By Erica E. Phillips
Anyone ordering a new heavy-duty truck this summer will have
wait until sometime next year to get it, assuming strained
manufacturing supply chains hold together.
An unprecedented run of orders for big rigs has pushed the
backlog at truck factories to nine months, according to industry
analysts, the largest since early 2006, when truckers stocked up to
get vehicles in place before tougher environmental restrictions
would take effect. Typically the backlog is about five months for
the truck industry's manufacturers, analysts said.
"It is longer than it should be," said Magnus Koeck, vice
president of marketing for Volvo AB's North America operation,
where Class 8 truck orders this year soared to 25,000 from 11,000
during the first six months of 2017. "Of course we are not alone in
this situation," he said. "Everyone is in the same boat."
North American freight-haulers ordered more than 300,000 Class 8
trucks in the first seven months of this year and are on track to
order a record 450,000 of the heavy-duty vehicles for the full
year, according to ACT Research. That would be the largest book
since 2004, when orders reached 390,000, according to analysts.
In July, North American fleets ordered more than 52,000 trucks,
an all-time monthly record.
Freight-hauling fleets are trying to keep up with swelling
demand in a robust U.S. economy even as they say they face
difficulty finding drivers. New trucks are one recruiting tool, and
the new vehicles also get better fuel mileage -- an attractive
feature for fleets as other costs are rising.
The orders are coming at a rapid pace as more U.S. companies,
from construction equipment makers to retailers, say rising
transportation costs and tight truck capacity are crimping their
ability to grow and slicing into profit margins. Cass Information
Systems Inc., which processes freight payments, says its monthly
index of U.S. trucking costs rose more than 10% in July, the first
double-digit year-over-year increase in the 13 years of the
measure.
It may be months before trucking capacity scales up enough to
meet the growing shipping demand. Many of the new trucks are aimed
at replacing older vehicles, trucking companies say, and production
still lags far behind orders. Manufacturers delivered 30,000 new
vehicles in June, ACT said, but factories are still catching up
after trouble earlier in the year getting the parts they needed to
keep up with demand.
"There's basically a shortage of trucks right now because of
supply-chain issues," said Don Ake, an analyst with research group
FTR. Manufacturers "can't build trucks fast enough because their
suppliers can't keep up."
Navistar International Corp., Daimler AG and Volvo, along with
engine-maker Cummins Inc., have said they faced supply-chain
problems earlier this year as the broader manufacturing sector
coped with delays in supplier deliveries to factories. "It doesn't
matter if it's one tiny screw or one tiny hose, if it's missing or
late, you can't complete the truck," said Volvo's Mr. Koeck.
Any delays at one supplier can ripple across the business,
companies say, because companies often build certain parts for
several different truck manufacturers. And companies say the low
national unemployment rate makes it tougher to fill vacant
jobs.
"The challenge was finding the labor, I suppose the next
challenge is keeping the labor," said Kenny Vieth, an analyst with
ACT.
Manufacturers say their suppliers have hired the necessary staff
and now are pushing through parts at a faster pace. Volvo Trucks
North America delivered 15,658 vehicles through June, up 71% from
its deliveries in the first half of 2017.
"With the strong demand and the corresponding increases in
production levels, the entire industry has been faced with supply
constraints and pressure on delivery timing," Jeff Allen, senior
vice president of operations and specialty vehicles at Daimler
Trucks North America, said in an emailed statement. "Recently we
have begun seeing these constraints lifting and an overall
improvement of the situation."
Still, Mr. Ake said maintaining the high pace of production
across all factories will remain a challenge. "The situation is
week to week," he said.
Michael Cancelliere, president of Navistar's truck and parts
division, says the company has been meeting with customers and with
suppliers to make sure they are getting the components they need to
keep assembly lines moving.
"The system gets somewhat stressed when you're dealing with the
capacity we're dealing with," Mr. Cancelliere said. "That's forced
us to get better."
Write to Erica E. Phillips at erica.phillips@wsj.com
(END) Dow Jones Newswires
August 17, 2018 06:14 ET (10:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.