Truck Orders Rise 28%

This story appears in the April 26 print edition of Transport Topics.

New orders for Class 8 trucks in March rose 28% from a year earlier, the second month in a row they have climbed, as buyers put requests for 11,285 new vehicles on the books, according to ACT Research Co.

Orders last month reached the highest level since December, and the March total was the third-highest in the past 12 months, according to ACT. The Columbus, Ind., company said in its April 19 report that Class 8 orders jumped 3,384 units, or 42.8%, from February’s level.

“This is the time of the year, traditionally, when we start seeing some of the big fleets come into the marketplace and negotiate their deals on the new model year,” said Steve Tam, ACT’s vice president for the commercial vehicle sector. “The strength of that [March] order number makes me wonder if someone hasn’t gotten to those types of agreements yet.”

The three- to four-month turnaround time on a truck order means that these fleets have to book now in order to field new trucks for back-to-school and holiday freight deliveries later in the year, Tam said.

Truck makers declined to comment on negotiations with U.S. buyers.

A Mack Trucks spokesman said only that “quote activity has in-creased,” and that “there are positive signs moving forward.”

Paccar Inc., which reported a first-quarter earnings gain, said the market for new equipment is showing signs of firming up, even if a full recovery may not be in the cards yet.

The Bellevue, Wash., truck maker saw its first-quarter profits rise on a pre-2010 sales rush, in which buyers bought trucks with engines made before new emissions regulations took effect in January.

Paccar said it has booked about 1,500 orders for its 2010-certified MX engine in the past 12 months. That represents about 5% of its total truck orders in the period, Chief Executive Officer Mark Pigott said.

In the short-term, however, Pigott said, he expects Paccar’s “build-rate in the second quarter to be comparable to the first quarter.”

ACT Research and other analysts attributed the March jump to easy comparisons with nearly rock-bottom activity in the prior year. Truck sales slumped to 94,798 in 2009, the worst sales year since 1983, WardsAuto.com reported.

Carriers offered mixed signs about new truck procurement.

Heartland Express said it plans to take delivery of an unspecified number of 2011 model year International ProStars in the second quarter.

Werner Enterprises said it plans “to keep our fleet size constant at approximately 7,300 trucks for the foreseeable future.”

Paccar, maker of Kenworth and Peterbilt trucks, sold $1.15 billion worth of new trucks in the United States and Canada in the first quarter, an increase of about 29% from year-ago levels. Much of the increase was a result of last year’s pre-buy.

On a conference call, Paccar said that while new truck demand will be constrained this year by the fragility of the recovering economy, higher used truck prices and an aging U.S. fleet eventually will drive buyers to order more new trucks.

“Truck retail sales are still below replacement demand levels, resulting in the North American truck fleet age of nearly seven years,” Paccar Executive Vice President Dan Sobic said.

Pigott said that “used truck values have gone up about $2,500 per vehicle over the last year or two” and that eventually, used truck prices will get “to a point where customers are saying, ‘You know, there may be some advantages to buying a new truck.’ ”

At least one Kenworth customer, refrigerated hauler TransAm Trucking, was swayed by those advantages. On April 22, Kenworth announced TransAm ordered 1,050 T660s, all with 2010 engines.

One analyst remained doubtful the new truck market would sustain its current pace as the pre-buy fades and freight markets stay inconsistent.

“We expect continued overcapacity, higher new truck prices and a slower-than-expected rate recovery for [truckload] providers to result in a truck demand upturn below market expectations into 2011,” said Tim Denoyer with Wolfe Trahan.

Likewise, W.M. “Rusty” Rush, the head of Rush Enterprises, the country’s largest Peterbilt dealership, said that “2010 will be another difficult year for truck sales.”

However, Rush expects orders will improve later this year, priming the market for a rebound in 2011.