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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 industry today
The Industry Today

Truck sales are down

2007 emissions pre-buy

Skyrocketing diesel prices

Economic downturn

2007 pre buy
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

vehicle registrations fall
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

2007 engines
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

it s diesel prices stupid
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

fuel impacting buying
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

fuel impacting owner operators
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.”

minimal fuel impact on
Minimal Fuel Impact On

Oil fields

Refuse and recycling

Municipal services

why are fuel prices escalading
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

positives of high fuel prices
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

impact of economy
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

freight rise and fall
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

freight rise and fall14
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

downturn is nothing new
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

capacity issues
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

bright spot
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

fleet talk
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?

fleet talk19
Fleet Talk

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

fleet talk20
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

the industry tomorrow
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

fleets 2010 prebuy
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

truck build projections
Truck Build Projections

Heavy Duty Trucking, October issue

engines in 2010
Engines In 2010

Two different technology approaches

SCR – Selective Catalytic Reduction

EGR – Exhaust Gas Regeneration

proponents of scr
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
proponents of egr
Proponents Of EGR

Cummins

International

MAN

Caterpillar hasn’t made a decision

slide27
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

slide28
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

talking about 2010
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

we must adapt to grow
We Must Adapt To Grow

Conditions

Trends

Forecasts

preparing for future
Preparing For Future

Plan for sustainable growth

Recognize the emergence of the global economy

Ensure safety

New technology

Anti-counterfeiting measures

how the industry looks today
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

the trucking universe
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

class 2c 8 truck universe 12 680 341 vehicles36
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

class 8 truck universe by vocation 2 712 588 vehicles38
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

class 8 truck universe by fleet size 2 424 500 vehicles40
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%

class 6 7 truck universe by vocation 1 319 136 vehicles42
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

class 6 7 truck universe by fleet size 1 319 136 vehicles44
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

class 3 5 universe by vocation 1 924 363 vehicles46
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

class 3 5 truck universe by fleet size 1 924 363 vehicles48
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

class 2c truck universe by vocation 6 724 254 vehicles50
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

class 2c truck universe by fleet size 6 734 354 vehicles52
Class 2c Truck UniverseBy Fleet Size6,734,354 Vehicles

Small business operations operatealmost 3 million trucks and vans

Includes carpenters, plumbers, dry cleaners, caterers and more

500+ market share grew 2% to 1.2 million vehicles