Class 8 production crimped by supplier issues

Class 8 production crimped by supplier issues

June saw a modest expansion of heavy-duty Class 8 truck retail sales but supplier disruptions slowed production abruptly in the face of unprecedented demand from fleet customers

June saw a modest expansion of heavy-duty Class 8 truck retail sales but supplier disruptions slowed production abruptly in the face of unprecedented demand from fleet customers.

Supplier problems in June included a brief lockout that resulted from a labor dispute at ArvinMeritor’s Tilbury, ON plant and a breakdown of two aluminum forging presses at Accuride that shut off two-thirds of its capacity. Although those problems have been resolved recently the supply of brakes and wheels, respectively, to OEMs were crimped.

According to Chris Brady, president of Commercial Motor Vehicle Consulting, OEMs produced a seasonally adjusted annual rate of 252,899 units in June, a 15% drop from the rate of 294,217 in May.

The operational disruptions at ArvinMeritor and Accuride, both publicly traded companies, caught the attention of Wall Street. “We recently cut forecasts not only for Accuride, but also for Paccar and Wabash National Corp., based on our channel checks that suggested operational disruptions at both Accuride and ArvinMeritor weighing on June production,” stated investment banking firm Bear Stearns. “We continue to believe that these disruptions will pose meaningful headwinds for second quarter reports out of the truck equipment names.”

“What [OEMs] probably did was continue to build but retrofitted the brakes [and wheels] when they got them,” Brady told FleetOwner. “It hurt production because they can’t deliver the vehicle without the brakes. Any glitch with suppliers impacts OEMs. Production would have to go down since they’re just building at such a strong rate.”

Heavy-duty Class 8 truck retail sales in June amounted to 25,240 units, a 6% increase compared with June 2005 sales, according to WardsAuto.com. This was a relatively modest year-over-year increase compared with the 20% jump in May on the sale of 25,149 units.

On a seasonally adjusted basis, June was a relatively soft month for truck sales. During the first six months of 2006, 140,209 units were sold, WardsAuto.com said. This translates to a seasonally adjusted annual rate of 283,811 for all of 2006, Brady said. For the month of June, the annual rate was 276,341.

Brady expects the industry will sell more than 283,811 units in 2006 as retail sales are set to increase in the second half of the year. This is because fleets are delaying purchases as long as possible because of the 2007 models—which will be equipped with emissions reduction technologies that command a higher initial cost and could carry higher residual costs associated with fuel economy loss and maintenance.

“There will be a steep decline in backlog of unfilled orders for OEMs in the second half of the year as weak orders [for ’07 models] are combined with high production rates [of ’06 models],” Brady said. “It will probably decline at an alarming rate.”

There has been evidence that improvements in aerodynamics in the ’07 models will offset fuel economy losses stemming from the new emissions technology, however. The new emissions technology will allow 2007-2009 models to meet the Environmental Protection Agency’s more stringent 2007 standards.

To comment on this article, email Terrence Nguyen: [email protected]

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish