Toxic Mix Hits Trucking, Orders for New Trucks Totally Collapse, Pummel Manufacturers

Monday, December 7, 2015
By Paul Martin

by Wolf Richter
WolfStreet.com
December 4, 2015

When diesel-engine maker Cummins announced its third-quarter earnings debacle on October 28, chief operating officer Rich Freeland had a special word about future production and sales of heavy trucks: “It’s evident now that retail sales [of trucks] and production will be down going forward.”

He wasn’t kidding. But it’s a lot worse than imagined at the time.

Demand for Class 8 trucks, the largest trucks on US highways, had been strong in 2014, and orders were expected to reach a decade high in 2015. Last year, the trucking industry was roaring, and there was talk of shortages of trucks and drivers, a capacity squeeze caused by vibrant order books around the country. Companies were stocking up for the great year 2015.

Optimism was boiling over. Interest rates were at zero. Money was nearly free. The economy would hit escape velocity. Stocks hit new all-time highs. And carriers ordered trucks from truck makers to be able to meet this demand coming down the pike, and truck makers ordered engines from engine makers such as Cummins. And the whole industry was cooking. Then summer 2015 came around.

Retail sales had been disappointing. Escape velocity had turned out to be an illusion. Inventories around the country had built up to a historic glut. And companies began trimming their orders. Suddenly demand for transportation slowed while capacity soared. In this scenario of slack demand and overcapacity, the load-to-truck ratio, published by transportation data provider DAT, collapsed to the lowest level in years.

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter