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As Heavy-Truck Sales Go, So Goes the Economy

Discussion in 'Coffee Shack (Daily News/Economy)' started by Scorpio, Oct 3, 2016.



  1. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    As Heavy-Truck Sales Go, So Goes the Economy
    David Ader

    [​IMG]


    For most people, the economy’s ups and downs are best measured by famous indicators like monthly job reports and quarterly releases of gross domestic product. But students of the arcane took special notice earlier this month when the Bureau of Economic Analysis released some disturbing data that didn’t make anybody’s front page. In August, domestic heavy-truck sales fell 29 percent from the same period of 2015, the weakest month in well over three years.

    Any drop that dramatic could always be an anomaly, but heavy-truck sales have been slipping for two years. Broad weakness in this category has historically been a reliable hint that a recession is on its way.

    [​IMG]

    It’s too soon to be sure that this history is repeating itself. Brian Wesbury, chief economist at First Trust, says August’s plunge could reflect comparatively narrow economic problems like reduced domestic oil production and slackening mining activity. He also said that regulatory issues might have played a role if sales through mid-2015 were boosted by new requirements on trucks’ antilock braking systems. In that case, the August drop-off would just represent a return to normalcy.

    Those are reasonable caveats. But there are other worrying signs. Caterpillar has said that used-machinery prices are down 10 percent from a year ago. That could also reflect the impact of oil and mining industry problems, yet a price decline in used construction equipment could have a dampening impact on new-equipment sales for big manufacturers.

    Another warning comes from the Cass Freight Index, a measure of North American freight volumes and expenditures. In August, Cass noted that its Expenditure Index was down 3.3 percent from July and 6.3 percent from the previous August. These measures, too, have shown weakness over the last two years.

    “August’s Cass Freight Index continued to signal that overall shipment volumes (and pricing) are persistently weak, with increased levels of volatility as all levels of the supply chain continue to try and word down inventory levels,” Cass said in its latest report.

    Weak truck sales have sometimes given false signals about a recession over the last 30-odd years. But the sheer size of this August’s drop looks different. We’ve never seen a plunge this steep that didn’t foretell a recession.

    This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    David Ader at dader1@bloomberg.net



    [​IMG]



    David Ader is an interest rate strategist. He has worked with Greenwich Capital, RBS and most recently with CRT.







    www.bloomberg.com

    http://www.silverbearcafe.com/private/09.16/truck.html
     
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  2. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  3. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  4. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  5. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  6. 917601

    917601 Mother Lode Found Mother Lode

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    A good post, in line with one of my " indicators" of "when"..back during the beginning of the '08 meltdown I noticed a HUGE absence of trucks on the Interstate I travelled to work. Atlanta area is where three main interstates intersect, and within three months of driving to work at 04:30 and getting to work without seeing an 18 wheeler, the economic crash occurred en masse, ...I remember thinking " how strange". Five major trucking lines went under or merged in a three month period back then. Good news, the roads are currently clogged with 18 wheelers, when I start to notice an absence of 18 wheelers, it will be that time again...some things just stick in your mind.
     
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  7. bb28

    bb28 Silver Member Silver Miner

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    I'm not sure I buy the correlation. Trucks like any other vehicle can be infinitely fixed up. The question is when it makes sense to buy a new product. It could just be that buying new trucks requires buyer confidence that is currently absent, so truck owners are opting to keep repairing their old fleet rather than invest in new ones.

    bb
     
  8. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    You probably know this already but a little bit of thought usually goes into retiring a truck when you're dealing with a fleet. Here's a short but good read:

    Knowing when to retire a truck
    http://fleetowner.com/fleet-management/knowing-when-retire-truck
     
  9. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  10. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  11. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  12. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  13. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  14. bb28

    bb28 Silver Member Silver Miner

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    One of the things I had heard about the self-driving truck is that automatic transmissions were very expensive and would need to be overhauled every 150,000 - 200,000 miles or once a year for an OTR truck. The cost and downtime were listed as cost prohibitive, thus the reason for old-school double-shift manual transmissions. I wonder how this will be dealt with in a driverless truck.

    bb
     
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  15. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    If you have the time check out the Driverless Cars / Trucks thread. Feel free to post anything you come across on driverless cars, trucks and equipment. The more the merrier.
     
  16. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  17. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  18. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  19. Buck

    Buck Fabian Society Gold Chaser

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    IIRC
    Over the past couple of years, there has been a push to replace trucks that don't meet some new EPA regulations

    I'm suspecting some of the sales that "normally" would have occurred at this time were dragged forward a few quarters/a year earlier and this is a part of what we're seeing

    As far as continuously repairing vehicles goes, that's not possible today as it was even 10 years ago

    Todays components are far more fragile and far more expensive than ever and there does come a point where replacing the entire vehicle is cheaper than repairing the individual components one by one
     
  20. Sport

    Sport Gold Member Gold Chaser

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    Emissions regulations have had more effect on class 8 truck sales than anything else. There was a huge spike in sales of trucks in 2006 as everyone panicked about the new emissions mandates coming into play. Since that time the sales for class 8 have been all over the map. There is a new set of emissions standards set to come online around 202o which may cause another run. Engine manufacturers have been given more time to work on new changes this time around. The thing that sucks is the new emissions requirements always seem to come at the cost of fuel mileage. In class 8 that is a tough trade-off.
     
  21. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Class 8 market dip in '17, with upbeat outlook farther out

    Dec 5, 2016 Aaron Marsh | Fleet Owner

    [​IMG]
    ACT Research expects that the North American Class 8 market will turn up in 2018, and certain factors — including Republican control of the presidency and Congress and a trade cycle peak — could make for "a very nice" Class 8 market closing out the decade.

