Truck Makers And Dealers Say No Growth Expected For Remainder Of 2008

Implications: Some analysts had predicted a second half upswing in US truck sales, but it will not be. Major manufacturer Paccar and their largest Peterbilt dealer (and largest of any dealer organization) - Rush Enterprises - each say that the US market will remain flat through this year. Volvo recently stated the same in their mid-year assessment. We can still only hope for something of consequence in 2009.

Analysis: It is useful to compare manufacturers’ outlooks with that of their dealers. The referenced article on Rush Enterprises gives us insight into the real world today.

First, Rush new truck sales for both heavy (down 11%) and medium-duty (down 26%) trucks through the first half are soft, as are used trucks sales (down 19%). The heavy-duty segment is not a surprise, but some had expected it to grow in second half. The medium-duty segment is softer than expected. Dealer used truck sales are usually big profit centers.

When assessing typical areas looking ahead - freight, financing and fuel - there are still no real bright spots today that would lead to any significant buys. We are in the peak of freight season now, so any plans for growth won’t really kick in until next spring (if then).

Financing is a big problem with both available equipment funding and residual values. Premium truck residuals have been hit hardest with Rush showing a 20% write-down being taken off the books. This is confirmed through independent valuation assessments in the marketplace. The bad news is that returns, defaults and bankruptcies have increased dramatically, so the credit and residual value issues have not bottomed.

Fuel cost v. surcharge continues to be a tip-over item, but recent crude price trends are positive (with much more reduction needed). There is then the spill-over into max-ed out credit lines and resultant poor credit ratings to clean up before funding of growth can resume.

The good news for most manufacturers is strength in Central and Eastern Europe, Asia, China and India, which are still putting some impressive profits to the bottom line - in spite of what is going on here in the US and Canada. Global growth however is expected to slow.