One of the joys of my job is always being on the lookout for great sources of information for the PMPA members.

We Think Heavy Trucks Rule!

Boy did I find a great source of news and  info on the heavy truck market!
Here are some factoids from a couple of their most recent news releases posted in their news room on their website:
1) FTR Associates has released preliminary data showing February Class 8 truck total net orders for all major North American OEM’s at 7,628 units, 19.7% higher than January when orders were the lowest since 2002.
Lesson there: January 2010 was lowest Class 8 truck sales volume since 2oo2! February data was still below 2009 average, but we think that for class 8 trucks, this may be the bottom.
2)FTR Associates continues to forecast Class 8 demand for 2010 and 2011 at the same levels as was forecast by the firm one year ago. FTR’s March North American Commercial Truck and Trailer Outlook Report   forecasts 2010 demand for Class 8 vehicles will increase just 3% over 2009. The company projects that this will be followed by considerably more significant improvement of over 50% in 2011.
Analysis: FTR is forecasting only a 3% increase in demand for class 8 trucks in 2010. Last December, we ran a post about the heavy truck market that gave 6 reasons why we were bearish about prospects for heavy truck:

  1. Commercial credit availability is still impaired,
  2. Reduction of debt throughout the economy,
  3. Decrease of “stimulus” spending,
  4. General  reticence to invest because of higher than normal risk.
  5. The economy has lost many years of growth- so fewer trucks are needed. (For instance, The precision machining industry sales are 85 percent of what they were in 2000 according to PMPA Business  Trends Report.
  6. The cost of  EPA 2010 Regulation compliant trucks is $10,000 higher. 

While the manufacturing indexes are showing improvement, we don’t see that any one of these 6 has gone away.  And with intermodal continuing to gain market share, the need for new Tractors remains weak in our opinion.
We think that the folks at  FTR Associates are right on the money with their research.
If supplying precision components to the heavy truck and trailer market is your company’s thing, we bet that you will find this FTR Associates to be a great new “Tool You Can Use.”
What is your take on the Heavy Truck Market? Are you seeing better than 3% growth? We said in December that heavy truck sales would lag GDP; if FTR Associates are correct at 3% growth for 2010 heavy truck,  what does that tell us about 2010 GDP?

The August 2009 PMPA Business Trends Report increased to 73 in August up 3 points from July, up 4 points from June, and up 8 points from the May 2009 low of 65.  Three months in a row of upward movement!

"Only three months in a row of non negative sales growth"
"Only three months in a row of non negative sales growth"

Three consecutive months of improvement. Or as one of my more pessimistic colleagues puts it, ” three consecutive months of sales not getting any worse.
We’ll prefer our positive optimism to living in his dreary outlook anyday.
Here are our latest reasons we believe that the precision machining industry has begun its recovery based on approximately 100 members participating in our monthly PMPA Business Trends Report.

  1. Three consecutive months of sales increases.
  2. Over half  52% of respondents reported sales increases, and one third reported double digit sales increases.
  3. Average length of first shift climbed again to 38.2 hours. 
  4. 63 % of responding companies reported 40 hour or more average length of first shift.

The shops reporting serve the Medical, Automotive, Aerospace, Heavy Machinery, Truck, Construction Equipment, Food Service Equipment, and Military Markets.
PMPA members can see the latest Business Trends Report here.
Bonus good news  about the economy from the Fed Open Market Committee per  an email from Dr. Ken Mayland, Clearview Economics:
“…economic activity has picked up…” versus last meeting on 8/12: “…economic activity is leveling out.”  Yeah!  The economy is now recovering (not recovered).
Picture credit :

Deutsche Bank reports that Class 8 truck orders for July were 9100 units, up 8.8% from June’s 8360. June’s 8360 was up 16.5% from the May low of 7176. The last of the EPA07 Truck orders will drive incremental production increases in Q4 2009 and Q1 2010 according to their global markets research report.

Class 8 trucks bring our raw materials and deliver our products.
Class 8 trucks bring our raw materials and deliver our products.

Deutsche Bank’s forecast for industy sales of Class 8 trucks is 90,000 for 2009; 125,000 for 2010. That’s the good news.
The downside is that the USEPA’s Heavy-Duty Highway Diesel Program Rules  required new engines will increase costs. 
“The introduction of new engines in 2010 may impact fuel economy, routine vehicle maintenance, and operational costs,”   according to the ATA website
Not to mention anticipated increase  of cost of the  new compliant class 8 engines: “Class 8 engine costs are expected to increase substantially in beginning in 2010 much like they did in 2007.” (Source : ATA website  , emphasis ours.)
” Navistar said that its exhaust gas recirculation technology will increase International truck prices by up to $8,000 for the 2010 model year. Depending on the specific engine model a truck uses, prices will be $6,000 or $8,000 higher due to compliance with the Environmental Protection Agency’s emissions standards, which go into effect January 1.” Source: Transport Topics
Inferences for the precision machining industry- the US Heavy Truck Market is on the mend, and thanks to the rules already on the books, we can expect yet another round of cost increases for freight to bring us our raw materials and to ship our products to our customers. For those of us making parts for this new generation of engines, this is good news, but it’s inflationary effects will be felt by us all.
How do we spell inflation?

The July 2009 PMPA Business Trends Report remained level at 69 in July. We were pleased to see that this index did not further erode in July.
This is a departure from both the seasonal trend of low sales in July and a departure from the declines in sales all this year (only 1 month out of 7,  March 2009,  showed an uptick). 
Here are three reasons we believe that the Precision Machining Industry’s recovery has begun.

  1. Sales have leveled off and did not decline further in July.
  2. Exactly half of all PMPA Business Trends Participants reported increases in sales for July. Almost one third reported double digit sales increases.
  3. Average length of first shift indicator climbed by 1.2 hours in July, first such increase all year. (The length of first shift has declined each month since January 2009 until July)

The shops reporting included those serving markets in Medical, Automotive, Aerospace, Heavy Machinery, as well as Trucks, Construction Equipment, Food Service, and Military.
Are we out of the dark tunnel yet? No.

You are here?
You are here?

But the  PMPA’s Monthly Business Trends Report data tells us that about half of us are seeing some light at the end of the tunnel.
PMPA members can see the PMPA Business Trends Report here.
Photo courtesy Blueridgecollargirl her August 8 2008 post gives perspective and is worth a read.