The payback for record new Class 8 trucks in 2018 is beginning to take hold as Mack Trucks and Volvo Trucks North America join Navistar in cutting fourth-quarter production.
Mack and sister company Volvo Trucks North America described the production cuts as typical in a cyclical industry.
"We've seen this many times before," Magnus Koeck, vice president of marketing and brand management for Volvo Trucks North America told FreightWaves.
Volvo plans a week of downtime at Thanksgiving and another around Christmas for workers at the New River Valley plant in Dublin, VA. The 1.6 million-square-foot plant employs 3,500 people.
Mack, part of the Volvo Group, also plans two down weeks during the fourth quarter at its plant in Lower Macungie, PA, spokesman Christopher Heffner said. The plant's 2,400 workers were told of the temporary layoffs last week.
"After two years of very strong demand, it's become clear that the North American market is softening to a more normalized level and we need to align production with demand," he said.
Navistar Inc. said during a conference call with analysts on September 4 that it is cutting production at plants in Springfield, Ohio and Escobedo, Mexico. The Springfield News-Sun reported that 136 United Auto Workers-represented workers faced layoff in Ohio by the end of the month. The numbers have not been finalized, a Navistar spokeswoman said.
In its latest North American Commercial Vehicle OUTLOOK, ACT Research said Class 8 and trailer markets face an "imminent pullback" in build rates as market conditions continue to deteriorate.
The backlog of new trucks ordered in the second half of 2018 shrunk to 171,000 units at the end of July, ACT President Kenny Vieth told FreightWaves. Based on 10,900 preliminary August orders and manufacturer build plans, the backlog should fall to about 154,000 units when final August numbers are tallied, he said.
The industry's order backlog has fallen 44% since peaking in October 2018.
Koeck said the Volvo plant's backlog extends into 2020, but he declined to say how many trucks are in queue for assembly.
"New equipment-buying truckers have only recently started to come to terms with the disequilibrium in truck supply and freight demand," Vieth said, adding, "when the change comes, it is likely to come fast. Everyone should be well into their preparations for a rapid downward correction in production levels in the next few months."
Truck supply and demand is getting back into balance, said Avery Vise, vice president of trucking at FTR Transportation Intelligence.
"It feels soft because we had a big year last year," Vise said.
Trailer orders have fallen dramatically in recent months after surging in 2018. Industry sales leader Hyundai Translead said it has no production cuts planned for the rest of this year. It is too soon to know what the first quarter of 2020 will bring, spokesman Stuart James told FreightWaves.
"If we're returning to ‘normal,' then trailer manufacturers should gratefully salute the recently past boom and prepare to compete in a good if somewhat cooler market," he said.
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