March 1997 A Newport Communications Service since 1970

Special Report: THE FREIGHTLINER/FORD DEAL

Decision to scrap the Marmon nameplate wasn't a surprise but "it went together a lot quicker than anyone expected," says company spokesperson. Marmon Motor Co. stopped building its custom-made conventionals Jan. 1 after parent TIC United formed a joint venture with Navistar to build International Paystar trucks at Marmon's Garland, TX, plant. Terry Palmer, assistant to Marmon President Bob Shaughnessey, says the rush to shift Paystar production from Navistar's Chatham, Ont., plant left no time to forewarn staff or dealers.

"Marmon still exists," she says, noting that the company will continue to fulfill parts & warranty obligations. Trucks on line when production stopped were mothballed & will likely be disassembled for parts. Parts inventory will be used for aftermarket service & warranty. Plant now operates as SST Truck Co. & will build up to 2,000 Paystars/year, says Palmer. Marmon assembly workers were laid off but expected to be called back to build Paystars. Permanent cuts came in distribution & sales.

AlliedSignal Automotive and European brake partner Knorr-Bremse AG to buy heavy truck air brake business of Echlin in U.S. & Europe. Deal includes Midland Brake in the U.S. and Grau in Europe & should enhance Allied Signal's heavy duty ABS business and speed development of electronic braking systems. It gives AlliedSignal Truck Brake Systems Co. access to Midland Brake aftermarket distribution network and rights to Midland, Maxi-Brake, Berg, and Like-Nu trademarks. Midland produces brake valves, actuators, compressors, as well as electrical, axle & clutch parts. Grau, which makes valves, actuators, trailer ABS & trailer drawbars, will become part of Knorr-Bremse product line.

Two U.S. friction material businesses, Prattville Mfg. and United Brake Systems, also included in deal. Both will become part of AlliedSignal Friction Materials, & companies will acquire worldwide rights to Grey-Rock and Brake Technology trademarks. Acquisition is subject to government review and approval of AlliedSignal, Knorr-Bremse & Echlin boards.

Volvo GM's goal is to "hit the break-even mark by mid-year & return to profitability in '98," says President/CEO Marc Gustafson. Sales of the new VN Series are ahead of projections, he says. Orders totaled 3,200 in mid-January, with 635 units shipped. The new Volvo 770 Integral Sleeper is due out this spring or summer with full production by August 1.

Paccar posts '96 net income of $201 million on sales of $4.3 billion vs. $252.8 million on sales of $4.6 billion in '95. Despite industry sales downturn, '96 "was a strong year for heavy duty truck manufacturing -- much better, in fact, than many in the industry anticipated," says Chairman/CEO Mark Pigott. 4th quarter net sales, including some DAF revenue, hit $1.2 billion vs. $1.1 billion in '95; net income was $65.1 million vs. $62.5 million in '95.

Peterbilt's '96 market share growth was due to distribution network expansion (28% since '93), new products, & expanded penetration of markets like construction & refuse, says General Manager Nick Panza. "It has been a gradual build-up over the past 3-4 years. You didn't notice it in '95 because it was such a big year and we were at maximum capacity." Despite market downturn, Peterbilt retail sales were up 8.1% last year, year-high market share was 11%. Company is currently building 75 trucks/day. Panza says they'll add 10 more North American dealer locations this year, bringing total to 197. Industry sales forecast for '97: 165,000 North American Class 8 retail.

Navistar to boost production at Springfield, OH, plant from 224 to 266 medium trucks & school buses, and from 47 to 65 heavy trucks/day. 500 workers are called back. Chairman/President/CEO John Horne says medium/heavy truck & school bus chassis orders are up from last year. Company posted 1st quarter fiscal '97 (ending Jan. 31) income of $15 million on sales of $1.3 billion vs. $22 million on $1.4 billion 1st quarter '96. Trucks/bus shipments were down 15.9%, midrange engines up 8.4%, parts sales up 5.1%.

GM to consolidate commercial vehicle production at Flint, MI, plant starting with C/K pickups in '99; P-model chassis in 2000; 3500 HD chassis cabs, C-Series, T-Series medium trucks & B-Series medium school buses in 2001. C/K is currently built in Janesville, WI, & Detroit. Others are built in Janesville. GM says it will invest $500 million to refurbish the Flint site. Consolidation will enable GM to produce a wider variety of products with less complexity, says GM VP & Truck Group Executive Thomas Davis.

