Truck Market Strengthening, Daimler Financial Exec Says

This story appears in the Oct. 4 print edition of Transport Topics.

WASHINGTON — The new truck market is showing signs of picking up further this fall as the economy improves and the nation’s truck fleet continues to grow older, the head of Daimler Truck’s U.S. financial arm said.

“I continue to be optimistic,” said Juergen Rochert in a Sept. 27 interview with Transport Topics staff in Daimler’s Washington office. “In large part, the economy is moving in the right way. People are getting their arms around the new technology [in 2010 trucks] — the economics are there. The average age of the fleet is approaching seven years. I can’t imagine a fleet that is 8½ years old.”

U.S. truck sales through August climbed 16.5% this year from the same period of 2009, but the pace remains well below the level needed to renew a fleet whose age is at a 20-year high (click here for previous story).

Optimism is being fueled by fleets’ growing interest in new trucks with better fuel efficiency and lower maintenance costs as the prices for late-model used equipment rise and that supply dwindles, said Geoff Robinson, vice president of sales, marketing and remarketing for Daimler Truck Financial.

Used tractors on the market buyers consider to be low-mileage vehicles now typically have 400,000 miles on them, compared with 250,000 in past years, he said.

Over the past 60 to 90 days, Robinson said that fleets are showing increased interest in buying trucks, based on an increase in applications for the financing of new trucks.

Until recently, 70% of financing applications in 2010 were for used tractors, up from the 60% level in 2008 and 2009, Robinson said.

“Freight and rates are coming back,” he said. “It may not be reflected in our business yet, but that’s the basis for future growth,” he contended.

There are other signs of a stronger market.

Daimler Financial’s revenue is projected to be $1.7 billion this year, about 40% better than in 2009, Robinson said.

The percentage of fleets that are behind on their payments has shrunk below 20%, Robinson said, far below the 40% to 50% that were more than 30 days late a year ago.

Last year, almost twice as many trucks had to be repossessed and remarketed than in 2008.

Rochert said that taking back a truck “is the last thing we want.”

“We’re here to sell trucks and buses,” he said. “We’re here to support sales. Our job is to help people get financing, not to say ‘No’.”

To illustrate that point, Rochert said the approval rate for new financing has remained steady at 78%.

Robinson said some fleets’ financial difficulties moved them to lower financing tiers with less advantageous terms. In those cases, Robinson said Daimler made extra efforts to complete a lending deal.

Over the past year, interest charged on Daimler’s loans has fallen about two percentage points as rates have declined in general.

Rochert said that in general many bankers have tightened their lending standards, though Daimler Financial hasn’t followed suit.

“A lender’s conduct has a direct impact on [fleets’] ability to buy trucks,” Robinson said. “Financing is an integral part of the package. Many customers want to know about flexibility. The question is how we adapt to that.”

Robinson observed that companies got themselves in trouble when they waited too long to contact their lender to discuss altering payment terms.

“There are a number of things we can do to make transactions easier,” he said. “Flexibility has helped some fleet customers get through this [recession].”

Daimler Financial, for example, started a program to allow 60 days to 90 days before a first payment is due since some carriers need at least 45 days before their revenue stream is solid enough to make a payment.

A pilot program for Western Star trucks offers no interest for the first six months.

Daimler Financial also has a guaranteed resale price program that some customers requested.

In addition, there are seasonal payment options to match the pace of fleets’ business levels and arrangements such as staggered payments or increased payments in the latter months of a loan.