    Aaron Marsh/ Fleet Owner
    Related Media
    [​IMG]
    ELDs and converging dynamics: Will they alter truckload, LTL landscape?


    With many speculating what the incoming Trump Administration will mean for trucking, "those are really more 2018 considerations," noted Kenny Vieth, president of ACT Research, in a Stifel Capital Markets call Friday. In terms of next year, though, the group expects just over 200,000 Class 8 trucks will be built for the North American market.

    "We've just got too many trucks and not enough freight," Vieth surmised. This year should close out at about 228,000 Class 8 trucks built before a continued downward trajectory into 2017. But several factors are likely to help the market pick back up starting in 2018, when ACT expects that 243,000 Class 8 trucks will be built.

    And things could be on the road to much better after that, should a number of elements fall into place. "If everything goes according to the script that I have written, the conditions should be in place for a very nice Class 8 market in 2019 and 2020," he said.

    New administration
    As noted, Vieth pointed out that possible beneficial economic moves from the Trump Administration like pushing for tax cuts or infrastructure investments would come no sooner than 2017, and the fruits of any changes wouldn't be seen until 2018 and going forward.

    "We've got at least two years to find out what total Republican dominance does to policy, just as we did in 2009 and 2010 when the Democrats had the same opportunity," Vieth explained, noting Republican control of the presidency and Congress. That control "should mean free policy rein, and I do recall the Barack Obama quote from 2009 that 'elections have consequences,'" he added.

    With the Trump Administration, some things to watch will be stances on trade, foreign policy and immigration, Vieth said, "and then there is the 3 a.m. tweet thing, which I think makes us all a little bit nervous."

    All jokes aside, the North American Class 8 market was considerably weaker during the first 10 months of 2016 vs. the same time the prior year. The United States, which accounts for 81% of the market, saw a year-over-year Class 8 decline in that time of 47%. Canada, which is 9% of the market, saw a 26% decline in Class 8.

    But one bright spot for Class 8 was Mexico, which represents about 8% of the North American market. The country has seen growth of 25% for the first 10 months of the year compared with the same 2015 period. Ultimately, it's still a 25,000-unit market, so what happens there only ripples so far.

    Still, "if there's a question regarding the future Trump Administration's policies, Mexico is a key consideration," Vieth noted.

    The thinking generally is that the new administration will ease up on regulations, he said, which should be a boon for businesses: "Whether it's labor, environmental or safety, those had been increasing headwinds for business and are likely to be mitigated."

    Even if the new administration ultimately lightens the regulatory burden, Vieth said not to expect GHG Phase II requirements to evaporate. "I think the paybacks are so good on aerodynamics and parasitic drag that even if the Greenhouse Gas Phase II rules get rolled back, the vast majority of that mandate is going to happen because of the bang for the buck for fuel economy relative to cost," he contended.

    "I think the vast majority of the GHG Phase II proposal is almost 'baked in the cake,' regardless of what the Trump Administration does."

    More positive 2018
    Notably, ACT kept a more favorable 2018 forecast for Class 8 now that Donald Trump was elected president. Vieth said the group considered the difficulty that a theoretical President Hillary Clinton would've faced with a Republican-led House of Representatives and Senate, particularly with funding issues.

    "Before the election, we were thinking of something like 225,000-230,000 [total Class 8 North American market units built for 2018] might've been a better place" than ACT's prediction of 243,000, Vieth contended. "That was kind of from the realization of having Hillary Clinton as president with the continuation of a Republican-led House of Representatives, which I don't think was ever in doubt.

    "Then all of a sudden, if we try to push through a $500 billion infrastructure package, the House would say, 'Okay, but you have to cut $500 billion worth of spending.' So the aggregate level of spending was not going to change all that much."

    President Trump should face smoother going in terms of working with Congress, but what will come of Republican legislative efforts is yet to be seen. If the rosier 2018 predictions are to come about, there will be indicators by about the third quarter of 2017, Vieth said.

    "As we look back through history, I want to say that every up-cycle that we've seen in the marketplace has started in the fourth quarter," he noted. "So if conditions aren't sufficiently good by the third quarter of 2017, you don't get bigger orders in the fourth quarter of 2017, which doesn't start production in time.

    "So that's that 15,000-20,000-unit delta that we were contemplating."

    A bubble popped
    For Class 8, the present reality comes from a cyclical downturn that came on fairly dramatically. "From the end of 2014 to the end of 2015, we went from the top of a cycle to a rapidly deteriorating market heading into 2016, and it continued to deteriorate through most of the first half of 2016," Vieth said.

    That deterioration has stopped or at least slowed, he added, "but in short, in the current market, we've just got too many trucks and not enough freight."

    How many too many trucks is that, exactly? According to Vieth, ACT's fleet utilization model suggested there was about a 5% capacity shortfall at the end of 2014; today, the model shows the market is about 7% overcapacity. "From our model's perspective, that's about 105,000 more tractors than are currently needed in the marketplace," he said.

    Precipitating the market declines for freight were dips in machinery and capital goods, Vieth pointed out, where "you've got six-to-eight touches by a truck on a relative dollar basis." "Freight started going wrong when the commodity bubble popped in the second half of 2014," he contended. "All of a sudden, all the commodity extractors — whether it was the oil guys, coal guys, steel guys, aluminum guys or farmers — they're all like, 'We're not making any money; we don't want any [new] machines.'"

    Keeping in mind ACT's approximately 100,000 excess truck estimate, productivity gains are also part of the Class 8 story. In 2013, truck tonnage in North America began a continuous climb while truckloads stayed relatively the same, according to figures Vieth cited from the American Trucking Assns.

