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Heavy Trucks Throttle Back


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Wall Street Journal / March 20, 2013

Better Scheduling, Fuller Loads Have Big Rigs Traveling Less, Lasting Longer

The road ahead for the nation's 18-wheelers is shrinking, undercutting demand for the big rigs that ply the nation's highways and tempering the celebrations at truck makers' annual trade show and extravaganza in Louisville, Ky., this week.

Heavy-truck sales, while rising modestly in recent years, remain far off their 2006 peak as rising fuel, driver and equipment costs have led shippers to devise ways to operate more efficiently.

Truckers are driving fewer miles, allowing operators to squeeze more years out of vehicles already on the road and lessening the need to buy new trucks or expand fleets as frequently as they have in the past.

Last year, the average distance traveled by tractor-trailers in the U.S. fell to 110,614 miles, a 12% decline from the late 1990s.

While railroads have taken some freight from long-distance truckers, greater productivity is having a bigger impact. Lighter weight and smaller packages, better routing and fewer empty trucks on the road have reduced the need for more trucks.

"The average length of a haul has been cut dramatically," said Rusty Rush, chief executive of Rush Enterprises Inc., the country's largest truck dealer with 78 outlets selling Peterbilt and International trucks.

Last year, the average distance traveled by tractor-trailers in the U.S. fell to 110,614 miles, a 12% decline from the late 1990s and down about 2% from 2006, according to Wolfe Trahan & Co.

"We've been working through a period of super-productivity gains" in trucking, said Kenny Vieth, president of ACT Research LLC in Columbus, Ind. "Everybody has been trying to take costs out of transportation. If your productivity is strong enough, you don't need a lot of new trucks."

Hillyard Inc., a St. Joseph, Mo.-based maker of commercial cleaning products, clocked 2.8 million miles of driving last year with its 21 trucks. But less than 10% of those miles were with empty trailers, compared with 25% four years ago.

Chuck Amen, Hillyard's transportation manager, said the company is doing a better job of finding freight loads from other shippers that its trucks can haul on their return trips to Missouri. Mr. Amen said increased use of smart phones has improved his ability to locate drivers on the road and dispatch them on the fly to pickup and delivery sites.

"Nobody makes money sitting still," said Mr. Amen. "We're doing more work with the same amount of trucks. Otherwise, we would have had to add one or two more tractors to cover that business."

The loss of incremental sales because of productivity gains is weighing on truck makers, gathered in Louisville for the annual Mid-America Trucking Show, which starts Thursday.

Mr. Vieth expects sales of heavy-duty trucks in the U.S., Canada and Mexico to drop about 4% this year to 263,000 vehicles. Last year's sales of 272,571 trucks fell short of his projection of nearly 300,000. After a promising start to 2012, truck sales tanked for several months before improving modestly late in the year.

"Everybody expected a better year than we got," said Mr. Rush, the truck dealer.

Truck makers are pinning their hopes on more fuel-efficient vehicles to stimulate replacement demand, looking to emulate the success of auto makers in driving demand back to prerecession levels.

Truck maker Navistar International Corp. is counting on a rebound after a failed strategy to comply with engine emissions requirements and high warranty costs caused the truck maker to report a loss of $3 billion last year and surrender market share to Daimler AG's Freightliner unit, Paccar Inc. and Volvo AB.

After a decade of steadily increasing truck prices to pay for government-mandated pollution reduction systems on diesel engines, truck and engine companies are redeploying their research efforts toward government standards for improving fuel economy over the next five years.

Unlike the pollution-reduction regulations, which generated plenty of grumbling from truck operators forced to pay higher truck prices for the same performance, manufacturers expect to offset rising costs for improving fuel efficiency with lower operating expenses.

A loaded heavy-duty tractor with a detachable trailer typically uses a gallon of fuel every 5 to 6.5 miles. Getting just one more mile more a gallon saves thousands of dollars a year on the fuel cost for a single truck.

Engine maker Cummins Inc. and Peterbilt, a unit of Paccar, are developing a tractor-trailer that gets nearly 10 miles to the gallon using a high-efficiency 15-liter engine and a more aerodynamic trailer and cab that reduce wind drag.

Analysts said improved fuel economy could provide manufacturers with much-needed purchase incentives. "It's a hugely cyclical industry," said Tim Denoyer of Wolfe Trahan. "If you get into a pattern where people feel good, they'll buy a lot of trucks. More fuel-efficient trucks could be a driver of demand."

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