Hotline September 2003 by chenmeixiu


									                                                                               SEPTEMBER 2003
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The Economy
Most of the pieces are falling into place
for economic & trucking recovery in the
2nd half of ’03 and certainly ’04, says Bob
Costello, vp/chief economist, American
Trucking Assns. and Donald Broughton, trans-
portation equity analyst, A.G. Edwards & Sons.
In a recent teleconference, sponsored by the
Truckload Carriers Assn., the two said manufac-
turing – which is trucking’s biggest customer –
was still "flat on its back," but there are signs of
improvement. Factory orders are still below the
10-year growth trend but inventory relative to
sales ratio is lean — especially among manufac-
turers & wholesalers — so it won’t take much to        Aging fleets are a worry since it means
spur a production ramp-up.                             more downtime & higher maintenance costs.
                                                       Broughton predicts more in-house maintenance.
There are lingering negatives: continuing job          He also says carriers that kept their fleets young
losses, low capacity utilization, wobbly               may have an advantage. New truck production is
economies in the rest of the world & caution on        below the normal replacement rate, which he
the part of most businesses. But there are more        pegs at 160,000-180,000 heavy trucks/year.
positives: fiscal & monetary polices favor busi-       Excess late model used trucks have been gone
ness investment, interest rates are the lowest in      for more than a year, so those remaining will
41 years, after-tax income growth is fairly solid.     bring a premium price.
The housing market has dropped off some, but
remains relatively strong. Cash flow & balance         Labor expenses will go up, says Costello.
sheets have strengthened in corp. America –            Driver pay leveled off with recession but turnover
including trucking. The dollar is falling, which       is still high – just under 100% for truckload carri-
makes U.S. goods more attractive overseas.             ers. Moreover, trucking faces the same problems
                                                       attracting drivers that it did before the recession.
Recovery won’t likely trigger an influx of
new trucking companies as it has in the past.          The worst of the insurance premium hikes
Barriers to entry, noted Costello, are "the highest    may be over but Costello doesn’t see lower
we’ve seen in quite some time." Fuel prices are        rates in the near future. Insurance represents 3-
volatile, insurance is very expensive & interest is    5% of fleet operating expenses & that doesn’t
low but loans are still hard to get for those just     reflect higher risks as carriers raise deductibles to
getting started.                                       hold off higher premiums. Many large carriers
                                                       are self insuring the first $1 million or even $2
Diesel prices aren’t expected to turn down-            million per incident.
ward & may even rise significantly if the winter is
cold & inventories aren’t replenished. Steep price     Small carriers not only face cost pressures
hikes in 2000 & 2001 brought a rash of trucking        but efficiency challenges. Per ATA data, smaller
failures, but Broughton says the fuel price/fleet      fleets consistently run a much higher empty mile
failure ratio has fallen off. Recession & diesel       ratio than their bigger competitors – mainly
price run-ups got rid of the weakest players, he       because they lack sales & marketing staff/exper-
says. “Companies that were able to survive are         tise to keep trucks loaded. Broughton also noted
capable of dealing with what we see now."              that small carriers tend to favor longer hauls
Freight rates are going up some & more carriers        because they can operate with less dispatch,
have fuel surcharge programs they can imple-           fewer receivables and fewer trailers. But shorter
ment quickly when fuel prices start to rise.           hauls typically pay better & may be more plenti-
                                                       ful in the times ahead as the continuing trend to
                                                       offshore manufacturing means more port-to-dis-

                                                                        HOTLINE SEPTEMBER 2003                             1
tribution center runs and fewer long haul ship-
ments from factory to warehouse or customer.
For more on TCA’s audio conferences:

ATA’s Truck Tonnage Index for June is up
5.5% from June ’02. First 6 months is up 3.9%
from same period last year. Despite a 5% year-to-
year decrease in May, ATA’s Costello says the
growth trend continues. "We continue to believe
that truck tonnage will grow at a modest pace &
hopefully improve as the economy improves in
the 2nd half of this year."

