There are more than 26 million trucks travelling on the interstates and highways of the U.S. today. Of those trucks, approximately 3 million are the heavy duty, Class 8 tractor or “big rig” trucks. In the past, AccuVal has presented information about the trucking industry overall in its featured article, Darkest Before Dawn: State of the Trucking Industry. In this insight, we will focus on one specific segment of the trucking industry, which is declining in both supply and demand.
The ongoing weakness in the U.S. economy and the dramatic decline in the housing sector contributed to sales of new Class 8 trucks/tractors declining by 11.6% in 2008. Class 8 sales totaled 133,473 in 2008 – the lowest level in 16 years. As of the first quarter of 2009, sales were continuing to decline, representing a 21% decrease over the same period for 2008. Freight Transportation Research Associates has forecasted total sales of 101,000 units in 2009. This is in contrast to two major truck manufacturers, which are forecasting more optimistic sales: Paccar, Inc. is predicting sales between 130,000 and 170,000 and Volvo is forecasting sales between 150,000 and 165,000. These manufacturers are counting on a demand driven by an aging fleet within the U.S. In 2008, the average age of a U.S. Class 8 fleet was 6.2 years; to-date, it has risen to 6.4 years per truck – the highest in 20 years.
The trucking industry is definitely hurting in the current economy. This includes fleets dedicated to specific manufacturers as well as trucking companies themselves. Of the more than 26 million trucks on the road, approximately 3 million are Class 8 trucks – and that number is declining. Sterling Truck Corp. manufactured 7,477 Class 8 trucks in 2008, which was a decrease of 8% from 2007. In March 2009, Sterling’s last truck was completed and the company will be closing shop this May. In 2008, more than 2,500 owner-operator trucking companies filed for bankruptcy and an additional 480 have filed in the first quarter of 2009. This has resulted in a 15% decrease in total capacity for the trucking industry. Unfortunately, industry experts are reporting that utilization is still below 70% overall and that this means even more companies will continue to shut down in 2009.
The trucking industry looks at the number of “loadings” and how many tons of freight are moved to determine demand levels month-to-month and year-over-year. Both loadings and freight tonnage have dropped about 10% when compared to the prior year and are dropping to levels not seen since 2002. The ratio of industry-to-sales, as reported by the Department of Commerce, is at its highest levels since 2001. Industry experts believe that this may or may not continue, depending on the saving habits of U.S. consumers; if consumers reverse the trend of zero savings to the 8% to 10% saved in the 1970’s and 1980’s, an increase in freight shipments is not likely to happen any time soon.
In times of economic growth, Americans have proven to be mobile – seeking better employment opportunities elsewhere. A contraction in new home construction, a tightening mortgage market and a loss of job security has significantly influenced mobility. According to the U.S. Census Bureau, the number of Americans that have moved is at its lowest level since 1948.
Trucking is not only slowing down in the U.S., it is also slowing down at the borders of both Canada and Mexico. The U.S. Department of Transportation has reported that the number of trucks crossing into the U.S from Canada totaled more than 5.9 million; now the number of trucks entering from the Canadian border has dropped in excess of 10%. The decrease in trucks entering from Mexico is not as significant at less than 1%.