Heavy-Duty Truck Order Slump Deepens

An unusually high number of cancellations in orders of heavy-duty trucks caused net orders in North America to plummet to the lowest point in over six years, according to a new report by research firm FTR.

Trucking companies in July ordered 10,400 Class 8 trucks, used for long-haul routes, below expectations and 56% fewer than the same period last year, according to preliminary numbers from research firm FTR released Wednesday. It was the fewest number of orders since February of 2010.

Heavy-duty truck orders, which have been sliding for months, were hit with "several significant order cancellations," which is uncharacteristic for this time of year, FTR said in its report. "The high cancellations are likely the result of fleets placing large orders at the end of 2015, for delivery a year out," said Don Ake, vice president of commercial vehicles at FTR in the report.

While sluggish freight growth has caused fleets to halt any expansions, there may be some increase in August orders as they replace older units, Mr. Ake said. Truck manufacturers have laid off thousands of workers at plants around the country this year amid the falling demand.

The report adds to what analysts and industry executives expect to be a grim few months for the trucking industry, in part a result of low growth in manufacturing activity, which has a strong impact on trucking demand.

The Institute of Supply Management said this week that its manufacturing activity index declined to 52.6 in July from 53.2 in June, showing modest, and decelerating, growth among U.S. factories, which are having a harder time with exports because of the strong dollar.

Truck engine maker Cummins Inc. this week blamed declining earnings in the second quarter in part on weak truck demand in North America. The company shipped 16,000 engines for heavy-duty trucks in North America in the quarter, 43% fewer than a year ago.

There are "too many trucks chasing too little freight," said Steve Tam, vice president at ACT Research, which also tracks heavy-duty truck sales. Truck orders are low now as fleets adjust their overly optimistic expansion plans after seeing strong growth in 2014 and early last year, he said. ACT reported 10,500 Class 8 orders for July.

"I think the trucking community had an expectation that [growth] was going to continue. But with 20/20 hindsight, that did not happen. Freight has been very flat for basically the last year," he said. "There are anecdotal signs that freight is improving very modestly, but I would liken it to treading water but still below surface at this point."

Write to Loretta Chao at [e-mail]

(END) Dow Jones Newswires

August 03, 2016 14:25 ET (18:25 GMT)

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