July exception freight was up 23% from July
’02, says Wayne Kirchmann, TransCore’s market           Economic Planning Associates expects
research mgr. This is the 18th consecutive month        steady quarterly advances in Class 8 retail
with a year-over-year increase in loads, he notes.      sales through the rest of ’03 & into ’04, but the
"On a month-to-month basis, July ushered in the         sluggish start will hold ’03 U.S. retail sales to
beginning of a seasonal summer dip with a 2%            139,000, 4.7% below last year. Forecast for ’04 is
decline in loads. This is consistent with historical    171,000. Class 7 forecast: 66,000 in ’03, 86,000 ’04.
& seasonal trends for summer and still indicates        Class 6: 48,000 ’03, 55,000 ’04. Trailers: 182,050
a strong exception freight market." Looking to          ’03, 211,750 ’04. Contact: Economic Planning
Oct., the best combinations of high freight vol-        Assoc., (631) 864-4900.
umes & favorable inbound/outbound load ratios
have traditionally come from Texas, Ohio,               74% of private & for-hire fleets in quarterly
Pennsylvania, Florida, N. Carolina & Missouri.          study by CK Marketing & Communications say
                                                        they plan to buy power units sometime in the
                                                        next 6 months – 41% said at least a portion of the
Sales Trends                                            purchases would be additional capacity. 48% said
Year-to-year heavy truck order & produc-                they plan to buy trailers in the next 6 months.
tion comparisons should get easier as we clear          One-third said they will avoid purchases in ’07,
last year’s pre-Oct. frenzy, note analysts at Merrill   when new emissions rules kick in, 26% said they
Lynch. ACT Research data puts June N. American          would still buy trucks & the rest were undecided.
Class 8 net orders 62.4% above June ’02, which
was the first month of declining orders after the       June N. American factory sales of Class 8
pre-buy. June N. American production was up             diesel engines were down 8.1% from a year ago,
1.8% from May but down 10.1% from a year ago,           according to Merrill Lynch. Year-to-date factory
when OEMs were filling pre-Oct. orders. Merrill         sales were down 2.3%. N. American market
Lynch forecasts N. American heavy truck produc-         share, YDT: Caterpillar 35.9%, Cummins 21%,
tion at 176,000 this year, down slightly from ‘02.      Mercedes-Benz 10%.
Class 5-7 net orders were down 12.8% from May
but up 3% from a year earlier. Production was up
7.4%. For the year, they forecast Class 5-7 pro-        Financials
duction of 174,000, down 5% from ’02.                   Paccar posts $124.1 million 2nd quarter on
                                                        revenues of $2 billion vs. $73.7 million on $1.8 bil-
June Class 8 U.S. truck orders were up                  lion 2nd quarter ’02. N. American industry heavy
41% from a year ago, according to Stark’s Truck         duty truck orders were up 10% from 1st quarter
& Off-Highway Ledger. Cancellation rate is run-         to 2nd, said Vice Chairman David Hovind. “Truck
ning at 5%. Order backlogs are still well below ’02     operators are more comfortable with the new
pre-buy levels but, at 56,125 units, continues a        engine technology & are benefiting from a slight
steady climb that started in Oct. Stark says N.         improvement in freight tonnage & rate increas-
American heavy duty truck production rose more          es.” Paccar 1st half revenues were $3.9 billion vs.
than 4% in July & additional increases in late          $3.3 billion same period last year. Net income
summer and early fall are planned for                   was $234.9 million vs. $120.9 million.
Freightliner, Kenworth, Sterling and Mack.              Chairman/CEO Mark Pigott said that the company
                                                        is expanding its parts distribution center in

Atlanta, building a new parts facility in Leyland,
U.K., installing automated paint processes in its
truck facilities & has started construction of a new
Kenworth engineering center in Renton, Wash.

