Trailer Orders Decline 12.2% During March, But Backlogs Remain Healthy, ACT Says

This story appears in the April 29 print edition of Transport Topics.

March trailer orders fell 12.2% from a year ago due to sluggish U.S. economic growth, ACT Research reported, but trailer makers reported continuing healthy order backlogs.

Manufacturers booked 16,911 net orders for new trailers in March, compared with 19,261 in the same month last year, ACT said.

The March total also declined on a month-to-month basis, slipping 5.5% from February’s tally of 17,898.

ACT analyst Frank Maly attributed the slowdown to “a level of caution” among trailer buyers about the economy.

“People are being prudent is what it comes down to,” he said. “The good thing is we’re not really seeing lots of cancellations. The orders that are being placed are firm business.”

Trailer orders declined on a year-over-year basis in each of the first three months this year, ACT said. The industry added a total of 54,825 net orders in the first quarter, down 16.2% from 65,403 in the same period in 2012.

“We do think that things are going to pick up as the year progresses,” Maly said.

The slower order intake is “not a huge shocker or concern” for most trailer makers right now because their backlogs are still “pretty good” and fleets still need to replace aging equipment, said Chris Hammond, vice president of marketing at Great Dane Trailers.

“There’s no alarm bell ringing,” he said. “You get used to riding the ebb and the flow of the trailer world when you’re in this business. It’s cyclical.”

Great Dane’s production backlogs extend into the third quarter, Hammond said.

Despite the softening in incoming orders, Great Dane entered 2013 at a higher production rate than it did in 2012 and has been building more trailers each week than it did 12 months earlier, he said.

Hammond said he anticipates full-year trailer production to be similar to, or better than, last year as a result.

Utility Trailer Manufacturing Co. also remains “optimistic” that this year will match or slightly exceed 2012’s build total through “the ups and downs of the seasons,” said Larry Roland, the company’s marketing director.

“There is little doubt that the beginning of sequestration and fears portrayed in the media had a significant effect on March orders,” he said.

Utility’s refrigerated trailer backlogs “remain firm,” but the slowing trends “have taken their toll primarily in the dry-van and flatbed factories, softening the backlog a bit,” Roland said.

David Giesen, vice president of sales and marketing at Stoughton Trailers, said March was a “very good month” for his company due to one large order that boosted the total. However, he said dry-van orders in the first quarter were down.

Looking at the industry as a whole, Giesen said he “would not have guessed that the first three months would have been this low.”

“I think the biggest issue is the sluggish economy,” he said. “That’s what’s slowing them down.”

Despite customers’ caution, their pent-up demand for new equipment still exists, Giesen said. “That’s why I believe the second half should be good.

Stoughton still has a “healthy” backlog, with all production lines extending into the third quarter, he said. “The question is, did the industry build up enough backlog to carry us through the slower months?”

ACT’s Maly said the industry’s backlog at the end of March represented about 4.3 months of production at current build rates, down from 5.1 months at the end of February.

“The majority of the difference is due to stronger production rates in March,” he said.

In contrast to the industry at large, order intake at Hyundai Translead rose year-over-year in the first quarter of 2013, said Brett Bartels, the company’s deputy general manager of sales and marketing strategy.

Assessing the industrywide orders downturn, Bartels said “caution is likely a reason for the decline.”

“People are still not really sure where things are going,” he said.

Earlier this month, Wabash National Corp. projected that its new trailer shipments for the quarter were about 8,600, within its previous guidance of about 8,000 to 9,000 trailers.

The company also said it expects shipments to be higher in the remaining quarters of 2013, compared with the first quarter, and maintained its full-year outlook of 45,000 to 48,000 shipments.

“Quote and order activity throughout the first quarter remained healthy and in line with seasonal demand trends,” Wabash said in an April 17 filing with the U.S. Securities and Exchange Commission.

The company is scheduled to report its first-quarter results on April 30.

ACT’s Maly also said the March cancellation rate, compared with incoming orders, was about 3%, which is “well within acceptable levels.”