    "Coming out of the recession, we've seen a lot of truck tonnage growth without a lot of loads growth," he told listeners. "Where is it? Increased density? Increased utilization? A little bit of modal share? A little bit of online retail shift?

    "Were we operating under the same conditions as we were during the last cycle, we would actually need about 10% more tractors — about 150,000 more tractors — than are currently on the road today to haul the same amount of freight," he continued. "So you can see the problem in a nutshell: especially in a slow-growth economy, high productivity growth leads to weak freight outcomes."

    Points to note
    Meanwhile, the U.S. has seen far less decline in the Class 8 vocational sector. "If you look at the U.S. numbers, we're not so bad in the vocational market," Vieth said. "One of the reasons we don't have a 'hair on fire' bad forecast for 2017 is that the quarter of the market that is the vocational piece is holding up reasonably well."

    Class 8 inventories are still swollen, but truck OEMs have adjusted production rates down accordingly. "We've worked a lot of inventory off, but there's still a lot of inventory to work off," Vieth said.

    In terms of sales-to-production balance, Vieth said trailers held up strong for about a year after the Class 8 tractor market began its decline, but they're now headed for their own equilibrium adjustment. "We saw trailer backlogs drop below 100,000 units in October, which was the first drop below 100,000 since early 2014," he noted.

    "We still haven't adjusted production relative to the size of the backlog," Vieth argued. "So we think there's certainly some production cuts coming up there."

    Some signs on the economic horizon, he noted, are looking up. In terms of strengths of lead indicators like commodity trends, stock market prices and consumer confidence, "over the last couple of months, it's generally been a better tempo on economic reports," Vieth said.

    Look for "generally slower growth" in the U.S. economy, with a pick-up likelier by around the mid-term elections. The economic recovery is at a tepid 2.1% growth in GDP and 2.1% growth in manufacturing, but there are encouraging signs regarding the latter.

    "We're seeing some nice improvement on a worldwide basis in manufacturing," Vieth said. "That's very good to see." He noted that Germany, the United Kingdom and India are seeing above trend growth in manufacturing, while China has moved to trend-type growth.

    "In our argument of what's wrong with freight in the United States, it really gets back to commodity prices," Vieth emphasized. "How you fix commodity prices is you fix aggregate demand for commodities globally.

    "In the last few months, things are getting better globally," he said.

    Continued pressure on used
    One area that's likely not to improve in the near future for Class 8 is the used market, according to ACT. And one thing to keep an eye on in this regard is contract freight rates vs. spot rates.

    "I pay a lot of attention to the spread between contract and spot rates," Vieth noted. "Contract rates have performed reasonably well compared to spot rates for the past 24 months," he added, while "the guys that operate in the spot market have just absolutely gotten killed over the last 22 months."

    Trucking companies in the contract market tend to be new truck buyers, he explained, while those in the spot rate market tend to be used truck buyers. Monitoring used truck sales and extracting a small subset of 400,000-500,000-mi. trucks for a look at used sale performance, Vieth noted that "through '14 and much of '15, there was a premium of $10,000 to maybe $12,000 above residual value or book value on equipment.

    "A lot of fleets were actually booking profits on their used truck trades, and it encouraged them to do more used truck trades," he pointed out. "That flipped toward the end of 2015, and you can see that [used truck] average valuation in four of the last seven months has been below our estimated residual value. That becomes a real issue."

    With trucks' residual values low, ACT has heard that "several OEM groups" are holding back "some fairly large" used inventory stockpiles, Vieth said. "So there's a chunk of inventory that hasn't even been introduced into the marketplace."

    All things considered, a rebound of used equipment prices doesn't look likely, and that will continue to put pressure on new sales. "For the near-term, there's probably more downward pressure on late-model used equipment values than upward," he noted.

    ELDs' 'meaningful takeout'
    A meaningful change in trucking is on the way with electronic logging devices, or ELDs, ACT believes. The group speculates that the coming ELD mandate is likely to squeeze perhaps significant capacity out of the market.

    Midsize truckload carriers, which make up about 10% of the market, will lose about 5% of their numbers, or about 4,000 trucks, ACT predicts. Small truckload carriers, which make up about 20% of the market, will lose a more substantial portion of their total at 10%, which amounts to 16,000 trucks.

    ACT believes owner-operators will be most affected. Those make up 30% of the market, and they could lose 15% of their 240,000 total, or about 36,000 trucks. All accounted for, ACT estimates that the ELD fallout will amount to 56,000 trucks, which is 3.7% of total tract fleet capacity or 7.0% of for-hire fleet capacity.

    "Basically, the big guys are running legal. It's when you get to the smaller end of the market and for-hire guys" where you'll find some paper log cheating, Vieth said. Taking some midsize and small carriers out of the mix and accounting for them running excess miles, again, ACT pegs the total ELD "takeout" of Class 8 trucks will be the equivalent of 56,000 units.

    "This is a pretty meaningful takeout," Vieth said.

    Shippers and insurers eventually could become a factor in fleets having ELDs, he contended. "Now that it becomes a law, do shippers and insurers start to care about whether the brokered truckers they're hiring are compliant?" he pointed out. "At some point, this probably starts to matter."

    Furthermore, "we do think that there are some post-mandate business failures that almost have to happen as guys just can't adjust to the new paradigm," Vieth argued. "So this could be, especially for the big fleets, the gift that keeps on giving for a while."

    Coming 'very nice' market
    ACT believes that the current buying/ replacement rates for tractors are on a cyclical schedule that will pick up as 2017 progresses and continue climbing from 2018 into much of 2020. And around 2018, other market forces — including legislative activity the Trump Administration is likely to undertake — could make for some bright years for Class 8 in North America before the cycle falls off naturally in 2021.

