June Truck Orders Up 13% But Are Lowest This Year

This story appears in the July 15 print edition of Transport Topics.

Truck manufacturers received 18,900 net orders for Class 8 trucks in June, the lowest monthly total so far this year but still 13% above the year-ago level, ACT Research reported.

The June orders figure ended a string of eight straight months above the 20,000 mark, according to ACT’s preliminary data on North American orders.

June marked the fifth consecutive year-over-year gain in order activity, the company said, but the total represented an 18% decline from May.

ACT Vice President Steve Tam said the month-to-month decline in June was not a surprise, given historical patterns.

“I wouldn’t call it a good June, but it also was not a sign of weakening,” Tam said.

Halfway through 2013, manufacturers have received a total of 132,692 net orders, up 11.1% compared with the first half of 2012, ACT said.

Another research firm, FTR Associates, released a similar figure for June orders. The group estimated the monthly total to be 18,606.

“Orders were slightly below the general expectations, but a decline was not surprising given the typical summer slowdown in orders,” Jonathan Starks, FTR’s director of transportation analysis, said in an announcement.

Starks said the hours-of-service changes that went into effect July 1 are unlikely to affect order activity for several months.

“For now, it is business as usual,” he said.

John Walsh, vice president of marketing at Mack Trucks Inc., attributed the decline in new order activity to normal seasonal patterns.

“With the U.S. economy continuing to chug along and the high level of replacement demand that persists in the market, the softening in June would appear to be tied to the onset of the traditional summer lull as much as anything else,” he said.

Volvo Trucks spokesman Brandon Borgna agreed.

“Marketwide orders in June likely reflect the softening demand normally seen during summer months,” he said. “We expect replacement demand will remain the primary driver of Class 8 sales through the remainder of 2013.”

While new truck orders are tracking ahead of last year’s pace, retail sales haven’t followed suit. U.S. retail sales of Class 8 trucks have declined nine months in a row on a year-over-year basis, according to WardsAuto.com (6-17, p. 1).

ACT’s Tam said the discrepancy is “just a matter of timing at this point.”

Although customers have been putting new truck orders on the books, the delivery schedules are more heavily weighted toward the back end of the year, thus pointing to higher sales volumes in the second half, he said.

Tam said it’s generally the buyers who are specifying those delivery dates, not the original equipment manufacturers. “It’s not a situation where the OEMs are dictating it. It’s a customer-driven scenario.”

Bill Kozek, who recently joined Navistar International Corp. as president of its North American truck and parts business, said the company expects sales to grow in the second half of the year.

“We have seen an uneven first half of 2013,” he said. “However, we have seen continued strength in automotive production, increasing construction spending and housing starts, as well as improving employment rates. As a result, we believe customers’ confidence in the market is starting to grow, which will positively impact sales and fall in line with Navistar’s 2013 forecast for an improved second half of the year.”

Navistar announced its hiring of Kozek on May 20. Kozek previously served as general manager at Peterbilt Motors Co. Before that, he was general manager at Kenworth Truck Co.

Daimler Trucks North America, the maker of Freightliner and Western Star trucks, declined to comment for this story, but its parent company, Germany-based Daimler AG, recently said it needs to boost spending cuts and sales gains in the second half to hit its 2013 earnings target, according to a Bloomberg News report.

Wolfgang Bernhard, head of the Daimler Trucks division, said on July 1 that the company has “a lot of catching up to do by the end of the year” to match 2012’s earnings before interest and taxes (see story, p. 6).

Other truck makers did not respond to requests for comment before Transport Topics’ deadline.

In a note to clients of J.P. Morgan Securities, analyst Ann Duignan said North American Class 8 production “could be higher than expectations” if new order trends for the year to date continue in the second half. Her firm currently forecasts 251,000 units of production, which would be down 10% from 2012.

ACT’s forecast is more optimistic, projecting that manufacturers will build about 262,000 to 263,000 trucks in 2013, compared with 278,700 last year, Tam said.

Tam said ACT expects data to show that industry backlogs declined in June, given the projected production of about 20,500 units. Manufacturers have added to the industry backlog every month since September, with the exception of a slight dip in April, he said.