Cummins posts '96 earnings of $160 million on record sales of $5.3 billion vs. $224 million on $5.2 billion in '96. 4th quarter earnings were $41 million on sales of $1.4 billion vs. $42 million on $1.3 billion in '95. 4th quarter sales to the heavy truck market were $270 million, down 23% from 4th quarter '95; mid-range engine sales were about even at $134 million. Cummins' sales were up in power generation, bus, light commercial vehicle & industrial markets.

Detroit Diesel earned '96 income of $4.8 million on revenues of $1.96 billion after a $24.9 million special charge. '95 income was $40.1 million on sales of $2.1 billion. 4th quarter net income was $4.6 million on revenue of $505 million vs. $4.5 million on $510 million in '95. 4th quarter revenues in the on-highway truck market fell 12% from '95; revenues rose in all other segments.

Heavy duty parts market was $10.12 billion ($10.29 billion with price increases) in '96 vs. $10.28 billion in '95, according to MacKay & Co. 43.9% of "point of final sale" were OE dealers. Others' shares: heavy duty distributors/fleet specialists, 28.9%; independent garages, 8.4%; engine distributors 7.7%, automotive parts retailers 6.6%. MacKay's '97 forecast:$10.25 billion.

'97 will be an "up" year for heavy truck sales, says Karen Ubelhart, Lehman Brothers analyst. Predicted declines are based on "overbuying" in recent years & notion of "historical" cycles with 2-year downturns. But fleets didn't overbuy, they overordered & that has been corrected, she says. Data doesn't support further weakness: Economy is strong, industrial production even healthier, ton-miles are up, late '96 orders were strong, early '97 is promising, cancellations are low. Could mean a 5% increase over '96, she says.

Dana follows acquisition of Sealed Power Div. from SPX Corp. with purchase of Clark-Hurth Components, a worldwide off-highway equipment manufacturer, from Ingersoll-Rand. Federal-Mogul restructuring will cut 2,900 jobs or ¹/₅ its worldwide employment. New Chairman Richard Snell says focus to be on manufacturing operations -- engine, transmission, steering & suspension parts; but sell 132 retail & 30 wholesale operations, most in other countries.

Ryder's truck leasing revenue was up for '96 but continued weak rental demand prompted a 12% cut in its commercial truck rental fleet. Restructuring & cost plan also includes disposal of 200 facilities & properties; consolidation of field offices & support services. Truckstops of America & National Auto/Truckstops merge as TravelCenters of America with 125 locations in 39 states. Mobil to invest $15 million in Petro truckstops. J.J. Keller to market & produce regulatory compliance & safety products for American Trucking Assns.

Kysor Industrial sells transportation products group to Kuhlman Corp., industrial refrigeration assets go to Scotsman Industries. LucasVarity buys Autospecialty. Goodyear Tire & Japan's Sumitomo Rubber Industries to make tires for each other in Asia & North America. Holland Hitch to buy Fruehauf Delphos Axle Products Div. Cooper Industries to sell Kirsch Div. to Newell Co.; buy Eletromec-Eletro Ceramica, Brazilian fuse maker.

AB Volvo taps Electrolux Chief Executive Leif Johansson for top spot vacated by Soeren Gyll, who took unexpected early retirement. Dan Sobic to Peterbilt assistant GM succeeding Daryl Gorup, now senior vp-dealership operations for Rush Enterprises' 11-Pete dealer network. Sobic is succeeded by David Rutman, former northeast regional sales & service manager. Bruce Ewald to director, Peterbilt U.S. fleet sales, from Paccar Parts national sales manager-Peterbilt Div. John Meyer to franchise manager, Nissan Diesel America, from midwest district manager.

Randall Schwarz to vehicle line exec, GM commercial trucks. Jim Scales to national sales manager-private fleets, Eaton, from national sales manager, Rockwell Highway Transportation Electronics. Rick Mates to manager, Stemco Pro Torq sales. Thomas Fraser to vp-network & corporate marketing, First Data Corp/NTS.

Tom Freewald to senior vp-marketing, Detroit Diesel. Jerry Rush to director, federal/state government relations, Rockwell Automotive & Rockwell Automation, from employee communications/public affairs director, Rockwell Automotive. Douglas Zalla to product development director, Valvoline. Ken Heckman to national sales manager, Koneta Rubber. Bandag names Paul Roots vp-dealer development, John McErlane vp-marketing, John Way vp-fleet development.

Allison Transmission names Lawrence Dewey worldwide general sales manager, Michael Headley managing director-Europe BV The Netherlands, Jack Summerville director-North American field sales. Jim Wanaselja, Allison's director-national accounts & OEM sales, now also responsible for marketing. <\n>Horton names Mike Waninger executive vp-aftermarket sales, Nels Johnson <\n>executive vp-OEM sales, John Goodman vp marketing.