    "We do think there's a trade cycle. All of the trucks that were bought in 2012, '13, '14 and '15, as we look out to 2020, our [tractor] trade cycle model begins to ramp up pretty well," Vieth said. "So if trucker profitability is in place then, there's likely to be a decent trade cycle as we look out to the end of the decade."

    Pair that with the impact of ELDs, Vieth said, and the stage is set. "If the electronic logging device mandate delivers a fairly large capacity takeout at the same time as the Trump Administration delivers an infrastructure project, maybe a corporate tax giveback, and there's good freight volumes and more machinery being sold, yes, I think there's a very good argument for a nice run-up in trucker profitability in 2018 and 2019," he told listeners.

    "These guys will have a bunch of old trucks to replace that they purchased in 2014 and 2015," he noted. "If everything goes according to the script that I have written, the conditions should be in place for a very nice Class 8 market in 2019 and 2020."

    http://fleetowner.com/truck-stats/c...m=email&elq2=9aadf21569814a4bae9c7985bda58184
     
  22. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Trump, trucking, and the outlook for 2017
    Dec 6, 2016 by Sean Kilcarr in Trucks at Work

    Related Media
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    Analyst: Driver training rule, speed limiters, GHG 2 'at risk'


    Lots of change may be on the menu for trucking in 2017 as economic trends and federal policy efforts could make further alterations to the U.S. freight market – everything from canceling regulations to the adoption of new strategies for meeting customer demands.

    “When you move 70% of the nation’s domestic freight there are few issues out there that we are not a part of either directly or indirectly,” Chris Spear, president and CEO of the American Trucking Associations (ATA) trade group, explained in a recent phone interview with me. “Tax reform, trade, and infrastructure: we have a role to play in all of those issues.”

    For starters, he noted that the 10-year $1 trillion infrastructure proposal put on the table by President-elect Trump could be a big positive for the industry in a number of ways.

    “Infrastructure is our industry’s lifeblood: We need good infrastructure and getting such a package passed is key right out of the gate,” Spear said. “At least as proposed, that package will likely be tied to tax reform.”

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    Trade is another really pivotal issue in Spear’s view, as over 76% of NAFTA surface trade is carried by trucks. “Again, we have to help shape whatever trade proposals will look like,” he noted.

    When it comes to regulation, though, you can boil Spear’s view down to two words: “it depends.”

    [​IMG]
    ATA's Chris Spear


    “We’re not afraid of regulations – we’re a very heavily regulated industry. But what we want are good, clear regulations that we can comply with without undue burden and a measurable return,” he explained.

    “Look at the Phase 2 greenhouse gas [GHG] rules: they will define future efficiency for our industry and offer a measurable return for our investments. This is a win-win for us and the environment,” Spear said.

    “But where regulations don’t work, we’ll oppose them. For example, the speed limiter rule we will oppose [because] it’s completely flawed approach.”

    In the end, he stressed, it “all really comes down to good give and take between industry and the regulators.”

    Sandeep Kar, global vice president for mobility at Frost & Sullivan, added that few industries will face the impact — whether net positive or negative — of a Trump presidency as strongly as trucking, which is a leading indicator of economic activity and typically feels the effects of economic swings and fluctuations well before many other industries or sectors.

    “While the effect of Trump administration’s legislative actions will be experienced primarily by the U.S. commercial vehicle industry, global market participants and markets will have much to note and consider,” he noted in a recent report.

    [​IMG]
    Frost & Sullivan's Sandeep Kar


    “Most presidential transitions include reasonable certainties regarding upcoming policy priorities and changes that enable nations, markets, and industries to prepare for their impact,” Kar said. “Over the past several decades, proposed policy changes generally have had narrow boundaries. This time it is different, and it is going to be more different for trucking than ever before.”

    He added that Trump’s publicly stated stand on lowering corporate taxes will definitely have cascading effects on all aspects of U.S. and global industries.

    “Lower corporate taxes would likely result in businesses considering either establishing or reshoring US operations,” Kar explained. “While on the surface this would appear to be great news for the U.S. trucking industry, it may not be as great for either U.S. or global truck manufacturers and suppliers. Lower corporate taxes will most likely drive service-based businesses to the U.S., which would be of less benefit to freight movement than a move of manufacturing operations.”

    Another concern: Labor costs could spike as lower corporate taxes could drive inflation, resulting in wage hikes which would render the incentive of lower taxes much less effective.

    Moreover, Kar thinks the U.S. and many other economies are still “unstable,” with many nations skating dangerously close to “recessionary boundaries.”

    Thus economic and trade policy changes could induce short-term recessionary spasms before a clearer and stable picture emerges, he said.

    Where trade is concerned, modifications or rejections of trade treaties such as the North American Free Trade Agreement (NAFTA) or the Trans-Pacific Partnership (TPP) could adversely impact U.S. truck OEMs and their suppliers as many manufacture and/or source materials from Mexico.

    However, there may be a “silver lining” from that as well, Kar emphasized.

    “Several Asian OEMs in recent years have secured strong positions in light- and medium-duty truck markets [and] new trade policies could hurt them, forcing more U.S. localization and higher taxation for market access — both of which will favor U.S.-based OEMs,” he explained.

    Another positive: expedited infrastructure refurbishment and/or enhancement projects and public-private partnerships focused on improving U.S. highways and freight movement infrastructure could have a net positive impact on freight and vehicle efficiencies, route congestion, and sales of off-highway vehicles if the administration implements many such projects immediately.

    “[But] this could prove difficult because funding [needs] could trigger higher taxes – and Trump has stated his opposition to increase the deficit to pay for his infrastructure plans,” Kar noted.

