Truck Pre-Buy Unlikely in ’09; Execs Confident in New Engines
By Sean McNally, Senior Reporter
This story appears in the May 26 print edition of Transport Topics. Click here to subscribe today.
NEW YORK — Executives with four of the largest U.S. trucking fleets all said they are not planning to pre-buy trucks next year.
The executives, speaking to investors and reporters May 20-21 here at the Wolfe Research Transportation Conference, said they were confident with the technologies that will be used to meet the Environmental Protection Agency’s 2010 diesel engine emission standards and that projected price increases on those models would be less than originally feared.
“We will not participate in a pre-buy,” said Jerry Moyes, chief executive officer of truckload carrier Swift Transportation.
“In 2006, we did participate in a big pre-buy,” said Max Fuller, co-chairman of truckload carrier U.S. Xpress Enterprises, “but for ’09, we won’t.”
Dave Parker, chairman and chief executive officer of Covenant Transport, said the Chattanooga, Tenn.-based truckload carrier would buy more trucks next year, but not to avoid purchasing new rigs in 2010.
“We did a pre-buy before, and we will remain on the same schedule,” Parker said. “So, next year will be a big buy year but just to replace our trucks, not necessarily to get ready for 2010.”
Judy McReynolds, chief financial officer for Arkansas Best Corp., said ABF Freight System, the less-than-truckload unit, was following a similar strategy.
“What we’ve done for this upcoming year is just replacements; we don’t have any net additions to our fleet,” she said. “Typically, we wouldn’t do a huge pre-buy. What we’ll do is get some advance units that have the engines in them and test them.”
McReynolds said ABF’s keeps its tractor fleet at about 18 months old, and the relative youth of the fleet gives ABF “a lot of flexibility.”
“If we don’t like what we see, we can just use the ones that we have for a little bit longer,” she added.
Before the tightening of standards for particulate matter and nitrogen oxides from diesel engines in 2007, sales of Class 8 trucks rose for 38 months, ending in December 2006.
Since then, heavy truck sales have declined year-over-year for 16 months.
The massive run up in sales heading into 2007 was fueled by concerns about higher prices and the reliability of the technology required to meet those standards.
“We’re not as worried about this one,” said John Smith, chief executive officer of truckload carrier CRST International.
“We feel very comfortable with these new trucks,” Parker said.
Fuller said the technologies that will be used to meet the 2010 rules are “proven,” either in Europe or the United States, and truck makers aren’t going to have to redesign their product to accommodate changes to the engine.
In 2007, he said truck makers had to put “bigger radiators in and redesign the cab to handle” the new engines, thus increasing costs.
“This cycle, I’ve heard numbers as low as $2,500 and as high as $5,000, plus the European manufacturers are talking improved fuel economy that’s fairly considerable, and the U.S. guys are basically saying we hope to maintain what we’re doing,” Fuller said.
The 2007 engines were widely criticized for their reductions in fuel efficiency.
“We aren’t being asked to gamble,” Fuller said. “For ’07 we were being asked to pay $10,000 more for trucks and engines.”
Fleet owners also have calmed their nerves because truck and engine makers are supplying carriers with test units well in advance of the technology switch.
Moyes said he expected to receive test engines “pretty quickly,” and Fuller said U.S. Xpress has been working with some 2010 engines “since January, and they are doing extremely well.”
The executives agreed they would not pre-buy trucks, but they were less sure about which technology they would embrace: selective catalytic reduction or exhaust gas recirculation.
Moyes was the only executive to endorse one technology, telling TT that Swift was “pretty committed to the Cummins product, and they will be the non-SCR engines.”
Fuller said U.S. Xpress was testing EGR engines, as well as Detroit Diesel’s DD15 model, but has yet to incorporate the SCR component.
CRST has yet to begin testing engines, Smith said, but “haven’t committed yet” to a technology.
“My guess is, we’re primarily a Freightliner purchaser, so wherever they go, we’ll probably go, too,” he said. “But you never know. We may go in a different direction, if we independently decide that’s wrong.”
