The current glut of late model used trucks could dramatically change the large truckload carrier business model, according to Jim Hebe, president and CEO of Freightliner LLC. Unless plans to “revive” the used-truck market push resale prices higher, TL fleets with business plans that call for trading Class 8 tractors every three years could see depreciation costs double, he said during a recent press conference.
Hebe also revealed that both the Freightliner and Sterling lines will get light commercial models.
“Large fleets have been sheltered from current (used truck) conditions by high guaranteed residual values,” Hebe said. “But the residual deals are running out.”
Given today's low used-truck prices on the open market, those fleets will no longer be able to maintain three-year trade cycles, he said, and would be forced to take on more vehicle maintenance and repair activities as they push those cycles out to four or five years.
Freightliner's strategies to boost prices include doubling the size of its SelecTruck used-truck dealer network by the end of the year.
“We also sold too many new trucks to owner-operators who couldn't afford them,” Hebe said. “We should have sold them used ones that would have allowed them to build reasonable business equity.”
Changes in new-truck financing that would spread the risk of loan defaults between dealers, manufacturers and finance companies could also bring stability to the used-truck market.
Last year, Freightliner opened a remanufacturing facility in Utah to refurbish and upgrade used trucks in an attempt to bolster the market. While the company remains committed to that program, Hebe said they also hadn't ruled out “junking” a certain percentage of older model vehicles.
Turning to new product releases, Hebe said that Sterling will get a Class 3/4/5 low COE later this year. However, details are still uncertain as Freightliner's parent, DaimlerChrysler, attempts to sort out its business relationships with Asian manufacturers Hyundai and Mitsubishi. Both produce light-duty low COEs that could be sold as Sterling models.
The Class 3 Sprinter van, currently built in Europe by DaimlerChrysler, will be introduced in North America as a Freightliner model in March. A Class 5 conventional truck, based on a new Dodge Ram pickup platform from the Chrysler division, will also be brought to market as a Freightliner, Hebe said.
“We're committed to producing a full range of commercial trucks covering Class 3 through 8,” Hebe said. “Light trucks are a major part of our future plans.”