    [​IMG]
    BoldIQ's Roei Ganzarski


    Roei Ganzarski, a former Boeing executive and now CEO of BoldIQ, which provides optimization software for asset scheduling, added another economic twist to trucking’s outlook where the economy is concerned: the rise of “demand-driven” freight transportation service.

    “Consumers or customers want to get what they want, at the time and place they want it, and only want to ask for it [delivery service] when they are ready to ask and not before,” he explained to me recently. “Thus the transportation operator must be ‘demand-driven’ in order to serve such on-demand needs in an efficient manner that enables scale, growth, and profitability.”

    That “on-demand economy” is also shortening planning cycles and significantly shortening decision making time frames. “This means the need for intelligent, data driven, and real-time decision making is critical,” especially in trucking, Ganzarski said.

    He added that this “demand-driven” view assumes that trucking companies and other freight service providers have finite resources to do their work.

    “This must be viewed differently from the so-called ‘sharing economy’ where an operation will use someone else’s resources because they are so inefficient, they have spare time or capacity on their resources,” Ganzarski pointed out.

    That will lead to more consolidation and even elimination of some transport companies that cannot adapt fast enough to the change, he said.

    I’ll tell you one thing: all of that adds up to what will no doubt be a very busy 2017 for motor carriers, on a whole range of fronts. Better load up on the coffee!

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  23. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    U.S. big truck sales plunge in November

    Canada’s heavy-duty sales fall again, but medium-duty sales rise, according to WardsAuto
    Dec 14, 2016 Fleet Owner

    Related Media
    [​IMG]
    Over-the-road market is going to be tough in 2017


    Heavy-duty truck sales in the U.S. totaled 29,754 units in November, 22.4% below like-2015’s 35,279, according to WardsAuto data. Canada’s big-truck makers declined again, posting a combined Class 4-8 sales drop of 12.5% on 2,830 deliveries.

    Wards reports Class 8 sales were off 33.2% from year-ago on 13,943 deliveries. PACCAR’s Kenworth plummeted 32.3% from prior-year, while Peterbilt was the only one up with a 2.2% increase on 2,062 units. In this class, Freightliner posted the weakest results, dropping 44.7% from prior-year. Mack (-31.5%) and Volvo (-39.1%) also didn’t do well. Year-to-date, Class 8 sales are down 22.4% from like-2015.

    Overall, medium-duty sales fell 9.5% with monthly volume at 15,811. For January-November, sales are running 4.1% above prior-year.

    In Canada, Class 8 sales fell the most, down 20.4% from year-ago, according to Wards. All truck makers in this group saw big declines. Mack (-51.2%) and Volvo (-37.7%) suffered the biggest drops in the group. Kenworth and Peterbilt posted losses of 18.4% and 11.6%, respectively. Freightliner was the group leader, declining only 9% from like-2015.

    In the medium-duty segment, sales rose 9.9% to 931 units from 782 in the same-month 2015. A large double-digit gain in Class 7 offset the loss in smaller-volume Class 4.

    WardsAuto has more.

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  24. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Over-the-road market is going to be tough in 2017

    However, the chairman, CEO and president of Rush Enterprises says the medium-duty segment looks steady and the increasing complexity of trucks “bodes well for us” in terms of service support demand.

    Dec 13, 2016 Sean Kilcarr | Fleet Owner


    SAN ANTONIO. W. M. "Rusty" Rush – chairman, CEO and president of Rush Enterprises – believes the over-the-road Class 8 truck market “is going to be tough” in 2017, but Class 4-7 medium-duty sales should remain steady heading into next year.

    “It [the medium-duty segment] has been good the last two years; we expect that to continue,” Rush explained in a meeting with reporters here at the company’s 2016 Rush Technician Skills Rodeo.

    “But you have to remember over-the-road is 70% of the [commercial truck] market,” he stresses. “And for once I agree with Kenny Veith [president of ACT Research]; Class 8 sales will be off 20% next year. And I really don’t see it getting any better in the first half of 2017; it’s going to be an uphill battle.”

    Rush predicted at the end of 2015 that the truck market would be tough this year and felt that his prediction more or less came true.

    The company’s third quarter results, released in late November, bear that out as revenues of $1.096 billion and net income of $14.9 million are down compared to revenues of $1.294 billion and net income of $19.9 million in the same quarter back in 2015.

    "A sluggish energy sector, choppy freight environment, excess Class 8 fleet vehicle capacity, and low used truck values continued to negatively impact our new and used Class 8 truck sales and parts and service revenues," Rush said in the company’s third quarter earnings statement.

    "Additionally, the consolidation of several of our truck centers earlier this year has also impacted parts and service revenues when compared to the third quarter of 2015,” he added. “On a positive note, we are seeing some increased aftermarket activity on both coasts where construction remains strong.”

    In his conversation with reporters this week, Rush reiterated that the construction and refuse truck markets in particular should remain strong heading into 2017.

    He also said the company will “continue to look to expand our footprint where the opportunities make sense,” largely in response to continued “consolidation” in its customer base.

    Rush also thinks the “increasing complexity of trucks” is a trend that “bodes well for us” as it should increase demand for the company’s parts and service operation.

    “We’re having larger customers who want to do more service work with us,” he said. “That’s what we do; we work on trucks. We make the investments in training, technicians and equipment that they can’t. And it’s not just maintenance we’re talking about; it’s repair work. But it’s going to take more investments on our part as the [truck] technology keeps getting more complex.”

    For that reason, Rush said his company will continue to invest in several “strategic initiatives,” which includes more data-driven truck service offerings such as its RushCare Service Connect system rolled out back in March.

