THE WALL STREET JOURNAL. Tuesday, September 3, 2019 |B3
warned of lower auto-related
sales for the year, and cab
builderCommercial Vehicle
GroupInc. said order rates
have been falling.
Investors in truck manufac-
turers have been anticipating
a slumping truck market for
months. Over the past 12
months, stock prices for Pac-
car and Navistar have declined
more than the overall stock
market.XL Specialized Trailers
Inc., which assembles flatbed
trailers for hauling big loads
such as construction equip-
ment, has experienced a drop
in orders over the past 90
days, said Stuart Sleper, presi-
dent of the Manchester, Iowa-
based company.
“We are planning for a
2020 that is not going to be as
good,” he said.
Big swings in productionare typical in the truck indus-
try.
Like farmers, truckers tend
to aggressively buy equipment
when they are flush with cash
but quit buying when their in-
comes drop.
ACT Research estimated
that trucking companies have
added about 6% more capacity
to their fleets, or about 90,000
heavy-duty trucks, than what
was actually needed to handlethe freight volumes over the
past two years.
Production of heavy-duty
models is expected to reach
about 350,000 vehicles this
year, the second-highest level
since 2006.
But a reversal is predicted.
ACT Research expects produc-
tion of heavy-duty trucks to
fall to about 238,000 vehicles
next year, a rate more typical
of years when trucking compa-Truck makers are logging
sharply lower orders, adding
another stress point for a de-
celerating U.S. manufacturing
sector.
The U.S. trucking industry
had one of its strongest years
ever in 2018, as high demand
for freight encouraged trans-
portation companies to expand
their fleets. Now, trade ten-
sions and slower global
growth are depressing freight
volumes.
Freight rates have fallen
more than 20% from a record
in June 2018, says St. Louis-
based research firm Broughton
Capital LLC. Trucking compa-
nies, in turn, are ordering
fewer trucks.
“There are more trucks
than there are loads now,”
said Kyle Kottke, general man-
ager forKottke TruckingInc.
in Buffalo Lake, Minn.
Production for heavy trucks
is still brisk, as manufacturers
work to fill orders placed over
the past year, but new pur-
chases are declining and pro-
duction rates are dropping.
Orders for heavy-duty mod-
els from the four largest truck
makers in North America—
Daimler Trucks North Amer-
icaLLC,PaccarInc.,Volvo
Trucks USAandNavistar In-
ternationalCorp.—fell 80% in
July from a year earlier, says
market forecaster ACT Re-
search.
Orders in June declined
69% from a year earlier.
The slowdown is rippling
through to the companies’
suppliers, contributing to a
broader slowdown for U.S.
manufacturers. Manufacturing
production as a whole was
down 1.6% this year through
July, according to the Federal
Reserve.EatonCorp., one of
the largest makers of truck
transmissions, recently
BYBOBTITA
ANDAUSTENHUFFORD
BUSINESS NEWS
nies are only replacing worn-
out vehicles in their fleets.
“It would not take much of
a weaker [gross domestic
product] to send the truck in-
dustry down more,” said Don
Ake, vice president of com-
mercial vehicles at transporta-
tion-equipment research group
FTR.
Some truck manufacturers
have already told their suppli-
ers they intend to cut truck
production beginning in the
current quarter, Mr. Ake said.
He expects other truck build-
ers to follow suit and pre-
dicted production will be
down by 20% in the fourth
quarter from the current level.
Some of the trucking indus-
try’s biggest customers, in-
cluding the steel industry, au-
tomotive suppliers and
farmers, are scaling back too.
“Everybody is fighting over
the same pool of freight,” said
Robert Haag, vice president of
operations for Indianapolis-
basedPerfect Transportation
LLC.
Order cancellations are also
rising. Dave de Poincy, presi-
dent ofEast Manufacturing
Corp., said the truck-trailer
maker’s cancellation rate is
nearly 8%, compared with a
typical rate of below 1%. He
expects production to fall 20%
in the company’s fiscal year
ending in May.
“They don’t need any more
trailers right now,” he said.
“The flatbed industry is a real
indicator of economic health.”
China’s retaliatory tariffs on
U.S. farm exports have re-
duced shipments of meat from
the Midwest to the West
Coast, said Dave Wozniak Jr.,
vice president of M.C.
VanKampen TruckingInc., a
Grand Rapids, Mich.-based
specialist at hauling office fur-
niture and perishable cargo.
VanKampen has cut its
fleet by 10 trucks, to 140 this
year, and Mr. Wozniak said
freight demand will likely fall
further if President Trump
follows through on plans to
apply new tariffs to Chinese
goods.
“The market is weak,” he
said.Truck Makers Apply Brakes as Sales Slow
Trade tensions are
depressing freight
volumes after banner
year for industry
Production
SalesJan. ’18 April July Oct. Jan. ’19 April July Jan. ’18 April July Oct. Jan. ’19 April July010,00020,00030,00040,00050,000010,00020,00030,00040,00050,000Netordersofheavy-dutytrucks Productionandsalesofheavy-dutytrucksOrdersarefallingfornewtrucksamidaweakerfreightindustry.Monthlyproductionofheavy-dutytrucksinNorthAmericais
outpacingsales,drivingupinventoriesofnewtrucks.Source: ACT Research Photo: Luke Sharrett/Bloomberg NewsINVESTING
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