Jan. Truck Orders Total 22,600 Despite ‘Uncertainty,’ ACT Says

This story appears in the Feb. 11 print edition of Transport Topics.

North American truck buyers ordered fewer Class 8 trucks in January than they did a year ago, but total orders still topped the 20,000 mark for the fourth straight month, ACT Research reported.

Net truck orders decreased 10.5% to 22,600 in January, the 13th consecutive month that orders declined on a year-over-year basis, said ACT Vice President Steve Tam. However, orders in January were 7.3% higher than December’s total of 21,065.

Truckers remain apprehensive, even though the “protracted string of negativism” related to the national election and the “fiscal cliff” debate at the end of the year is now in the rearview mirror, he said.

“There still is some uncertainty out there, but I think it’s more related to the tepid economic growth we’re expecting in 2013,” Tam said.

John Walsh, vice president of marketing at Mack Trucks, also pointed to economic concerns.

“Uncertainties surrounding both the U.S. and global economies continue to have a dampening effect on what should be a fairly strong purchasing environment, given the age of the existing fleet and truck tonnage levels,” he said.

Another research firm, FTR Associates, released similar preliminary data, showing January orders at 22,235.

January orders were a little better than expected, Tam said, but not enough for ACT to change its forecast for full-year production, which calls for a 5% decline to 264,300 units.

About six months ago, ACT had expected 2013 production to grow by about 5% over 2012’s level of 278,700. Lower order intake during the second half of 2012 will translate to less production in 2013.

“When we made those changes to the forecast, we basically just pushed the volume up by a quarter or two,” he said, “so now we’ve got our peak coming in 2014, instead of 2013.”

Net orders for 2012 were 228,900, down from 306,600 in 2011. Orders sank as low as 12,925 in July, before picking up at the end of the year.

Navistar International Corp.’s forecast for 2013 points to “an overall lower first half” followed by growth in the second half, spokeswoman Elissa Koc said.

“The economy appears to be getting better with a pretty slow recovery, but nothing that’s spurring significant new truck purchases beyond replacement,” she said. “Ultimately, we’re seeing fleet customers replacing trucks that need to be replaced.”

Paccar Inc. Chairman and CEO Mark Pigott said he’s encouraged that many of his company’s customers are reporting strong or even record results for the fourth quarter.

“Some of them have announced that they are going to be increasing their purchases, but I think that it’s still primarily replacement, because I think everybody is waiting to see what the tone and the direction of the general economy is,” he said on Paccar’s Jan. 31 earnings call.

Last year’s orders slowdown was cited by truck manufacturers that recently cut production jobs or said they were planning potential layoffs.

Volvo Trucks said it moved forward with a layoff affecting about 300 employees, while sister company Mack Trucks said it is reducing its workforce by 175. Daimler Trucks North America said it may cut up to 1,300 factory jobs in the spring.

In a Jan. 31 statement DTNA spokesman David Giroux said the North American truck industry faced “tremendous uncertainty” in 2012.

Despite slower economic and freight growth, DTNA is “cautiously optimistic” that market conditions will improve this year due to the “extreme age” of the truck population, he said.

“Presently, the average age of a Class 8 truck is beyond its normal operational lifecycle which leads to increased maintenance costs,” Giroux said.

ACT’s Tam said the average age of a Class 8 truck in operation was 6.6 years at the end of 2012, down slightly from the all-time high of 6.7 years at the end of 2011.

Broad replacement demand will continue to gradually reduce the average fleet age through 2015, he said.

Göran Nyberg, Volvo Trucks’ president of North American sales and marketing, said replacement demand continues to be high, but Class 8 sales will likely remain modest through the first quarter of 2013.

“We expect market conditions to improve as the year progresses,” he said.

In a Feb. 4 note, analyst Timothy Denoyer of Wolfe, Trahan & Co. said the orders total “suggests strength in orders of Navistar trucks with Cummins engines, as our checks suggest Navistar won more orders in January.”

Navistar in late December announced the shipment of its first 300 ProStar+ models with Cummins ISX15 engines.

“Our checks also suggest Paccar and Navistar are pricing aggressively to stimulate demand,” Denoyer added.