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In the doldrums
Page 18
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The world truck market has hit a wall. Orders are down, revenues are down and staff are being laid off. Can and will it recover any time soon?
THE THIRD QUARTER results are in and they have left the unmistakeable taste of fear etched upon the collective palate of the global truck industry.
Although some of the manufacturers witnessed an increase in operating profits over the 13-week period, the numbers are generally shabby and the prospects going forwards are not good.
Scania's response to its third-quarter numbers, which saw its global order intake drop by 41% — with a 69% fall-off in Western Europe and a 45% decline in Eastern Europe — is simple. It plans to cut production and implement job cuts among its temporary contract staff. which is around 20% of its workforce.
Near neighbour AB Volvo had a particularly bad time during the same period. The world's second-largest truck-maker by sales saw its European order intake come to a complete halt, with just 115 vehicles ordered during the quarter, down from 41,970. "In view of the weakened business trend in Europe, we expect the truck market to grow by 0%-5% in 2008," Volvo said in a statement. In the US, the market is expected to decline by about 10% this year compared with 2007.
Volvo's Q3 worldwide order intake plummeted 55% to 32,072 vehicles from 71,572, and, not surprisingly, it has decided to downsize its workforce.
Core market stumps Iveco also had a rough quarter. While Fiat as a whole saw its quarterly profit rise slightly, Iveco didn't fare so well. 03 revenue came in at €2.42bn (£1.97bn), down 6.2% year on year. Deliveries fell by 17.9% to 39,953 units, and in Western Europe — lveco's core market — there was a 25.9% fall, with 23,960 units entering service.
Iveco's trading profit in Q3 sank €9m to €181m (I:148m), a margin of 7.5%, although the nine-month total was still ahead 15.4% at €651m (£531m). Rat CEO Sergio Marchionne points squarely to global economic turmoil and the part the financial industry played in causing it. Marchionne's worst-case scenario, which suggests that overall net income could fall as low as €400m (£326m) during 2009, is somewhat below 2008 projections of between €2.4bn (£1.9bn) and €2.6bn (£2.1bn).
Elsewhere, back in August, Paccar began to cut both staff and output at its Kenworth plant in Melbourne,Australia, with more cuts looking likely.
Lead times plummet Three months ago, at Paccar's Q2 conference call, CEO Mark Pigott was asked about lead times. He stated: "We're increasing the build rate, but there are certainly a lot of benefits to having a backlog of one year. But right now [it] looks pretty good."
Fast-forward 13 weeks and it's a very different picture. Pigott again, this time at the Q3 call: "We are looking at four to eight weeks of build, which we look for around the world, and then some will have orders slated in the first and second quarter."
In other words, Paccar has seen its lead times fall by around 10 months in 13 weeks. Either someone's been working very hard, or demand for Paccar products has gone away.
So what about the Germans? MAN saw its 03 commercial vehicles operating profit up by 26% to €268m (£219m), but also saw its order intake tumble by 50% to 14,285 units. Daimler Trucks anticipates higher unit sales in 2008 than in the previous year, but this has to be set against a European order intake that has now fallen in three consecutive quarters, by 21% in 01. 43% in Q2 and 56% in 03.
So how long will the market slump last, how bad will it get, and what will reverse it?
Much of what has driven the markets over the past few years has gone. There is no more EU accession to salivate over, nor is there any significant legislative change on the horizon; the advent of Euro-5 in October 2009 seems likely to pass unnoticed. As such, there seems almost no reason to assume truck sales will pick up any time soon.
But, when they do, one is forced to wonder quite what level the next peak will achieve. It seems improbable it will be anything like the last one. •