Trailer Orders Rise 15%, Ending String of Monthly Drops

By Rip Watson, Senior Reporter This story appears in the Oct. 1 print edition of Transport Topics.

Trailer orders rose 15% in August from a year earlier, ACT Research reported, reversing a recent pattern of decline and fueling hope that the traditionally strong fourth quarter order pace will occur again this year.

Information compiled by ACT showed orders totaled 15,370, which was an 8% improvement from July and the best month since April. Dry van orders rose the fastest at 56.5% in August from a year earlier, ACT data show. Refrigerated trailer orders climbed 13%.

“We have to put this in context,” said Kenny Vieth, president of ACT, Columbus, Ind. “The third quarter [historically] includes three of the four weakest months for trailer orders, so any improvement is good.”

“We expect volume to pick up in the fourth quarter and first quarter [of 2013] when the big fleets come into the market,” he added.

Vieth explained that many fleets place orders late in the year or in winter so that they have new, additional equipment available when freight volumes pick up in the April-June period. Ordering earlier in the cycle can mean that the new equipment sits idle until freight volumes grow.

In last year’s fourth quarter, trailer orders totaled about 72,000, or about 24,000 per month, including a five-year high in November over 28,000.

“The order pace slowed through the summer,” Chris Hammond, vice president of dealer sales for Great Dane Trailers, told Transport Topics. “Our fourth-quarter production is filled so we expect a strong finish.”

He added that “fleets are still talking about good order sizes for next year. This is especially true for flatbeds as we continue to try to increase our capacity in that segment.”

Dave Giesen, vice president of sales and marketing for Stoughton Trailers, said he is also seeing the typical seasonal trend.

“We are starting to come out of the traditional slow season,” he told TT. “Our schedule is really full for the fourth quarter. We are still optimistic. We are already getting a lot of interest in the first quarter [orders]. We still have a pretty healthy backlog.”

There is, however, a major question mark overhanging the pace of fourth-quarter orders, Vieth said: the so-called “fiscal cliff.”

His reference is to the uncertainty about potential federal budget cuts and a possible end to tax cuts.

“The smaller truckers who are typically in the market at this time are holding back,” said Vieth. He said the federal budget issues are making owners “cautious” about equipment orders.

He predicted if the issues are resolved, a normal amount of orders would be placed.

Giesen acknowledged that there was some hesitation in orders by what he called “a smaller group” of customers.

“The majority of them are running business as planned,” Giesen said.

Hammond said that production in 2013 may start more slowly because of the uncertainty about events in Washington.

Manufacturers including Utility Trailers, Hyundai Translead and Wabash National did not return calls seeking comment.

Vieth said there is still a bit of time for the fiscal situation to be resolved before the busy months of November and December. October, he said, is usually a transitional month into the stronger order pattern.

Orders in 2012 have been dropping since January, when the total was 26,000. Since then, the number of orders has slipped on a monthly basis and dropped below 15,000 earlier this year.

Trailer building continues at the rate of 20,000 a month, and the order level is holding around 15,000, levels that are satisfactory for this time of year, Vieth said.

As a result, the trailer manufacturing backlog is holding relatively steady, he said.

The trailer backlog of around 4.5 months is in sharp contrast to the Class 8 tractor business.

Declining Class 8 orders in recent months have pushed the backlog below three months and forced reconfiguration of manufacturing schedules, Vieth said.

Dry van and refrigerated trailer orders typically account for about two-thirds of trailer orders.

The ACT orders are on a net basis, including cancellations. The cancellation rate was below 2% in August.