Dana Heavy Truck Marketing adds 4th U.S. region. Managers: Pat Brandt, east U.S.; Jay Simpson, mid-central; Bob Carlucci, central; Vern Cole, western. Tim Ramer to sales & marketing manager, Spicer Heavy Truck Marketing. Doc <\n>Pingree to Goodyear special projects manager. Rich Ellis succeeds him as PR manager, Commercial Tires North America.

Carl Kirk, executive director, The Maintenance Council, also now an ATA vp & executive director, ATA Management Systems Council. William Joyce Jr. to executive director, New York Motor Truck Assn., from operations manager, Lake Shore Transportation Lines. He's a former TMC chairman. Died: Doreen (Dodi) Reagan, director of safety, National Private Truck Council; Gerri Murphy, TMC member services director; Paul Hykes, former ATA engineer.

THE BUSINESS MAGAZINE OF TRUCKING 38 Executive Park, Suite 300, Irvine CA 92614 (714) 261-1636 Fax  (714) 261-2904 Special Staff Report: THE FREIGHTLINER/FORD DEAL Ford to exit the big truck market with pending sale of its heavy truck business to Freightliner. If the deal is finalized & approved by government, Freightliner will own technology, tooling and assembly equipment for the Louisville/AeroMax (HN80) trucks, the predecessor Ford L-Series and the Cargo medium duty low cab forward. Sale will take Ford out of heavy truck markets in Canada, Mexico & Australia as well as the U.S. The acquisition adds a complementary mix of medium & heavy duty truck products to the Freightliner lineup, says President/CEO Jim Hebe. However the new -- yet to be named -- lineup of Class 8 trucks and the Cargo will stay with the current Ford dealer network. Sales, marketing & aftermarket support will be handled by Freightliner. Hebe, an ex-Kenworth dealer & exec, balks at parallels with Paccar's Kenworth & Peterbilt divisions. He says Freightliner will combine resources for maximum utilization but will have two distinct distribution networks. "The customer base has virtually no overlap," notes Hebe. An analysis of last year's production showed Freightliner heavy truck sales running 89% sleeper equipped while only 20% of the Ford heavies built were sleepers. Target markets are different. Freightliner's linehaul trucks have helped propel it to the number one overall Class 8 market position but it hasn't done well in vocational segments such as oil delivery, tankers, municipal vehicles & construction applications. Ford has been successful in these niches, creating what some call the market for the "Little Red Dump Truck." A study of Ford customers some years ago reportedly placed it high on the list for vocational applications but low for over-the-road trucks. The Freightliner/Ford lineup would see the new HN80 models -- AeroMax and Louisville -- in niche roles: the AeroMax as a cost-conscious day-cab tractor for heavy distribution fleets, the Louisville in vocational applications. "I think the HN80, in the niches where it was designed to be targeted, is far and away the best product. Ford did a really excellent job of niching it," Hebe says. There may be other HN80 products down the road. Ford was poised to launch several new vocational versions, including a short 101-inch BBC tractor and a 120-inch long-nose conventional. A medium duty truck is scheduled for introduction this year and Hebe confirmed it will form part of the new lineup. A 77-inch sleeper cab, the AeroLiner, was also in Ford's development plans but will likely get the thumbs down from Freightliner. The Cargo gets a second chance. Ford began importing the low cab forward from Brazil in the mid-1980s and has built them at its Kentucky Truck Plant since 1991. But low volumes -- about 26,000 total -- prompted Ford to begin phasing out the line last year. Low demand for medium duty cabovers also hurt the launch of Freightliner's Business Class coe. But Hebe says the Cargo is a ready-made product to gain incremental sales & give Freightliner a fully rounded product offering. Ford's decision to get out of heavy trucks came after "a thorough strategic review" and the conclusion that they should concentrate on high volume light & medium duty trucks, says Jim Donaldson, Truck Vehicle Center VP. Once that decision was made the deal was "a very short time in the making," John Merrifield, heavy truck sales & marketing manager, told Hotline. Ford, he says, initiated the contact. The sale will allow some housecleaning at the Kentucky plant. According to Hebe, heavy truck production accounts for only 10% of total KTP volume, but requires 40% of the space. Removal of heavy truck manufacturing frees up capacity for the F-250, F-350 and Super-Duty pickup trucks -- plus a new medium duty truck and new light duty truck due out next year. Ford says it expects to maintain the KTP workforce at current levels. Freightliner's not saying where it will build the new line; Hebe won't rule out a new facility, but calls it a long shot. But, as one Ford insider noted, they're a "very agile" producer. "Freightliner manufacturing is nimble at its ordinary way of doing things, not extraordinary like Ford's," he said. "We put out a pretty good product, but it takes us a long time." Some speculate that Freightliner will be able to cut manufacturing costs of the former Ford trucks, making them even more price competitive. Ford dealers are generally pleased. "Long term, it's the best thing that could happen to us," one told Hotline. Ford's parts & service support, some say, has been a weak link in the heavy truck program. Freightliner's parts & service operation is considered to be strong. Hebe gets high marks and, after years of speculation regarding Ford's commitment to the market, most said they are just pleased to "have a supplier that will be there and be aggressive." Both companies are close-mouthed regarding transaction details, but analysts speculate that Freightliner got a $200 million bargain, and Ford got out of the business while keeping faith with its dealers. Timing hasn't been officially announced, but in a letter to employees, Donaldson said they expect to have a definitive agreement in the next few weeks and to close the sale by year-end or early '98. One possible holdup: government approval. With Ford's 9%, Freightliner will have almost 40% of the Class 8 market. It will take some time for personnel to be sorted out, but Merrifield says Ford people will all be accommodated within the company. "The asset sale involves products, drawings and service and parts business. No people involved," he says. "Ford people don't have to go to work for Freightliner. But Ford would not prohibit an employee from working for Freightliner." NEWPORT COMMUNICATIONS HEAVY DUTY TRUCKING TRUCKERS NEWS TRUCK SALES & LEASING CAMIONES TRUCKSTOP & TRAVEL PLAZA Heavy Duty Trucking / RoadSTAR / Truck Sales & Leasing/ TruckingInfo.com / Truckstop Travel Plaza / Poster Media / Hotline Archives Copyright © 1997 by Newport Communications Group, HIC Corporation. Reproduction in any manner, in whole or in part, without permission is prohibited. Box W, Newport Beach, CA 92658-0617, (714) 261-1636, Fax: (714) 261-2904

