Monday, June 15, 2009

Trucking Manufacturer Shows Signs of Trucking Industry

Volvo Sales Are Indicative of What's Going on in the Economy

But the slide in truck deliveries eased up in May.

Volvo seems to be stuck in reverse. May marked the ninth consecutive month of sales declines for the Swedish truck maker as demand continued to crumble. Volvo said it delivered 9,446 trucks in the month, down 57% from 22,128 in May last year, but the decline at least marked an easing up from the 62% drop for deliveries in April.

The truck maker's deliveries have been continuously dropping since September last year, when they dropped by a far narrower 8%, year-on-year.

Volvo, which has been trying to wring out cost-savings by cutting around 21,000 jobs since the start of last year, also said shipments fell 64% year-on-year in Europe, its biggest market, and by 62% in North America.

"It is hard to spot a trend with just these figures," said Alexis Albert, an analyst with Natixis Securities in Paris. "The recovery in sales will be related to the recovery of the economy and visibility is very, very low."

Hundreds of trucking companies have been going bankrupt, said Albert, and the remaining firms are buying fleets of slightly-used trucks at cheap prices from their insolvent competitors.

In the U.S. alone, bankruptcies among truck makers more than doubled in the second half of last year, soaring 118%, according to Donald Broughton, an auto analyst with Avondale Partners. Broughton estimated that bankruptcies took about 88,000 trucks off the road in the first half of 2008.

To deal with the slump, Volvo said in April that it was cutting 1,543 jobs, and added that it would continue to implement cost-cutting measures."

What Does This Mean to You (and your company)?

What you (and your company) can possibly deduce from this is that the supply of trucks has dropped. When the economy comes back, there could be an increase in difficulty of finding truck capacity - be prepared for rates to start coming up as suppliers need to do what it takes to get their product to their customers.


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