    Rush also pointed out that a “changing of the guard” is occurring at the top echelons of the trucking industry as many trucking executives “who came of age during deregulation” in the 1980s are now starting to retire.

    “This is still a relationship-based business, but it’s taking on a more data-driven ‘corporate’ focus now,” he explained. “It’s about hard, hard dollars and cents, vehicle uptime, and finding out where the value comes from.”

    Mike McRoberts, Rush’s senior vice president and chief operating officer, added during the meeting that there is a growing gap in the “data sophistication” between large and small fleets as well as within industry operational practices as a whole.

    “Take the e-commerce parts business – the industry as a whole is late to that game,” he pointed out. “Many still rely on catalogs and calling people on the phone for parts.”

    For that reason, Rush said the parts business will still remain a “multichannel” market.

    Overall, however, Rush said he is confident in his company’s prospects heading into 2017. After achieving $5 billion in revenues in 2015 and selling 37,702 trucks, the softness that enveloped the freight market this year created big “headwinds,” in his words, that the company still managed to surmount.

    “We took a huge hit when the oil services business bottomed out; we had to adapt and we did,” he said. “As I like to say, the good part about sleeping on the floor is that you can’t fall out of bed. The only way to go now is up. So if the market stabilizes – if the economy improves and freight picks up – we can hope for a better 2017.”

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  25. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Truck orders stable as 2016 ends

    December Class 8 orders were above projections, say analysts, though overall medium-duty demand remained on a downward trend.

    Jan 5, 2017 Fleet Owner Staff | Fleet Owner

    Class 8 and medium-duty orders made strong showings in December, according to preliminary data analysis, though medium-duty demand overall is declining, noted Michael Baudendistel, vice president with the Stifel Transportation & Logistics Research Group.

    Yet Baudendistel stressed that, for now at least, Stifel is maintaining its 2017 projections for 230,000 Class 8 and 230,000 Class 5-7 medium-duty units.

    “Fall order season closed out with December orders which were slightly above expectations, though still supportive of current 2017 production outlooks and not likely to lead to any significant change in estimates, in our view,” he explained in a research note this week.

    “Overall, we believe total orders for the month [of December] should be viewed as in line with relatively low expectations, with Class 8 slightly outperforming and Class 5-7 slightly underperforming expectations,” Baudendistel pointed out. “[It’s] perhaps encouraging that demand has not deteriorated any further.”

    Kenny Vieth, president and senior analyst with ACT Research, noted that demand for Class 8 units ended 2016 “on a positive note” with 21,400 units booked in December; the only month in 2016 in which orders rose above 20,000 units, he added.

    However, year-over-year comparisons were negative, Vieth said, as Class 8 orders are down 24% in December 2016 compared to the same month in 2015.

    By contrast, medium duty Class 5-7 orders climbed to an eight-month high of 20,600 units back in December, he noted, though for all of 2016, medium-duty orders of 228,500 units were “a virtual carbon-copy” of 2015’s net order intake, giving up 1.1% compared to 2015, he said.

    Stifel’s Baudendistel, though, noted that medium duty orders “have now declined for five consecutive months” and that following weak orders in November last (down 9% compared to November 2015), his firm reduced its 2017 medium-duty production estimate to 230,000 units from 235,000 units.

    “We are maintaining that forecast for now, though we believe persistent weakness in orders indicates there remains pressure to the downside on our recently-lowered forecast,” he added.

    That being said, Don Ake, vice president of commercial vehicles at research firm FTR, believes that Class 8 orders in particular “have been following stable, traditional, patterns for six months now,” and based on fourth quarter 2016 order volumes “should begin a modest recovery in February.”

    He added that the most recent economic news has been positive, so freight demand should keep truck orders propped up for a few more months.

    “[Though] 2017 still looks to be a tough year, backlogs are [now] growing and that means the worst should be behind us for now,” Ake said.

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  26. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Ten transportation trends to watch in 2017

    Jan 6, 2017 by Sean Kilcarr in Trucks at Work

    So what are some of the broader transportation trends trucking CEOs should keep their eyes on as we hurdle into 2017 and beyond?

    For example, how will domestic migration patterns affect freight flows? Will the increasing automation of just about everything lead to job losses in the freight industry as well as the global economy as a whole? Could transportation infrastructure investments and rising energy “self-sufficiency” in the U.S. prime the country for big economic growth?

    These aren’t $64,000 questions, mind you; they are more like 64 billion-dollar questions, with huge ramifications for trucking – especially in terms of how freight gets moved.

    John Larkin, managing director and head of transportation capital markets research for Stifel Capital Markets, recently took a stab at identifying some of the big long-term freight market trends, while providing a few near-term insights as well – with both sets offering more than a few interesting things for trucking firms to contemplate.

    “We remain very bullish, with respect to transportation and logistics stocks, over the long term,” Larkin said in a research note.

    “However, we think that near term fundamentals are generally weaker than widely understood. Rate pressures building throughout 2016 will not reverse on a dime [and] some inventory overhang still appears to exist throughout our nation’s supply chains,” he stressed.

    “These and other factors cause us to believe that freight transportation and logistics fundamentals won’t definitively turn positive until mid-year 2017, at the earliest,” Larkin pointed out. “And, it is entirely possible, in our view, that the turnaround won’t become evident until the second quarter of 2018.”

    That being said, there are ten key long-term trends he believes are poised to accelerate in the coming year or so; ones freight companies – truckers included – need to keep an eye on.

    The pro-business stance of the Trump presidency: “We sense that the widespread business optimism regarding the future, following the election of Donald J. Trump to the U.S. Presidency, will drive accelerated hiring and increased levels of capital investment in the coming years, even without any additional fiscal policy stimulus,” Larkin said.