Volvo reports 2nd quarter profits of 1.72
billion kronor ($210 million), up 59% from a year
ago. Revenue was 44.6 billion kronor ($5.4 bil-
lion), down 10%. CEO Leif Johansson said there
are signs of market stabilization after 1st quarter
uncertainty, but added that it’s too soon to
change ’03 predictions. Volvo continues to fore-
cast a 170,000 heavy truck market for N. America
& 200,000 for Europe. "However, we also expect
that the total market is more likely to differ from
forecast on the positive side rather than the nega-
tive," he said. Heavy truck sales represent 35% of      Light Vehicle Systems sales were $1.2 billion vs.
Volvo’s revenues & got much of the credit for           $984 million; operating income was $46 million
higher profits.                                         vs. $59 million. Light Vehicle Aftermarket sales
                                                        were $44 million vs. $43 million; operating
Cummins posts $14 million 2nd quarter                   income as $10 million vs. $26 million.
profit on sales of $1.54 billion. The company
didn’t release consolidated comparisons with            Navistar posts $19 million profit 3rd fiscal
previous quarters because prior financial results       quarter on $1.9 billion revenues vs. $16 mil-
are being re-audited and restated with a change         lion loss on $1.6 billion same period last year.
of auditors. Engine business sales totaled $889         Worldwide shipments of International heavy &
million, up 5% from a year ago. Sales of heavy          medium trucks & school buses totaled 21,200
truck engines totaled $266 million vs. $265 mil-        units vs. 19,800. Shipments of mid-range engines
lion same period last year. Sales of medium duty        to other OEs totaled 82,200 vs. 73,400. Despite
truck & bus engines totaled $141 million vs. $157       July industry order increases for medium trucks,
million. The company shipped 12,800 heavy duty          Navistar lowered its Class 6-7 forecast from
engines in the quarter vs. 14,700 a year ago; and       77,300 (same as ‚02) to 72,700 N. American retail
69,900 mid-range engines vs. 67,000.                    for year ending Oct. 31. Class 8 forecast is
Oshkosh Truck Corp. reports $24.2 million
income on sales of $538.2 million for its 3rd fis-
cal quarter ending June 30. Net income in 3rd           Alliances &
quarter ’02 was $21.6 million on $489.5 million         Acquisitions
sales. Operating income was $40.9 million, up           Chairman Joe Magliochetti says Dana’s rejection
6.6%. Commercial sales were $213.6 million, up          ArvinMeritor’s $2.2 billion hostile takeover bid is
4.4%. The company said unit volumes decline in          final & is supported by most of the company’s
all commercial lines but front-discharge concrete       shareholders. But ArvinMeritor says it’s still
mixers. Fire & emergency sales were $148.3 mil-         ready to deal. In a letter to Dana’s board,
lion, up 19.7%. Defense sales were $178.8 million,      ArvinMeritor Chairman/CEO Larry Yost repeated
up 9.8%.                                                his request for a meeting to discuss the buyout
                                                        and again said they were willing to consider a
ArvinMeritor reports net income of $47 mil-             higher price and a cash/stock transaction. The
lion on $2.1 billion sales for its 3rd fiscal quarter   tender offer, which was to expire midnight Aug.
ending June 30 vs. $62 million on $1.9 billion for      28, is for $15/share cash.
the same period a year earlier. Chairman/CEO
Larry Yost said results were negatively impacted        ArvinMeritor files 2nd lawsuit against Dana, this
by lower light vehicle production in N. America &       time claiming the company made "material mis-
W. Europe, soft demand in the light vehicle after-      representations" in its SEC filings explaining the
market, & reduced build rates in some commer-           takeover rejection. An earlier suit accuses Dana
cial vehicle markets. Commercial Vehicle                management of breaching its fiduciary duty to
Systems sales were $645 million vs. $622 million;       shareholders by refusing to discuss buyout
operating income was $38 million vs. $35 million.       offers. Meantime, Dana sued UBS AG for conflict

