Tag Archives: Trucking

After a torrid couple of years, the 18-wheeler business is fading. From Wolf Richter at wolfstreet.com:

This is a very cyclical business. 

In December, orders for new Class-8 trucks — the heavy trucks that haul the products of the goods-based economy across the US — plunged by 43% from a year ago, to just 21,000 orders, the lowest since August 2017, and down by 60% from August 2018. The chart shows the percent change of Class-8 truck orders for each month compared to the same month a year earlier, which eliminates the effects of seasonality (data via transportation data provider FTR):

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Many internet commentators would like to treat every statistic and story emanating from the government indicating the economy is strong as just so much propaganda. However, how do you explain the trucking industry, which is going great guns? From Wolf Richter at wolfstreet.com:

“Fleets are desperate for more equipment, but trucks are in short supply due to the supplier constraints.”

Orders for heavy trucks that haul trailers loaded with anything from junk food to oil-field equipment across the US skyrocketed 141% in June compared to a year ago, to 41,800 orders, making it the highest June ever recorded, according to transportation data provider FTR. For the first six months this year, order volume of Class 8 trucks surged nearly 90% from a year ago to a phenomenal 235,050 units.

The chart below shows the percentage change of Class 8 orders compared to the same month a year earlier. Note the transportation recession when orders plunged, and truck makers were responding with layoffs. Orders began to rise in early 2017, including the year-over-year spike of 158% in October 2017, compared to the terrible October a year earlier:

Truck manufacturers “cannot keep up with demand due to component shortfalls,” FTR reported. “The backlogs are being moved out further, which is pushing fleets to get orders in sooner rather than later so they can find a build slot.”

This chart of Class 8 truck orders in units also shows that orders are seasonal, that month-to-month declines starting in March are typical, and that June is typically a weak month. But not this year:

FTR points out how the circularity of rising orders and subsequent delays getting orders filled leads to even more orders and even greater delays – which is part of the boom-and-bust cycle of the industry:

“There is an enormous demand for trucks due to burgeoning freight growth and extremely tight industry capacity. However, supply is severely constrained because OEM suppliers cannot provide the needed parts and components required to build more trucks fast enough. This bottleneck is causing fleets to get more orders in the backlog in hopes of getting more trucks as soon as they are available.”

“Fleets are desperate for more equipment, but trucks are in short supply due to the supplier constraints. This is creating a surge in orders as fleets react to this unusual situation.  If OEMs were producing at capacity, the truck build this year could have been as high as 360,000 units. Orders for the last twelve months have now reached 411,000, so there are some excess orders in the backlog.”

To continue reading: Heavy-Truck Orders Explode, Trucking Companies Struggle with “Capacity Crisis,” Truck Makers & Supply Chains are Inundated, Backlog is Ballooning, But it’s a Cyclical Business

Yet another indication that the real economy is not doing well. From Wolf Richter at wolfstreet.com:

Transportation Recession exacts its pound of flesh.

Orders for Class 8 trucks – the rigs crisscrossing the US highway system that keep the nation supplied – plunged 27% in September to 13,791, according to FTR Transportation Intelligence. It was the worst September since 2009.

The year 2014 had been great. Nearly 300,000 Class 8 trucks were built. 2015 started out even stronger, and the industry anticipated – in what has become a series of false hopes inspired by QE-nurtured optimism about capital expenditures – that 327,000 heavy trucks would be ordered, which would have been a record.

But then the trucking industry began to sputter as the goods producing economy was swooning, and soon trucking companies, beset by overcapacity, began to curtail their purchases from heavy-truck dealers, and dealers with inventories piling up, began to cut orders to manufacturers. As 2015 wore on, orders continued to fall. Despite the strong beginning, orders ended the year down 5.3% from 2014, to 284,000 trucks.

This year has turned out to be outright ugly. This chart shows orders for Class 8 trucks in 2015 and 2016 through September:

“Fleets are cautious due to an uncertain economy and slow freight growth,” explained Don Ake, vice president of commercial vehicles at FTR. “Class 8 inventories also remain high and this also restrains new orders.”

But as in 2014 and in 2015, hopes rule the day.

“Large fleets are expected to begin ordering replacement units for 2017,” Ake said. “If the economy does improve and the trucking outlook brightens, then medium-sized fleets and others should feel confident enough to order also in coming months.”

Struggling with plunging orders and under pressure to cut costs, truck manufacturers have been laying off people all year. Volvo Trucks North America has gone through two rounds of layoffs this year, 500 folks in February and another 300 in July.

“[W]e operate in a cyclical market, and we have to adapt to market demand,” spokesman John Mies wrote in an email in July to The Roanoke Times, Roanoke, VA, not far from Pulaski County, where the Volvo plant is located. Layoffs always hit surrounding communities the hardest.

Freightliner, a unit of Daimler Trucks North America, announced nearly 1,000 layoffs in January and another 1,250 layoffs in February, blaming “a sustained reduction in orders.” Then in June, it added another round of layoffs, this time 800 workers.

Navistar cut 10% of its workforce, or 1,400 people, in late 2015. Paccar, which produces Kenworth and Peterbilt trucks, also announced layoffs at some of its plants, along with suppliers of truck manufacturers, including diesel engine maker Cummins.

Heavy trucks play a crucial role in the US economy. In 2015, they transported 64.3% by value of total freight, with the other modes being rail, pipeline, air, and vessel. The trucking business, even more so than railroads, is an important thermometer for the goods producing economy. And that’s where part of the problem lies.

To continue reading: Heavy Truck Orders Plunge, Worst September since 2009