kscarbel2 Posted February 5, 2017 Share Posted February 5, 2017 The Morning Call / February 1, 2017 In the cyclical heavy-duty truck market, what goes up must eventually come down, and that's exactly what happened to Mack Trucks in 2016. Mack delivered 18,846 trucks last year, its weakest year since completing 13,465 vehicles in 2010 as it just started to climb out of the 2009 production bottom, according to a full-year report released Wednesday by Mack's parent company, the Sweden-based Volvo Group. Mack's delivery total in 2016 was a 31 percent decline from the 27,411 trucks the manufacturer delivered in 2015, which was its strongest output since 2006. Mack's results in 2016 were not surprising, given that heavy-duty truck makers slashed production throughout the year to help normalize inventory levels at dealers following a year in which the market experienced peak demand as customers renewed and expanded their fleets. For example, Mack laid off about 400 workers at its Lehigh Valley Operations in January 2016 to meet the reduced demand in the market. In addition, Mack scheduled several down weeks in 2016 at its 1-million-square-foot LowerMacungieTownship facility, where all Mack trucks built for the North American market and export are assembled. The most recent temporary layoff week for workers at the plant came during the week of Jan. 2, which was added after Mack reported a 40 percent decline in third-quarter deliveries. In an email, Mack spokesman Christopher Heffner confirmed employment at the company's Lehigh Valley Operations remains at about 1,480 employees. When asked whether Mack was planning any further layoffs or shutdowns, Heffner said the company's production and employment will continue to be driven by market demand to ensure competitiveness. "Despite lower industry volumes, Mack was one of the few heavy-duty truck manufacturers to grow market share last year, achieving an increase of nearly a full percentage point compared to 2015," Heffner said. "And we're excited about our prospects in 2017 as well, with the construction segment of the market expected to remain active and customers continuing to respond very positively to our industry-leading products and support solutions." In its report Wednesday, Volvo did not mention further production cuts in 2017. Instead, Volvo said, production cuts in the fourth quarter of 2016 helped reduce the inventory of new trucks at dealers. As a result of normalizing inventory, the company said it would not implement — "for the time being" — a previously planned production cut in the first quarter of this year at a Volvo Trucks assembly plant in Virginia, where 500 workers were scheduled to be laid off. But despite the inventory reduction at dealers, the 2017 truck market isn't expected to be robust. "At the end of 2016, new truck inventories had come down to much healthier levels," Volvo wrote in its report. "However, there is still a used truck overhang which is expected to continue to dampen demand for new heavy-duty trucks." As a result, Volvo expects the total North American heavy-duty truck industry to amount to 215,000 units in 2017. By comparison, Volvo said that figure finished at 243,229 in 2016 and 301,700 in 2015. But according to a Jan. 25 report on the truck equipment industry from Stifel analysts, Volvo's projection for 2017 might be generous. Stifel expects 200,000 heavy-duty trucks to be produced this year. But Stifel raised its production estimates for 2018 and 2019, primarily because of an outlook for an improved freight economy — resulting from expected lower tax rates, less regulations, improved domestic manufacturing and pro-energy policy — that its analysts believe will translate into orders in late 2017. If those orders come in, the analysts wrote, that should lead to increased production beginning in 2018. In addition, Stifel expects production in 2018 to be boosted by the enforcement of the electronic logging device mandate, which is slated to take effect in December and requires the device be installed on trucks to monitor how long drivers stay behind the wheel. For those reasons, among others, Stifel is expecting production of 230,000 heavy-duty trucks in 2018 and another 265,000 units in 2019. . Quote Link to comment Share on other sites More sharing options...
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