                                                                         HOTLINE SEPTEMBER 2003             3
of interest, charging that the investment bank
                                                        to be delivered over three years. Trailers will
was advising ArvinMeritor at the same time it
                                                        have ArvinMeritor’s RideStar Highway
had business relationships with Dana.
                                                        Parallelogram air suspension system, Meritor TL
Wabash National to sell assets of its trailer leas-     axles, Q Plus brakes, LSteelLite X30 brake
ing, rental & wholesale aftermarket parts distribu-     drums & Meritor automatic slack adjusters.
tion businesses to Aurora Trailer Holdings for          Undercarriage system will be assembled at
$65-$70 million, including $55 million in cash.         ArvinMeritor’s Frankfort, Ky. plant.
Aurora will supply parts to Wabash’s factory-
owned branches & Wabash will supply new &               TripPak Online to process time sensitive ship-
used trailers & maintenance services to Aurora.         ping documentation & provide workflow soft-
Aurora was formed by Jefferies Capital                  ware to FedEx Custom Critical. Comdata
Partners. Derek Nagle, formerly president of            opens onsite permit office for Landstar System.
several Wabash businesses, is Aurora’s presi-           Energy & Engine Technology makes first side
dent/CEO. Wabash reported a $27 million loss for        rail installation of its AXP 1000 idle reduction
the 2nd quarter, including a $29 million non-cash       device. Company says successful test could
charge related to planned asset divestitures. Net       mean installation of 8,000 truck fleet. Units are
loss for 2nd quarter ’02 was $22 million. Sales         built by BMZ, Pompano Beach, Fla.
were $230 million vs. $210 million a year earlier.
                                                        Qualcomm & Science Applications Int’l wins
SmarTire Systems selects Hyundai Autonet                $2 million contract from the Federal Motor Carrier
Co. (HACO) as primary manufacturer of its tire          Safety Administration to develop & field test
monitoring products. Company terminates agree-          untethered trailer asset management system for
ment giving Visteon Corp. manufacturing rights          high-value or high-security-risk loads. Test will
for certain SmarTire products & included provi-         quantify costs & benefits. Qualcomm will use its
sions for joint efforts in commercial vehicle &         TrailerTRACS untethered system currently under
other markets. SmarTire says it will market its         development. The company pulled an earlier ver-
products & services directly to OEMs in all mar-        sion from the market in ’01.
kets but Korea, where it has an alliance with
Clean Air Partners to offer Euro IV compliant           U.S. EPA says diesel producers are on track
Dual-Fuel powered trucks & conversions through          to have adequate supplies of ultra-low sulfur fuel
Foden dealers in the UK. Clean Air’s joint venture      for ’07 emissions. At a recent conference to dis-
partner T. Baden Hardstaff to provide sub-              cuss compliance, the agency said industry data
assemblies & other support. Terex to distribute         supplied by refiners indicates that the domestic
Daewoo crawler excavators & wheel loaders               diesel supply will be within 95% compliance in
under the Terex name in N. America.                     ’06. But the projections are premature, says the
                                                        National Petrochemical & Refiners Assn. Exec.
                                                        Dir. Bob Slaughter told an environmental/energy
New Business                                            publication, Greenwire, that refiners face a range
Delphi lands $1.5 billion in new commercial             of design, engineering & investment issues to
vehicle business in the first 6 months of ’03 –         meet the new standards for on-highway diesel as
exceeding its target for the full year. Greg            well as expected new standards for non-road
Kochendorfer, global director for commercial            engines.
vehicles, said the majority of this year’s new busi-
ness falls into 6 product areas: diesel fuel injec-     The fuel distribution system is also an
tion, diesel electronic control units, audio, safety,   issue. When dealing with such small levels of
climate control, and electrical/electronic distribu-    sulfur, any minor upset can cause production
tion systems. "Europe & N. America have always          loss through contamination, he said. Pipeline
been strong CV markets for Delphi, but this year        operators will require a finished product that is
Asia-Pacific is leading all regions in new business     below EPA standards to account for contamina-
booking performance," he said. Company booked           tion at transfer points – and other concerns can
$1.1 billion of new CV business last year, up from      arise as product moves from tank to pump.
$900 million in ’01.
                                                        Cummins Westport Inc. & South Coast Air
Wabash National gets $120 million order from            Quality Management District to jointly devel-
U.S. Xpress for 7,000 Wabash DuraPlate trailers         op technology that could enable CWI’s mid-range