    “Pro-business policies will help move the economy forward, even more so. For example, a streamlined/rationalized federal tax code should directly increase corporate cash flows, allow for the repatriation of foreign profits, while stimulating growth and investment,” he added.

    “Fewer and less onerous environmental, labor, and energy development related regulations should also provide a much needed incremental boost for the broader economy,” Larkin pointed out.

    Furthermore, a sensible infrastructure investment plan and the rebuilding and modernization of our nation’s military should also contribute to an accelerating rate of economic growth, he noted.

    “Lastly, revised trade policy should favor exports and somewhat discourage imports, thereby favoring domestic manufacturing,” Larkin stressed, “The sum total of all these initiatives has the potential to significantly ramp up the rate of demand growth for freight transportation and logistics services.”

    Amazon’s freight transport plans and the e-commerce wars: Amazon’s entire infrastructure network is geared for speed and in the case where strategic logistics partners are not up to the challenge, it’s beginning to provide transportation and logistics services itself, Larkin noted.

    “Just in the past year or two, the company has rolled out its own trailer fleet, has developed an uber-like last mile delivery process named Flex, has received its license to operate as a non-vessel owning common carrier (NVOCC) in the international container shipper market, has developed its own air parcel hubs with its ‘own’ dedicated aircraft, has been at work developing its own truck brokerage operation, and recently revealed a plan to deliver packages by drone from airborne warehouses,” he said.

    “All of this activity doesn’t even speak to the 20 or so new distribution centers and fulfillment centers the company has constructed in 2016 in the U.S., not to mention around the world,” Larkin added.

    “While the company builds out its network and its network freight density and potentially an insurmountable lead in the e-commerce space, carriers and 3PLs [third party logistics providers] alike must develop an Amazon strategy,” he stressed. “Either engage in a fully-integrated, collaborative partnership with Amazon, or align with more traditional, slower moving customers. It may well prove difficult to serve both of these ‘masters’ sustainably.”

    Automation and its impact on manufacturing, transportation, and especially jobs: Automation of manufacturing could actually speed up “reshoring” efforts and the implication for transportation is “dramatic,” Larkin said.

    “Freight will be touched domestically eight to 12 times when a product is produced entirely within a continent or a country rather than the two to three times it will be touched within the consuming continent or country when a product is produced overseas and imported,” he explained.

    “With automated production eliminating the labor cost differential, which historically justified globalized supply chains, raw materials, semi-finished materials, finished materials, parts, components, sub-assemblies, and finished products will all require transportation in and around the region of consumption,” Larkin pointed out.

    “Lastly, 3D printing is the ultimate in automated manufacturing as the component, part, sub-assembly, or finished product can be produced with minimal notice in the vicinity of the end user,” he said. “Opportunities for the transportation of various substrates to the 3D printing enabled front line production sites should abound.”

    Automating transportation, though, comes with more challenges – and, if successful, may reduce jobs in this sector, Larkin emphasized; though in light of the current driver shortage that might be a net positive, he thinks.

    “Robust autonomous technology [need to be] capable of dealing with variable weather conditions, invisible lane markings, hackers, communication system disruptions, etc.,” Larkin explained. “Taken alone, autonomous trucks operating on the interstate highway system would likely eliminate the persistently challenging driver shortage and might destroy highway-to-rail intermodal conversion economics.”

    Taken together with double 53-ft. trailers, triple 28-ft. trailers, platooning, and/or other highly productive vehicle combinations and technologies, autonomous trucks could be the “next transformational driver” leading to a sizable reduction in the ratio of logistics costs to gross domestic product, Larkin said.

    In spite of the automation trend, the mismatch between available labor and available jobs widens: “The U.S. needs to overhaul its education system, in our view, as automated manufacturing and 3D printing won’t create the traditional manufacturing jobs often promised by politicians,” Larkin emphasized.

    “We essentially need to stop suggesting that all citizens receive a college diploma while developing and providing an alternate educational path that equips a sufficient number of young people with the skills necessary to program a computerized machine tool, maintain a robotic welding machine, re-optimize an automated warehouse, operate a platoon of trucks, etc.,” he stressed. “When will our political leaders wake up and recognize the need for this new wave blue collar educational path? Or will automation lead to increased unemployment, a smaller workforce, and all the attendant social problems?”

    Dynamic pricing, long a staple in the airline industry, is coming to the world of freight: With the advent of Application Program Interfaces (APIs) real-time data can be exchanged between 3PL’s, freight brokers, carriers, shippers, and receivers – and this real-time data interchange, combined with predictive analytics, can enable motor carriers to achieve better lane balance, higher equipment utilization rates, and higher load factors, Larkin believes.

    “By offering real time, variable pricing strategies and tactics, designed to fill up a truck or a train that will be running next Wednesday anyway to meet customer’s requiring time definite service, carriers can run more productive, more balanced, more heavily utilized networks, while maximizing profit potential,” he said.

    “We expect to see this technique applied in the less-than-truckload sector first. Truckload carriers will likely follow, while the railroads may be last to adopt this approach,” Larkin noted.

    Migration to the south, the southwest, and the mountain states will continue: “The states that continue to ramp up taxes and regulations are losing population or, at a minimum, not growing as fast as the states that have adopted more business-friendly tax and regulatory regimens,” Larkin explained.

    “Freight flows are adjusting to the changing industrial migration and population migration patterns,” he cautioned. “[So motor] carriers with a focus on hauling manufactured products out of certain regions (i.e., the northeast, for example) need to be cognizant of these accelerating trends in order to maintain the equipment utilization and lane balance that often drives profitability.”

