Manufacturers Say They’re Ready to Meet Higher Demand in 2015

This story appears in the Nov. 24 print edition of Transport Topics.

October’s extraordinary total for new-truck orders has raised expectations for Class 8 production in 2015, but analysts and manufacturers said the industry appears to be in a good position to handle the growing demand.

ACT Research boosted its forecast for 2015 North American Class 8 production to 327,600 units, up from its previous projection of 311,800, after October net orders spiked to 46,200, the second-highest monthly total on record.

“Momentum has been building,” ACT Vice President Steve Tam said. “The order intake in October was significant enough that it not only justified but necessitated an increase for the 2015 forecast.”

While October was a historic month for North American truck orders, which represent vehicles to be built in the months ahead, it also was a banner month for U.S. Class 8 retail sales, as tracked by WardsAuto.com (see story, p. 1).

If ACT’s updated projection comes to fruition, 2015 would be the best year for truck production since 2006 and the third best in history, Tam said.

ACT expects full-year 2014 production to come in at 298,300 units, up from 245,800 in 2013.

Research firm FTR also anticipated raising its 2015 production forecast, which currently stands at 300,000 units.

FTR Vice President Don Ake said he expects that outlook to increase by at least 3% to reflect improved expectations for the back half of next year.

“Right now, fleets are confident enough in 2015 to order out through the end of next year because they don’t see anything slowing down,” he said.

Despite October’s stunning order intake, analysts said manufacturers likely will be able to keep pace with the rising demand.

ACT’s Tam said truck makers will be increasing line rates and may need to rely on more overtime, but likely won’t need to add significant production capacity through additional shifts.

Although the industry may en-counter some “growing pains,” it generally seems to be prepared for the growth, he said.

“With some of the other key economies around the globe slowing down a little bit, that’s freeing up some of the components and parts that we’re going to need here to meet our rising appetite for trucks,” Tam said.

FTR’s Ake also said the industry is in a “good position” to handle the current demand, but supplies could be strained if growth continues to accelerate.

Some truck makers expressed confidence that they will be able to meet the growing demand.

Mack Trucks is currently building at a “strong” level and “will continue to meet customer requirements moving forward,” said John Walsh, vice president of marketing.

“We’re confident that, working together with our suppliers, we’ll continue to successfully manage the strong level of demand in the Class 8 market,” he said.

Volvo Trucks declined to comment on its production volumes, but the company will “continue to effectively manage our production activities moving forward,” said Magnus Koeck, vice president of marketing and brand management.

“We work with many suppliers, so we are confident that we can manage through any situations or shortages that might arise due to a surge in demand,” he said.

Tim Kraus, president of the Heavy Duty Manufacturers Association, said the industry’s suppliers are taking normal steps to increase production, such as adding overtime, but don’t seem to be having any trouble absorbing the additional demand.

At an HDMA Heavy Duty Business Forum earlier this month, leaders from member companies did not express major concerns about production capacity, Kraus said.

“With the nature of our business being as cyclical as it has been, everybody is configured to roll with the punches,” he said, adding that suppliers are working more closely with original equipment manufacturers than in the past.

At the same time, the growth in North America hasn’t been complicated by booming markets elsewhere in the world, reducing the potential for parts shortages, Kraus said.

Truck component maker Eaton Corp. said it may need to boost production levels as demand rises, but the company sees that as “an opportunity, not an issue,” said James Michels, manager of global business communications.

“We are very confident that we will be able to meet our customers’ production output in 2015,” he said. “We have

standard processes where we look at demand and conduct advanced demand planning analysis each month, so we are always prepared for any market fluctuations.”

Navistar International Corp. CEO Troy Clarke recently said he expects the growth to continue, citing confidence in the marketplace and the continued need for replacement purchases.

“We don’t think we’re at the peak of the truck cycle,” he said Nov. 11, at R.W. Baird’s annual industrial conference. “As we speak, we think there is another good year in front of us, and we’ll take a look at 2016 when we get a little closer.”