Orders Slow, But Freightliner Doesn't
January 26, 2000
With truck orders slowing to a more sedate pace than we've been used to, you'd think that truck makers would be taking a breather. Not so at Freightliner Corp. If anything, the Portland-based division of DaimlerChrysler is stepping up its product development plans and aggressively realigning its operations for the new Internet/wireless age.
Over the coming year, the company plans to introduce a brand new Class 1-4 truck as well as a wireless communication system which will allow Internet access from in the truck cab.
The company is coming off a banner year, selling a total of 194,597 trucks, up from 124,036 in 1998. Freightliner brand Class 8 sales (90,483) still make up the bulk, but Business Class (34,382); Sterling (25,467), and Freightliner Custom Chassis (22,542) all made strong gains for the year.
President and CEO Jim Hebe says the company will continue to invest heavily in medium duty products. "The medium duty market has become much more customized," he said. "Freightliner spends more on custom engineering medium duty trucks than on Class 8 models. The market is changing to become more vocation-specific than weight-specific."
Hebe said dealers only selling medium duty will evolve into vocational dealers. "Not all dealers do well in niche markets. Those that try to tag it onto to traditional truck business are doomed to fail. A lot of the people buying in that market don't see themselves as truck buyers."
Hebe said the company's investment in FCCC, the former chassis division of Oskosh, has really paid off. "Last year, we earned 4.25 times what we paid for it," he said. While sales of motor home chassis are hot right now, FCCC will also benefit from growth in package carriers as they expand to meet demand for e-commerce deliveries.
Hebe believes buying trucks on the Internet is a long way off, if ever. But supporting the product online will grow rapidly. "It will take a lot of work with dealers," he said. "The biggest challenge is in parts distribution. There are a lot of layers of margin in the parts business and they can be reduced by technology.
"The risk to dealers isn't so much from OEMs like us, but from the companies that circumvents the entire OEM process. If that happens, you can bet that vertical integration of components will escalate."
Freightliner certainly hasn't backed off its financial commitment to dealers. It's CapAd program has approved 27 projects worth $138 million to help dealers improve facilities. The company is also building service presence in truckstops through its relationship with Travel Centers of America. Over 40 T/A facilities are currently ready to service Freightliners and they are being added at a rate of 10 a month. The T/A affiliation will add 320 service bays and 850 technicians to the 4,300 bays and 4,500 technicians Freightliner already has at its dealer locations.
Freightliner will also introduce a program to manage dealer parts inventories where dealers will be required to stock specified amounts of critical parts. Inventories will be monitored electronically and parts automatically restocked as they are used. The increase over current parts inventories would be minimal, Hebe said. And the company would buy back parts that didn't sell.