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The Trucking Industry: 2008 and Beyond

The Trucking Industry: 2008 and Beyond. The Industry Today. Truck sales are down 2007 emissions pre-buy Skyrocketing diesel prices Economic downturn. 2007 Pre-Buy. Fleets purchased 2006 models in higher volume to avoid purchasing the new 2007 engines

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The Trucking Industry: 2008 and Beyond

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  1. The Trucking Industry:2008 and Beyond

  2. The Industry Today Truck sales are down 2007 emissions pre-buy Skyrocketing diesel prices Economic downturn

  3. 2007 Pre-Buy Fleets purchased 2006 models in higher volume to avoid purchasing the new 2007 engines Required to meet EPA emissions standards implemented in 2007 Pre-buy left pre-2007 trucks in inventories The pre-buy wasn’t as much as projected

  4. Vehicle Registrations Fall 2007 had the lowest number since 2003 with 642,333 units Falling nearly 20% from the record number registered in 2006 Class 8 registrations down 37.8% Class 4 new vehicle registrations were up in 2007 than 2006

  5. 2007 Engines A headache in one way or another Requires investment in new training and new tooling Higher price tags Resistance of customers because of unproven technology In some cases, increase in downtime

  6. It’s Diesel Prices Stupid The rapid rise in diesel prices during the 1st Quarter had a significant impact on carrier margins Results in many fleets further delaying equipment purchases According to A.C.T. Research

  7. Fuel Impacting Buying Customers canceling orders, sometimes several times Tom Graddy, chairman & CEO, Vanguard Truck Centers On one day, a customer considered ordering several trucks Lost couple of loads, cancelled the order Gained a couple of loads, reinstated the order Got his fuel bill so changed his mind again

  8. Fuel ImpactingOwner-Operators Kenny Doonan, President, Doonan Truck & Equipment “If owner-operators today aren’t tied into a major carrier or tied into a major shipper, where they have automatic fuel adjustment clauses. They’re going to be a thing of the past.”

  9. Minimal Fuel Impact On Oil fields Refuse and recycling Municipal services

  10. Why Are Fuel Prices Escalading? Supplies are in good shape Oil market is no longer functioning on supply-and-demand fundamentals Diesel-gas price differential not likely to change significantly in thelonger-run A bubble in commodities market is the problem Need the dollar to strengthen ATA’s Economic & Motor Carrier Industry Update, March 2008

  11. Positives Of High Fuel Prices Increase in aerodynamic interest Changing the business with ¾ to 1 mpg difference Making it not as affordable to operate older trucks Increased interest in gasoline engines for medium-duty applications Increased interest in alternative fuels

  12. Impact Of Economy Poor fiscal policy decisions by government and consumers alike put the economy in a bind The economy is pulling anchors Housing market Credit market High oil prices

  13. Freight Rise And Fall Freight Transportation Index rose 2.4% in January Matching its largest monthly increase in the past two years The freight TSI measures the month-to-month changes in the output of services provided by the for-hire freight transportation industries. Department of Transportation’s Bureauof Transportation Statistics

  14. Freight Rise And Fall For-Hire Truck Tonnage Index was down in March from after remaining unchanged in February For-Hire Truck Tonnage Index fell 3.3% in March Lowest level since November 2007 Monthly Truck Tonnage Report, ATA April 24, 2008

  15. Downturn Is Nothing New It’s been a difficult 12 months But trucking is cyclical so we’ve been here before We adapt because of the nature of the industry Optimistic future Projected 10-year expansion Increase truck population 44% According to ATA/Global Insight Study

  16. Capacity Issues Capacity likely to tighten quickly once freight volumes improve Underlying fundamentals still support tight capacity (driver shortage) ATA’s Economic & Motor Carrier Industry Update, March 2008

  17. Bright Spot While high fuel prices and slow economy are forcing some carriers out of business, the remaining ones should have leverage to charge higher rates when the economy comes back because capacity will be tighter A brisk export business in used trucks to Russia and other countries is helping to take some capacity out of the market

  18. Fleet Talk Ray Greer, President & CEO, Greatwide Logistics Services Becoming more aggressive with on-board computers Breaking the myth that Owner-Operators would never adopt on-board technology It is widely accepted Why?

