Heavy-Duty Truck Fleet Ages as Carriers Seek Cost Savings

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

The U.S. heavy-duty fleet truck fleet is aging as carrier executives scrimp to cut costs wherever they can amid the continuing national freight drought.

The nation’s truck makers are trying to look on the bright side of this new statistic, saying the increasing age should help prime the pump for better sales down the road when freight levels rise.

The average age of the nation’s total highway tractor fleet is now nine or 10 years old, depending upon the estimate used. That estimate covers a wide variety of fleet types: Large truckload carriers still have the youngest fleets, while private and less-than-truckload carriers have much older vehicles, and small truckload carriers fall in between.

“Due to the economic situation today, we have no choice but to put off purchases of new trucks,” said William Reed Jr., president of Skyline Transportation, Knoxville, Tenn., whose company runs about 75 tractors.

“Margins are getting slimmer and slimmer, so there’s no choice but to continue to run equipment,” said Reed, who also is chairman of the Small Carrier Advisory Committee of American Trucking Associations.

“Private fleets generally keep their equipment longer,” said Larry Dean, general manager of corporate transportation for NCI Group, a Houston metal-products company.

“We have been using a six-year cycle with full-service leasing, but our game plan is for a longer time now. Our intention is to extend for another year or two. I’ve seen there’s a lot of interest in that,” said Dean, who also is a board member of the National Private Truck Council.

“We’re looking for every reduction in cost we can find. If we can extend the useful life of the vehicles without going for another six-year obligation, that’s how we hedge our bets,” he said, adding that the company leases about 80 trucks.

The average U.S. Class 8 tractor was 10.3 years old at the end of last year, up from 9.4 years at the end of 2006, according to R.L. Polk & Co., which analyzes motor vehicle registrations.

FTR Associates has tracked an increase both in the national average and among publicly traded truckload fleets. FTR, Nashville, Ind., said that from 2006 to this year, the national average for Class 8 tractors has risen to 9.15 years from 8.28 years.

For the publicly traded truckload fleets, the first-quarter average this year was 2.3 years, up from 1.61 years during the fourth quarter of 2005.

The fleet age of the second-largest truckload carrier, Schneider National Inc., is four years and four months, Vice President Steve Duley said in May at an investors’ conference. He described that as “kind of high for us.”

Original equipment manufacturers have been following the trend, saying it is an omen for eventual good sales when the trucking economy finally does recover.

Thomas Plimpton, vice chairman of Paccar Inc., told parts makers at a meeting of the Heavy-Duty Manufacturers Association in February that at some point, aging trucks must be replaced. Paccar owns Kenworth Trucks and Peterbilt Motors.

The truck-fleet age “is the highest we’ve seen in 10 years,” Scott Kress, senior vice president of Volvo Trucks North America, said at a May 8 press conference, and Leif Johansson, chief executive officer of VTNA parent corporation Volvo AB, said that partly because of the aging population of U.S. trucks, he expected fourth-quarter truck sales in North America to be better than a year ago.

And on June 9, Navistar International Corp. mentioned the aging fleet and the need for replacement sales in a sales forecast with its quarterly earnings report.

CK Commercial Vehicle Re-search produces a quarterly Fleet Sentiment Report, and 64% of carriers surveyed in the first quarter said that their tractor age had increased an average of 16%.

Steph Sabo, chairman of ATA’s Technology & Maintenance Council, said older trucks are now a given among maintenance managers. The main question now is how to deal with them.

“Many people have trucks parked and they can’t get rid of them” because of the low resale values, Sabo said. That means truck-utilization is low, and tractors are not piling on the miles that lead to more maintenance.

“Some fleets are doing more maintenance, but the trigger is whether they’re running more miles,” said Sabo, who heads maintenance at Norrenberns Truck Service, Nashville, Ill.

Reed of Skyline said using auxiliary power units has helped to counteract the effects of running equipment longer. Reed said he installed the APUs to save on fuel costs, but found that by not idling his trucks’ engines for heat and air conditioning, engine wear and tear is reduced, which allows him to defer maintenance.

“This takes off hours of idling by the engine, which extends its life,” Reed said, adding that his company used to trade in tractors every four or five years, and now that’s up to five or six years.

Dean of NCI said fuel costs have led him to examine the miles he runs more carefully, shedding mileage from his leased fleet by asking for-hire carriers to make some one-way runs and concentrating his in-house fleet to concentrate on the company’s core business.

“We don’t automatically put a driver out on a run any more . . . Instead we’ll pay one-way miles to a for-hire carrier,” Dean said.

While the aging trend must eventually crack, OEM order boards suggest it will not happen soon.

ACT Research Co. reported earlier this month that orders for new tractors remain at low levels (click here for previous story).

Commenting on what it will take for him to buy new trucks at Skyline, Reed said, “when the economy recovers, and people buy more goods, which means more manufacturing and more shipping of goods. Until that changes, there won’t be much action.”