natural gas engines to meet U.S. EPA 2010 emis-
sions standards as early as 2005/2006. Project         Associations
team will develop a prototype engine based on          Truck Renting & Leasing Assn.’s 8th annual
cooled exhaust gas recirculation in conjunction        Larry Miller Memorial Golf Tournament to be
with an after-treatment system to its current line     Sept. 22, Kemper Lakes Golf Course, Long Grove,
of natural gas engines. $2 million project will be     IL. Event honors late industry leader & former
funded equally by Cummins & SCAQMD.                    Ruan President/CEO Larry Miller. Tournament
                                                       helps fund TRALA’s Founders Scholarship Fund.
Michelin & Robert Bosch to showcase 10                 Contact: TRALA, (703) 299-9120,
clean-diesel vehicles at ’03 Challenge Bibendum,
Sept. 23-25, Sonoma & San Francisco, Calif.            "Life in the Fast Lane" recruiting video, pro-
Event evaluates advanced technology vehicles on        duced by the Automotive Warehouse
emissions & performance.                               Distributors Assn., promotes career opportuni-
                                                       ties in the automotive aftermarket. Video is avail-
Caterpillar pledges $250,000 in retrofit technolo-     able for high schools, technical schools & col-
gy to support U.S. EPA’s voluntary program to          leges. Contact: Jim Eady, AWDA president, (816)
help school bus fleet operators replace older          523-8693,
vehicles with newer models or install low emis-
sion control devices on existing buses.
                                                       ArvinMeritor Commercial Vehicle Systems
Lease/Rental                                           Advanced Engineering Group names Gary
U.S. & Canada lease/rental fleet is 1.02 mil-          Ganaway director, product systems director;
lion trucks: 30% in full service leasing, 11% in       Vern Caron, director, electronics strategy & pro-
Class 6-8 commercial rental, 27% in Class 2c-5         gram management; Tjong Lie, director,
consumer rental, 32% in finance leasing, accord-       advanced suspensions program management,
ing to ’03 Truck Renting & Leasing Industry            Thomas DePotter, director, advanced product
Report. Trailer fleet is 877,800: 19.8% in full ser-   development.
vice lease/commercial rental, 53.2% in commer-
cial trailer lease/rental, 12.8% finance leasing,      Scott Wine to president, Jacobs Vehicle
9.9% light duty consumer rental, 4.3% car              Systems, succeeding Brian Burnett who was
trailer/dolly consumer rental. In 2001 68.4% of        recently named president of Veeder-Root. Both
lease/rental trucks are 5 years old or less vs.        companies are subsidiaries of Danaher Corp.
31.3% of non-leased trucks.                            Wine was previously vp/gen. mgr., Danaher man-
                                                       ufacturing programs. Steve Slesinski to prod-
58.9% of trucks in full-service lease fleets           uct planning director, Dana Commercial Vehicle
are Class 8, 33.7% are Class 6-7. 42.1% of trucks      Systems, from senior product & program mgr.
in finance lease are Class 8, 26.1% are Class 6-7.     Kent Finkbiner to marketing director, Webb
36.6% in commercial rental are Class 8, 36% are        Wheel Products.
Class 6-7. Industry Report also details lease/rental
revenues, fleet sizes, purchase & disposal trends.     Newport Communications names Dennis
Contact: Truck Renting & Leasing Assn., (703)          O’Connor director, marketing & Internet opera-
299-9120.                                              tions, Al Brunelli southeast regional marketing
                                                       mgr., Bill Madden western marketing mgr.

