth, ACT’s president and senior analyst, referring to emission-control devices used in U.S. models, including selective catalytic reduction engines and diesel particulate filters, used to meet the Environmental Protection Agency’s 2007 and 2010 emission-reduction requirements.

“A lot of the world’s regions are recovering faster than North America. We’re shipping whole trucks on ships, as well as knockdown goods that get reassembled,” said Phil Christman, Navistar Inc.’s president of global truck operations.

“The weak dollar has helped us when competing globally against manufacturers from other countries,” Christman said.

The Federal Reserve monitors the dollar’s strength against many other world currencies through its “broad” index, which sank to 94.05 on May 2, its lowest reading since October 1995. The index was above 105 in the spring of 2010.

“Latin America is coming out of the global financial crisis sooner than the [North American Free Trade Agreement] region, and sales are returning to pre-crisis levels. Increases in South Africa are due to a favorable exchange rate coupled with strong sales,” said Diane Smith, manager of international sales operations for Daimler Trucks North America.

North American truck exports peaked in 2007 at 28,448 for the year before plunging to a low of 7,658 in 2009. Last year, ACT said, OEMs exported 12,723 units.

As an example of the currency effect, it took more than 600 Chilean pesos to buy one U.S. dollar in early 2009, according to Bloomberg News. For most of this year a dollar could be purchased with fewer than 500 pesos, meaning the dollar has depreciated by more than 20% against the peso over more than two years.

Veith’s hypothetical $90,000 truck would cost a Chilean business about 44.1 million pesos, a nice drop from about 54.9 million pesos at the 2009 level.

“Through the first quarter of 2011, our export business was up 59% versus the same period in 2010. . . . We’re seeing improvement in markets across the globe, with a favorable trend for the Mack brand in Latin America, the Middle East and Africa in particular,” said Carl Heikel, senior vice president for international operations for Mack Trucks.

Heikel said the majority of Mack’s exports are complete trucks sent via ocean freight. He also said a free-trade agreement between the United States and Colombia appears likely to be ratified in July and operational by the end of the year, “eliminating significant import duties on trucks coming from the U.S. and creating a far more level playing field” with other global truck makers.

Palmetto Ford dealer David Yglesias, Miami, said he sells medium-duty trucks to Latin America, particularly Classes 3-5 diesels with unusual body configurations. He said a 4-wheel drive, 15-passenger personnel carrier is popular with Chilean mining companies.

“We sell 300 to 500 trucks a year,” Yglesias said of his total export volume. He said 1998-style engine technology is often standard.

Cummins Inc. manufactures on- and off-highway diesel truck engines for the export market, said company spokeswoman Christy Nycz.

“We sell ‘pre-2010’ engines to vehicle manufacturers who then sell the trucks to be in service in places such as Mexico, Australia and South Africa. As an example, Australia is currently at a level of emissions similar to the U.S./Canada/EPA standards of 2007,” Nycz said.

Portland, Ore., dealer David Thompson sells Macks and Volvos on the U.S. West Coast and exports used trucks, particularly Macks, to Russia’s eastern Siberia region.

“My company is working on two projects right now,” Thompson said on May 25. “Russia is opening again because of high oil prices.” Thompson said his exports to Russia correlate strongly with world crude oil prices, with high prices bringing high demand.

Russian tariff laws now favor the import of truck parts over whole trucks, Thompson said, so he disassembles entire trucks before shipping.

While Thompson sells to Siberian Russia, Christman said Navistar sells new trucks in European Russia, where there is intense competition from European OEMs Daimler and Volvo. Although Russia has its own OEMs, he said U.S. trucks are prized for their quality.

Thompson also said he has been involved in exporting whole trucks via roll-on/roll-off shipping to Africa and the Middle East, with 2006-2008 models being popular.

Christman said there is a modernization trend in many countries, particularly in Central and South America.

“When countries allowed used trucks to enter, there was no demand for new trucks, but if the government takes a position in favor of new trucks, it creates a market for them,” Christman said.

Concerns about safety and emissions have spread to other nations, he said, so as they develop economically they also find a greater interest in newer trucks.