  19. Fleet Talk Real-time monitoring of fuel consumption has resulted in $10,000 to $15,000 in incremental income to Owner-Operators

  20. Fleet Talk Dave Berry, Vice President, Swift Transportation When Swift went to 62 miles per hour Each mile per hour is worth 1/10 of a mile per gallon

  21. The Industry Tomorrow Still expecting a 2010 pre-buy The longer the U.S. economy remains weak, the less likely it is that builds will rebound significantly in 2nd half 2008 Still expecting a modest recovery 2nd half 2008 According to ATA/Global Insight Study

  22. Fleets 2010 Prebuy 2nd half upswing projected Fleets start 2010 pre-buy Truck dealers project that 2009 will be the biggest truck sales year ever

  23. Truck Build Projections Heavy Duty Trucking, October issue

  24. Engines In 2010 Two different technology approaches SCR – Selective Catalytic Reduction EGR – Exhaust Gas Regeneration

  25. Proponents Of SCR AB Volvo Volvo Mack Daimler Trucks North America Dodge Freightliner Sterling Western Star • Ford • General Motors • Paccar • Kenworth • Peterbilt • Mercedes Benz • Volkswagon • Cummins medium duty and vocational trucks

  26. Proponents Of EGR Cummins International MAN Caterpillar hasn’t made a decision

  27. SCR Pluses Used in Europe without problems since 2005 Offers better fuel economy Lower operating costs Small urea tank projected to be topped off every two or three times a truck’s diesel tank needs filling Critics are saying Higher new purchase costs Might be problems with urea – diesel emissions fluid

  28. EGR Pluses More common technology Lower upfront costs No costs for DEF tank and catalytic chamber Doesn’t require driver to monitor DEF fluid gauge Critics are saying Higher operating costs

  29. Talking About 2010 The faster the industry can get the right knowledge to the carriers, the better decision they can make….the fewer problems the industry will be facing

  30. We Must Adapt To Grow Conditions Trends Forecasts

  31. Preparing For Future Plan for sustainable growth Recognize the emergence of the global economy Ensure safety New technology Anti-counterfeiting measures

  32. How The IndustryLooks Today Trucks/Tractors Over 4 million Class 6 – 8 trucks and tractors For-Hire dominates Class 8 Government/Utilities/Services continues strong growth in Class 8 Private Fleets own Class 6 & 7 Government/Utilities/Services declined in Class 6 & 7 for heavier equipment

  33. The Trucking Universe The following statistics present a clear, unbiased picture of Classes 2c – 8 commercial truck ownership and usage Trucks and Tractors By Class By Vocation ©2008 Newport Communications Group, Profile of the U.S. Commercial Truck Market

  34. Class 2c – 8 Truck Universe12,680,341 Vehicles

  35. Class 2c – 8 Truck Universe12,680,341 Vehicles Tractor universe grew 2.2 million between 2003 and 2007 Class 8 grew almost 300,000 Class 7 declined by nearly 100,000 128,000 gain in Class 6 Class 3 – 5 declined by nearly 129,000

  36. Class 8 Truck Universe By Vocation2,712,588 Vehicles

  37. Class 8 Truck Universe By Vocation2,712,588 Vehicles 928,000 For-Hire Carriers, making up 34% of the market Private Fleets, Lease/Rental and Agriculture has held the same since 2003 Government/Utilities/Services gained a percent Construction/Mining/Logging declined a percent

  38. Class 8 Truck UniverseBy Fleet Size2,424,500 Vehicles

  39. Class 8 Truck UniverseBy Fleet Size2,424,500 Vehicles 3% increase in 500+ fleets since 2003 10 – 99 fleets has held steady since 2003 1 – 4, 5 – 9 and 100 – 499 declined by 1%

  40. Class 6 & 7 Truck Universe By Vocation1,319,136 Vehicles

  41. Class 6 & 7 Truck Universe By Vocation1,319,136 Vehicles For-Hire and Agriculture each increased by 1% Wholesale/Retail/Manufacturing declined 1% All other vocations remained steady Lease/Renal with 327,000 trucks and For-Hire with 315,000 trucks make up half of Class 6 & 7 trucks

  42. Class 6 & 7 Truck Universe By Fleet Size1,319,136 Vehicles

  43. Class 6 & 7 Truck Universe By Fleet Size1,319,136 Vehicles 500+ Fleets dominate Class 6 & 7 Little change in market share in all sectors

  44. Class 3 – 5 UniverseBy Vocation1,924,363 Vehicles

  45. Class 3 – 5 UniverseBy Vocation1,924,363 Vehicles Numbers are down but all vocations maintained their market share Category includes major package delivery such as UPS and FedEx 59% of Class 3 – 5 are diesel powered 78% of Agriculture uses diesel power 68% of Wholesale/Retail/Manufacturing uses diesel power 66% of Construction/Mining/Logging uses diesel

  46. Class 3 – 5 Truck UniverseBy Fleet Size1,924,363 Vehicles

  47. Class 3 – 5 Truck UniverseBy Fleet Size1,924,363 Vehicles Commercial operations with 1 – 4 trucks own over half of the trucks in Class 3 – 5 Giant delivery services dominate 500+ operations

  48. Class 2c Truck UniverseBy Vocation6,724,254 Vehicles

  49. Class 2c Truck UniverseBy Vocation6,724,254 Vehicles 1.4 million Agriculture trucks account for the largest segment of Class 2c Wholesale has over 1.3 million 35% are diesel powered Over half of Agriculture are diesel About one-third of Construction/Mining/Logging, Lease/Rental and Wholesale/Retail/Manufacturing are diesel

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