U.S. RETAIL TRUCK SALES REPORT

CLASS 8 - 33,000 LB & OVER GVW MANUFACTURER JAN SALES YTD SALES YTD SHARE Ford 958 958 8.40% Freightliner 3,453 3,453 30.26% Kenworth 1,218 1,218 10.67% Mack 861 861 7.55% Navistar 2,219 2,219 19.45% Peterbilt 1,397 1,397 12.24% Volvo GM Heavy Truck 1,083 1,083 9.49% Western Star 153 153 1.34% Other 68 68 0.60% Totals 11,410 11,410 100.00% CLASS 7 - 26,001-33,000 LB. GVW MANUFACTURER JAN SALES YTD SALES YTD SHARE Chevrolet 295 295 3.78% Ford 1,680 1,680 21.52% Freightliner 850 850 10.89% GMC 757 757 9.70% Hino 8 8 0.10% Isuzu 14 14 0.18% Kenworth 56 56 0.72% Mack (Renault) 34 34 0.44% Mitsubishi-Fuso 23 23 0.29% Navistar 3,992 3,992 51.14% Nissan Diesel (UD Trucks) 1 1 0.01% Peterbilt 53 53 0.68% Volvo GM Heavy Truck 43 43 0.55% Other 0 0 0.00% Totals 7,806 7,806 100.00% CLASS 6 - 19,501-26,000 LB. GVW MANUFACTURER JAN SALES YTD SALES YTD SHARE Chevrolet 91 91 6.51% Ford 433 433 30.97% Freightliner 352 352 25.18% GMC 283 283 20.24% Hino 19 19 1.36% Isuzu 28 28 2.00% Mack (Renault) 42 42 3.00% Mitsubishi-Fuso 30 30 2.15% Navistar 97 97 6.94% Nissan Diesel (UD Trucks) 23 23 1.65% Other 0 0 0.00% Totals 1,398 1,398 100.00% 1997 RETAIL TRUCK SALES Class 6 Class 7 Class 8 TOTALS January 1,398 7,806 11,410 20,614 Year to Date 1,398 7,806 11,410 20,614 96 YTD 1,365 8,122 12,220 21,707 Change 33 -316 -810 -1,093 Percent 2.4% -3.9% -6.6% -5.0%

Compiled by Heavy Duty Trucking Magazine
Source: American Automobile Manufacturers Assn.