Fleet Management

Top Economists See Truck Production Falloff

September 19, 2000

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Truck production, which has already begun to slide steeply from the record highs posted in 1999, will get steadily worse throughout this year and next before flattening out.
But that's not all bad, agreed the six economists and transportation experts who spoke at the Economic Outlook Conference sponsored by the National Truck Equipment Association in Dearborn, Mich., this week.
Lower production may help reduce the glut of used trucks currently on the market.
"Right now, we're seeing a rash of 'drive-through' repossessions," said Dan Lukas of American Commercial Research Co. "The driver parks his truck at the dealership, tosses his keys on the counter and says 'Bye.'"
On the other hand, Lukas said the driver shortage is so intense that many fleets may be obliged to raise driver wages to unprecedented heights. "If fleet drivers start earning $55,000 a year, a lot of owner-operators may have second thoughts about staying in business for themselves and opt to become company drivers."
Heavy truck prices also are languishing, said David Wyss, chief economist for Standard & Poors Data Resources. But he sees them leveling as production gets down to more normal levels from the 1999 sales binge.
Wyss also predicts the U.S. will lose market share in the world truck market, down from 38% this year to 30% in 2005. The U.S. will continue to be the primary producer of trucks for the Canadian and Mexican markets, but Japan and China will increase market share.
Currently, medium truck production is still holding strong -- actually reaching record levels in the first two quarters. But the experts predicted a 6% falloff by the end of the year and an additional 9% in 2001.
"The decline in heavy-duty truck production in combination with other leading economic indicators provides strong evidence of an economic downturn for segments of the commercial truck and transportation equipment industry," said Stephen Latin- Kasper, NTEA director of market data and research.
Wyss said North America's share of global truck output is expected to decline from 38% in 2000 to 30% in 2005.
None of the six conference participants predicted a major recession. "It takes several months for higher interest rates imposed by the Fed to achieve a slowing of the economy," said Wyss. "That means the economy will continue to soften through at least the middle of next year.
"But Alan Greenspan will jump on the accelerator as soon as he thinks the threat of inflation is over."

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