So, as the economy plods along in its present state, one subsection of the trucking industry continues to feel the pain, and will likely feel the pain even after an economic turnaround.
Trailer manufacturers are certainly hurting as fleets aren’t buying. Wabash National reached agreement with its bank yesterday on a forbearance agreement revolving line of credit to help it manage its debts. Just last week, it announced it would not be bringing back 790 employees that have been on an extended holiday break since Christmas.
Wabash is not the only manufacturer struggling, though. The whole industry, which saw a huge drop in trailer output from 2007 to 2008 (from 218,422 units to 151,641), expects to see even further declines this year.
The problem, as I see it, is the durability of trailers. Even when the economy improves, will fleets purchase new trailers. Maybe, maybe not. Trailers will last longer than tractors, so if a fleet has to decide where to spend its money for the next several years, guess where it’s going?
That is more bad news for the manufacturers, and potentially bad news for the whole industry long term. As fewer trailers are purchased, the likelihood of several trailer builders going out of business increases. The end result is decreased competition. The lack of competition hurts in several ways, notably the slowdown of technological achievements as companies may not see the need to invest in advancing aerodynamics, cost reduction technologies, and more. Ultimately, with fewer players, it might also lead to higher prices.
Hopefully, I’m just being pessimistic and this scenario will not play out.