Paccar, DTNA Curtail Production Into April
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Paccar Inc. and Daimler Trucks North America, which together represent 70% of Class 8 U.S. retail sales, announced concerns over supply disruptions, weaker customer demand and economic uncertainty amid the coronavirus pandemic have led them to limit or suspend production into April.
One industry analyst said given what COVID-19 and its impact on the economy meant, the truck makers’ temporary actions were not unexpected even as the Department of Homeland Security on March 19 designated transportation equipment manufacturing part of the nation’s critical manufacturing sector.
“Because the trucking industry was already in an over-supply situation prior to the advent of COVID-19, the temporary shutdowns may help to ameliorate the industry’s inventory excess,” said Steve Tam, vice president of ACT Research.
Earlier in March, truck maker Navistar Inc. and U.S. automakers announced temporary shutdowns at least through the end of March affecting cars and medium-duty vehicles. Ford on March 25 extended its shutdown beyond the end of March, in a nod to expanding stay-at-home policies.
Independent engine maker Cummins Inc. is a major supplier of medium- and heavy-duty engines. Asked on March 24, the same day as Paccar’s announcement, if the company had similar intentions regarding production, a spokesman told Transport Topics, “Not at this point.”
Paccar, through its two truck brands Peterbilt Motors Co. and Kenworth Truck Co., is Cummins’ largest customer for Class 8 engines 10 liters and above, with 54,602 last year, according to WardsAuto.com. DTNA’s Freightliner brand is the largest customer for Cummins in the category of Class 8 engines under 10 liters, with 15,403 units.
DTNA’s planned return to production is scheduled for April 6 in the United States and April 14 in Mexico. It announced its steps March 24 as well.
“We will continue to provide full support of our aftermarket operations to ensure our parts distribution centers continue to run smoothly and fulfill their crucial role helping to keep critical infrastructure running,” DTNA said.
Paccar suspended truck and engine production at its factories worldwide from March 24 to April 6. It is the second-leading U.S. truck maker based on monthly retail sales data with a typical monthly share of 31%.
DTNA is the market leader in U.S. commercial vehicle sales, with typically 41% Class 8 market combined share with its Freightliner and Western Star brands each month. It also produces classes 4 through 7 commercial vehicles.
Its truck plants limiting production include those in Mount Holly, N.C.; Cleveland, N.C.; Gaffney, S.C.; and Portland, Ore., as well as in Saltillo and Santiago, Mexico.
“There will be limited operations at each plant location during this period,” according to DTNA’S statement.
Meanwhile, Paccar said it was in a strong financial position, with excellent liquidity and investment-grade credit ratings of A+/A1. Manufacturing cash and marketable securities were $4.28 billion at the end of February. The company also has access to existing lines of credit of $3 billion.
Paccar’s North American brands include Peterbilt Motors Co., Kenworth Truck Co. and the MX engine. In Europe, it makes DAF trucks.
Paccar will continue to support the aftermarket and its customers “who deliver essential infrastructure services to our communities,” according to the company statement.
Paccar expects financial results for the first quarter and the rest of 2020 will be hurt by lower production schedules due to changes in customer demand and the effect of government regulations or mandates.
Paccar will provide a formal update on its 2020 outlook in first-quarter results during the earnings call scheduled for April 21.
Navistar Inc. announced March 23 it suspended production at its truck assembly plant in Springfield, Ohio, for two weeks in response to disruptions to its supply chain resulting from COVID-19.
At the Springfield plant, Navistar manufactures General Motors’ cutaway G van as well GM’s Class 4 and Class 5 vehicles. It also produces its own International brand MV and CV series medium-duty vehicles there, a spokesman said.
Automakers FCA, Ford Motor Co. and GM on March 18 were the first vehicle manufacturers to announce temporary plant closures at least until the end of March.
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