National Highway Traffic Safety
Administration issues rule requiring manufac-
turers to do braking-in-a-curve performance test-
ing for single unit trucks & buses. Tests have
been required for tractors since ‚95. Agency
dropped earlier proposal to require the test under
full load, agreeing with manufacturers that test-
ing under lightly loaded conditions is more
severe. Final rule, with details & discussion is in
the Aug. 11 Federal Register at

                                                                        HOTLINE S EPTEMBER 200 3         5
             CLASS 8     CLASS 7                                                  CLASS 6
                       33,001 LBS. & OVER         26,001-33,000 LBS.          19,501-26,000 LBS.
MANUFACTURER        JULY       YTD   YTD       JULY      YTD      YTD      JULY     YTD      YTD
                    SALES     SALES SHARE      SALES    SALES    SHARE    SALES    SALES    SHARE
Chevrolet              0         0     0.00%     158    1,271     3.44%      81      636   2.23%
Ford                   0         0     0.00%     218    1,034     2.80%     920    5,074 17.80%
Freightliner       4,598    25,046    32.81%   1,790   11,308    30.63%   1,402    7,613 26.70%
GMC                    0         0     0.00%     308    2,331     6.31%     138    1,021   3.58%
Hino                   0         0     0.00%      26      136     0.37%     113      548   1.92%
International      2,142    12,238    16.03%   2,378   14,601    39.54%   1,475   12,226 42.88%
Isuzu                  0         0     0.00%      28      458     1.24%       0        3   0.01%
Kenworth           1,436     7,873    10.31%     270    1,775     4.81%       0        0   0.00%
Mack               1,212     7,660    10.03%      15      189     0.51%      14      180   0.63%
Mitsubishi Fuso        0         0     0.00%       7       41     0.11%      40      265   0.93%
Nissan Diesel          0         0     0.00%       4       33     0.09%      42      305   1.07%
Peterbilt          1,680     9,252    12.12%     240    1,712     4.64%       0        0   0.00%
Sterling           1,024     5,511     7.22%     336    2,033     5.51%      87      647   2.27%
Volvo              1,076     7,343     9.62%       0        0     0.00%       0        0   0.00%
Western Star         160       849     1.11%       0        1     0.00%       0        0   0.00%
Other                 58       561     0.73%       0        0     0.00%       0        0   0.00%
Totals            13,386    76,333   100.00%   5,778   36,923   100.00%   4,312   28,510 100.00%

                        April Miller        Sean Izor          Brooke Hammerly
                       Single Source     Dana Corporation      Ruan Transportation

  Elise Bouchee        Annette Eden       Bonnie Cook          Christina Tekampe        Nelson Sanz
  PACCAR Inc.       Ruan Transportation Eaton Corporation       No. Illinois Mack     Ryder System Inc.

   Grant Case         Katie Eckerke       Khalil Hasham         Meredith McCoy        Michael Manzi
Eaton Corporation     Cummins Inc.       Budget Group Inc.      Dana Corporation      GE Capital/TIP

              A           F      A C E                  V        A L U E
                    The Truck Renting and Leasing Association
           salutes our scholarship winners and invites you to participate
          in the Eighth Annual Larry Miller Memorial Golf Tournament
  on Monday, September 22, 2003, at the Kemper Lakes Golf Club outside Chicago.
        For more information, go to or call (703) 299-9120.

   Bill Rhoades      Tiffany Powers        Amy Nguyen            Deanna Fowler       Michael Radovanovic
Ruan Transportation Big Dog Leasing      Dana Corporation       Ryder System Inc.      Cummins Inc.

  Joseph Charest       Justin Mutter        Laura Mercer          Lisa Radak         Nathaniel Wherley
   Mack Trucks       Dana Corporation    Southwest Idealease     Detroit Diesel      International Truck

  Michael Marx         Alyssa Smith      Nicole Fernandez       Brooke Stanford       Veronica Lestina
 Mack Trucks Inc.    Keen Leasing Inc.   Ryder System Inc.     Hino Diesel Trucks    Ruan Transportation

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