Trailer Orders Gain 10%; Analysts Say Market Easing

Trailer manufacturers said they received 12,524 net orders in August, a 10% increase from a year ago, but below July’s level, ACT Research Co. reported last week.

But August’s decline from July’s total, coupled with a steady stream of cancellations, raised concerns about the market’s strength, the company said.

Frank Maly, ACT’s director of commercial vehicle transportation analysis, and other industry executives said that while the trailer market still showed strength, the rapid boom from November through March was over and they were uncertain about the near future.

“The extremely strong quoting activity and the surge in orders that began in the fall of 2010 have now reached a plateau,” Maly told Transport Topics. “Concern over economic uncertainties has now become a factor in the short to medium term.”

He said that July and August were typically the lowest order months of the year.

“We’ll be carefully watching orders in September to see whether a rise after the usual summer slowdown will occur,” Maly said.

Fleets have so far placed orders for 144,819 new trailers through August, compared with 94,293 during the same period of 2010, a 53.7% increase, ACT reported Sept. 26.

ACT said orders were up 10% from the 13,298 new trailers ordered last August, but down 5.8% from July. Between November 2010 and March 2011, orders were about 20,000, peaking at 28,075 in March.

Maly said that while the number of cancellations per month has not gone up, the percentage of cancellations has climbed because new orders have slowed.

“Back in March, just 1.3% of orders were canceled, which went up to about 4.2% in July and 5.4% in August,” Maly said. “The gradual upward path of cancellations bears watching.”

Bill Tirrill, vice president and trailer sales manager of leasing company Fleetco Inc., already has seen a fall rebound.

“We’ve seen sales pick back up again, which is a nice change of pace from what we lived through during the normal summer slowdown in July and August,” Tirrill told TT.

Tirrill said many of the fleets that were buying or leasing “seem to be getting their trailers under the 10-year rule again.”

He said shippers slacked off during the recession on their rule of not sending freight in trailers more than 10 years old, or five years old in the case of paper distributors.

“The shippers haven’t reimposed it yet, but you can tell a lot of fleets are trying to get their tractor fleet under 10 years old, in case they do,” Tirrill said.

He added that Fleetco’s leasing arm of 1,600 trailers has 100% utilization.

“That tells us that fleets are getting orders from new customers, and what they’ll usually do is to lease for three to six months to make sure the contract will work out, and then they’ll buy.”

Glenn Harney, chief sales officer of Hyundai Translead, also was cautious about the market’s direction.

“ACT Research has pretty much been right on target in its assessment of the trailer market,” he said.

Harney told TT that the trailer market “does seem to have slowed a little bit” because of “uncertainty in the freight environment.”

“Customers who a few weeks ago were talking about putting in robust orders have begun to scale back some,” he said. “Quoting activity is still very strong, and we’re closing a lot of business, but the quantities have dropped back.”

“I don’t see a sense of panic right now, just caution,” he added. “Everyone is waiting to see whether the government will make a move in one way or another.”

Joe McAleese, CEO of Bendix Commercial Vehicle Systems, which makes air brake systems and other components, also was cautious.

“Declines in trailer orders are concerning if they continue in the coming months,” McAleese said. “Usually, trailers are a leading indicator of the overall Class 8 industry.”

“Right now, we’re still doing fine in the trailer sector, busy across the board,” McAleese said. “I think we’ll be up again next year as well. Again, it would be concerning if this leading indicator didn’t turn back up.”

The shaky economy also worried executives at platform and flatbed builder Fontaine Trailers, said Hank Prochazka, vice president of sales.

“This summer was a very slow downtime,” Prochazka told TT. “We were in a constant state of battle, and we’re fighting our way through.”

He said that company officials “grew very concerned watching the stock market drop and the stalemate in Washington.”

“A lot of our customers went into a holding and wait pattern,” Pro-chazka said. “However, orders in August and September were robust, and October is looking very good.”

Prochazka said Fontaine had enough of a backlog to keep its factory busy through the first half of 2012.

“Still, I don’t see next year as anything more than flat, and flat is the best that I can see, because of the economic conditions,” Prochazka said.

Three manufacturers, Wabash National, Utility Trailer Manufacturing Co. and Great Dane Trailers, did not respond to requests for comment.