    Urbanization is changing the way Americans live, work, and play. And that impacts freight: While the suburbs “aren’t completely dying,” Larkin warned that Millennials and “empty nesters,” in increasing numbers, seem to want to live, work, and play in urban areas.

    “Many of those preferring the urban habitat choose not to own an automobile, instead preferring public transit, walking, cycling, or ride sharing,” he said. “Shopping is often done online and desired food, beverages, other consumer goods, as well as, durable goods are delivered directly to the buyer’s residence or place of employment.”

    Thus motor carriers whose entire existence tends to revolve around the more traditional “brick and mortar” supply chains need to be aware of the speed with which this urbanization trend is contributing to rapidly changing consumer preferences.

    “Only Amazon and Amazon’s partners seem to be ahead of the power curve as this powerful dynamic reshapes America’s supply chains, particularly the last mile delivery component of retail supply chains,” he emphasized.

    Infrastructure investment is critical to improving the nation’s transportation network. But funding mechanisms need change: The U.S. network of highways, developed in the 1950s, was largely federally funded and paid for by highway users taxes collected in

    the form of a fuel tax. But as vehicles became more fuel efficient, tax revenue – a function of gallons of fuel purchased – waned. “The highway system deteriorated and has become chronically congested in many locales,” Larkin said.

    “Some have argued for a vehicle miles traveled (VMT) tax as substitute for the fuel tax, but Congress seems unable to advance that concept,” he noted. “The VMT tax would not suffer from improved fuel economy, but might prove more challenging to efficiently collect.”

    Yet President-elect Trump is proposing a trillion dollar, multi-year infrastructure program that would address deficiencies in the U.S. highway network and that would also address other forms of infrastructure inadequacies, found within public facilities such as ports, intermodal connectors, inland waterways, sewer systems, water distribution, etc.

    “Finding funding for such a large scale plan has always been a challenge in Washington D.C.,” Larkin pointed out. “But ramifications for transportation companies would be positive.”

    On the one hand, materials used in the construction or rehabilitation of infrastructure would have to be transported, he said. Certain types of carriers – railroads and flatbed-based truckload carriers, in particular – would be beneficiaries, Larkin added.

    “And to the extent traffic congestion were to be eliminated and network fluidity were to be enhanced, transportation companies would be able to increase asset utilization, in some cases fairly dramatically,” he noted.

    U.S. energy self-sufficiency will drive an improved trade balance and freight demand: With the advent of hydraulic fracturing and horizontal drilling, the U.S. has the potential to become energy self-sufficient within the next five to 10 years – and the exploration and energy extraction processes alone should generate significant amounts of freight and incremental economic activity, Larkin stressed.

    “The potential for a resurgence in oil and natural gas liquids transportation demand, frack-sand transportation demand, and demand for the transportation of other goods and products needed by crews conducting the exploration and extraction operations certainly exists over the coming one to two year time frame,” he said.

    “And with our low cost energy position enhanced, the potential for further growth of the feedstock intensive petrochemical industry also exists and could drive additional transportation demand,” Larkin noted. “Railroads, liquid bulk barge operators, and tank truck carriers should stand to benefit if and when this trend gains momentum once again.”

    The U.S. still needs a national freight strategy: A “national freight strategy” is still required in order for the U.S. to do “more with less” and accelerate the rate of what Larkin calls “secular” economic growth.

    “The U.S. has never developed and implemented a full blown national freight transportation strategy,” he said. “As a result, our multi-modal network is sub-optimized. The lack of a comprehensive plan also ensures that the importance of intermodal connectors, ports, inland waterways, railroads, etc., is ignored.”

    Yet Larkin noted that It will be “interesting” to see if Elaine Chao, President-elect Trump’s Secretary of Transportation candidate, will be able to lead the charge in this area “finally addressing our transportation infrastructure deficit, our outdated revenue generation mechanism for transportation infrastructure projects, and our lack of a cohesive national freight transportation strategy.”

    Larkin thinks that, “If she is successful,” Chao will give the U.S. economy and the freight transportation industry much needed “shots in the arm.” And a national freight strategy would not only lead to a more efficient allocation of capital to the highest return projects but would “contribute to America’s improved global competitiveness,” he added.

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  27. mtnman

    mtnman Gold Member Gold Chaser Site Supporter ++

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  28. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Heavy truck sales sink in U.S., Canada

    Jan 17, 2017 Fleet Owner


    WardsAuto reports that U.S. sales of medium- and heavy-duty trucks in December fell 9.9% from like-2015. And in Canada, truck sales were down 21.1% in December, according to Wards.

    Class 8 sales in the U.S. were down to 15,629 units, a 22.0% decrease from year-ago’s 20,773 units. According to Wards, PACCAR’s Kenworth increased 5.8% to 3,079 units, while all other companies dropped. The largest declines came from International (-39.2%), Daimler (-31.6%) and Volvo (-23.1%). Class 8 year-to-date deliveries also plummeted, down 22.6% to a 2016 total of 192,662. Volvo’s 12-month total dropped the most in the group, down 33.6% to 20,543 units.

    For December, medium-trucks rose 2.3% on 20,096 deliveries. Year-to-date, the group rose 3.6% to 207,694 units, up from 200,529 from like-2015.

    In Canada, Class 8 deliveries totaled 1,911 units, down 17.9% from year-ago. PACCAR gained 0.2%, balanced out from Kenworth’s increase of 0.7% and Peterbilt’s decrease of 0.5%. According to Wards, all other truck makers in this segment posted double-digit losses, including Daimler (-22.1%), International (-15.1%) and Volvo Truck (-25.7%).

    Medium-duty truck sales plummeted 28.7% to 709 units from 995 in same-month 2015, with year-to-date losses in each segment.

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