Trucking Executives Cautious About 2010

This story appears in the Jan. 25 print edition of Transport Topics.

LAS VEGAS — Top executives from large trucking, truck-making and component manufacturing firms said they all see signs of a good business climate to come, but predicted 2010 will not be a boom year, and they are moving forward with very conservative business plans.

Speaking at the Heavy Duty Dialogue on Jan. 18 and the trade show that followed here, the officials agreed that surviving 2009 had been a notable accomplishment, and that they all expected this year to be better, but they weren’t sure just how much better.

One example of this split came from Jerry Moyes, chairman and CEO of Swift Transportation Co. He told attendees about what he saw as his company’s substantial opportunities in North American truckload transportation, plus international shipping from West Coast ports.

However, Moyes then said, “We’re done for this year” in terms of his truck-buying plans for 2010. “And next year, we’re taking a look at running our trucks longer.”

Moyes said for this year he’s buying only 15 to 20 tractors with 2010 engines so his staff can test them. Swift has a fleet of 14,000 tractors, and his Central Refrigerated Service unit has another 2,000 Class 8 trucks.

While large fleets have generally run their trucks for around three years, it appears that at least some are planning to extend their duty cycles by as much as two years.

Truckload carrier U.S. Xpress Enterprises won’t buy new trucks until the second half of 2010, and not many then. In the meantime, its managers are looking into the used truck market for the first time, said Patrick Quinn, the fleet’s co-chairman and president.

Moyes and Quinn were on a fleet panel during Heavy Duty Dialogue.

To kick off the day’s panels, Dennis Michels, chairman of the Heavy Duty Manufacturers Association, which sponsors the dialogue, said he saw a Detroit newspaper headline announcing, “The buzz is back,” with respect to the automobile industry.

“I think that applies to our industry as well, but are things better?” Michels asked.

“We’ve learned to be very lean and operate at the bottom of cycles,” said Dennis Slagle, CEO of Volvo AB’s two North American manufacturers, Volvo Trucks and Mack Trucks. “We’re hoping for a recovery, but planning for a continuation of 2009 and staying lean,” he said, adding that early 2010 truck sales will be dominated by selling off the inventory of 2007-generation truck engines in inventory.

Slagle said he has listened to fleet statements and talked to customers. Therefore, he was not surprised by Moyes’ and Quinn’s statements.

Diversified operations, either by geography or product line, were cited as survival techniques by others.

Parts maker ArvinMeritor Inc. survived a brutal 2009, posting a net loss of $1.21 billion for the 12 months ended Sept. 30, although $944 million of the loss was from noncash charges.

“We got through and made it to the other side,” said Chairman and CEO Charles “Chip” McClure. “And we didn’t need any government help and avoided bankruptcy court.”

In an interview with Transport Topics, McClure said recent experiences made him especially confident of decisions made to shed costs, sell off the company’s light vehicle lines and concentrate on on-highway and off-road commercial vehicles.

Among the places where ArvinMeritor operates, McClure said China currently is doing best, India and Brazil are tied for second and the United States and Europe are the most sluggish. Although the recession proved to be global in nature, the fact that it was not simultaneous among the continents was helpful.

“India did not have the subprime mortgage problems we did. Their economy eventually dropped off, but it’s come back nicely,” he said.

“The Chinese government stimulus really hit our sweet spot last spring,” McClure said, funding programs that led to truck manufacturing. He also said Brazil has improved its economy considerably.

“Business is much better now than during the first half of 2009, when it was absolutely miserable,” said Joseph McAleese, CEO of Bendix Commercial Vehicle Systems.

Interviewed at his company’s booth on the trade show floor, McAleese said that there is reason to be optimistic, but economic expansion has not yet gained traction.

“Since the last four or five months of last year there was an expansion in original equipment sales, and it’s continued into January, but I think after the inventory of 2007-generation engines is gone, then we could go backwards,” said the maker of brakes and stability systems.

“The aftermarket sales picked up around August, and they’ve been OK, but they’re not robust,” he said.