Hebe: No Recovery Without Crude Oil Price Turnaround
March 26, 2001
The single most important factor that brought down the trucking industry’s fortunes was energy cost, and those fortunes won’t change until fuel prices decline, says Freightliner CEO Jim Hebe.
Pointing out that every U.S. economic downturn since World War II has been linked to energy problems, he said: "We need diesel prices of $1.15 to $1.18 at the pump for a turnaround." Hebe made his remarks to the Heavy Duty Manufacturers Assn. annual Mid-America Trucking Show meeting last week in Louisville, Ky.
Barring "something dramatic," he predicted Class 8 U.S. retail truck sales in 2001 will only range from 100,000-110,000, and Class 6-7 sales will be 120,000-130,000. Canada will be under 10,000.
Orders for all North America should start to pick up next fall and rebound in 2002, when Class 8 sales should hit 150,000, he said.
The national economy needs further action from the Federal Reserve, and pay increases in the middle income segment, Hebe asserted. As for technology advances in trucking, their cost is "beyond the current appetite" of truck buyers unless they’re at no added cost, mandated or proven to pay for themselves quickly. He urged elimination of the 12% federal excise tax and investing the money in technology development.
As for the used truck oversupply, Hebe said that while some have blamed Freightliner for it, his company "has done more than anyone else to fix it. Some of our customers bought too many (new) trucks...it’s everyone’s issue to deal with."
He said equipment depreciation rates should be liberalized, financing of used trucks needs an overhaul, and dealers must share in the cost of correcting the situation.
Longer range, he predicted that in five years truckload carriers will have shorter hauls, drivers will be home more and trade cycles will be longer. Less-than-truckload carriers will grow and have shorter trade cycles, more technology, and more long combination vehicles with liberalized size and weight restrictions.
Private fleets will grow and return to owning equipment, a factor that will pressure full-service leasing companies, Hebe said, and predicted that owner-operators, who currently buy about 18% of new trucks sold, will be buying about 10%.
As for logistics, "The owner of the best system will dominate… he who controls the customer base controls the freight," he said, adding that freight transportation will be global and involve all modes.
The worldwide truck manufacturing industry is now in its third stage of development, he said. First was the establishment of small manufacturers; then came a small number of regional powerhouses in Europe, North America and Asia. The third stage is rapid globalization, whose players are now clearly defined, with the exception of Asia (Japan, China, Korea and India).
Global standards on safety, electrical/electronic systems and emissions are coming, he said, but with the exception of the light commercial segment, he predicted, "no global truck will emerge."