Truck Order Backlog Grows

This story appears in the May 2 print edition of Transport Topics.

As the backlog of orders for heavy-duty trucks has grown to levels not seen since late 2006, at least three of the four major vehicle manufacturers have announced commodity surcharges, with the extra fees as much as $975 a truck.

ACT Research Co., an independent analysis firm in Columbus, Ind., said on April 20 that Class 8 orders in March totaled 28,900 units, the fifth straight month that orders reached 25,000 or more. And this trend is driving the delivery backlog.

“Given current production levels, this strong order volume pushed the Class 8 heavy-duty backlog to almost 108,000 units” at the end of March, ACT said. This is the largest backlog since December 2006.

“Every indication is that orders will continue to be strong in the near term, and we’re still in a backlog build-up period,” Frank Maly, ACT’s director of commercial vehicle transportation analysis and research, told Transport Topics.

Meanwhile, Mack and Volvo Trucks North America, both part of global truck maker Volvo AB, said they would institute a $975 materials surcharge on each vehicle in the second quarter. Daimler Trucks North America, which builds Freightliner and Western Star trucks, and Navistar Inc., maker of International Trucks, said they would add commodities surcharges, but they declined to specify figures.

At the end of April, “we are instituting a $975 materials cost surcharge [for each vehicle] to defray increasing materials costs,” Kevin Flaherty, a Mack senior vice president, told TT.

Most commodities — including petroleum, rubber, steel and aluminum — have shot up dramatically in the past six months.

“We have implemented a raw materials surcharge, as well, but can’t provide specific amounts, as they vary by vehicle,” Stephen Schrier, spokesman for Navistar Inc., told TT.

Paccar Inc., parent company of Peterbilt Motors Co., and Kenworth Truck Co., did not respond to inquiries about whether it has changed the initial prices for trucks built in 2011.

Mack Trucks said that it has just begun adding the surcharge.

Flaherty said Mack also was hiring more people to help fulfill expanded orders.

“We are in the process of hiring about 50 people to support an increase [in production] that will be effective June 1,” Flaherty said.

Ron Huibers, senior vice president, of sales and marketing, for Volvo Trucks, said the company would be able to meet the expanded orders, though some delivery delays could occur.

“We expect the replacement cycle that we are now in to continue, and we are well-positioned to manage it,” Huibers told TT. “However, if an expansion cycle begins, backlogs and lead times could start to stretch.”

He said that VTNA announced in March a $975 “materials cost surcharge” per truck over the original 2011 price and said it would go into effect sometime in the second quarter.

Daimler spokeswoman Amy Sills said that Mark Lampert, DTNA’s senior vice president of sales and marketing, had announced at the Mid-America Trucking Show in early April that the company was imposing a surcharge on each vehicle for the cost of materials, but the amount was not disclosed.

“[We] don’t comment publicly on pricing topics in any detail,” Sills told TT.

She did say that DTNA had faced challenges in raising production to meet the sudden order increase.

“The rapid acceleration in production presents many challenges along the supply chain,” Sills said. “We have been successful in addressing those challenges and maintaining production schedules to meet market demand.”

Richard Witcher, vice chairman of American Truck Dealers, said truck manufacturers were acting cautiously to avoid the severe downsizing of the past recession.

“The waiting time for delivery is extending, and the further we go along with the recovery, the extension times will get longer,” said Witcher, who is chief executive officer of Minuteman Trucks Inc., Walpole, Mass., a dealer for International and Western Star trucks. “I know from ATD board of directors meetings that this is happening to everyone else, as well.”

Witcher said that truck manufacturers “are faced with a difficult perspective and decision-making process” in deciding how much to ramp up production.

“They had built up large staffs to meet the huge orders of the last cycle, and then they had to face an enormously painful process to have to let a number of people go to reach what was called the new ‘paradigm,’ ” Witcher explained.

“Manufacturers are not eager to shoot up their production, but rather all are taking as much caution as possible to reach an appropriate response,” he said.