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Truck builders respond to low demand

Keywords: Tags  trucks, Navistar, Cummins, Paccar, Volvo, Lewis Campbell, Tom Linebarger, Mark Pigott engines

CHICAGO — Truck and engine builders and suppliers of axles, wheels and other components are working quickly to cut production, trim work forces and lower costs as demand for Class 5 to 8 trucks has fallen precipitously in the second half of 2012.

"Demand has dropped sharply over the last three months, reflecting a high degree of uncertainty among customers in most geographic markets," Cummins Inc. chairman and chief executive officer Tom Linebarger told investors recently.

Columbus, Ind.-based Cummins’ engine sales fell 14 percent in the third quarter compared with the same period last year. "We have been responding ... by delaying or canceling projects, flexing production at some of our manufacturing plants, reducing discretionary expenses and reducing our work force by 1,000 to 1,500 people by the end of this year," Linebarger said.

Sweden’s Volvo Group said U.S. customers had been cautious ahead of the presidential election and remain so ahead of the outcome of budget discussions, affecting demand expectations for 2013. This wait-and-see approach affected order intake for heavy-duty trucks, which declined 33 percent year over year, Volvo said in its third-quarter earnings report.

Lisle, Ill.-based Navistar International Corp. intends to close its Garland, Texas, truck manufacturing plant during the first half of 2013, transferring output to plants in Ohio and Mexico. "Navistar has too much manufacturing capacity in North America," president and chief operating officer Troy Clarke said.

The company predicts its 2012 invoiced medium-, heavy- and severe-duty trucks will total 49,200 vehicles worldwide, down 25.6 percent from 66,100 last year.

"We have to lower the breakeven point," Navistar executive chairman and interim chief executive officer Lewis Campbell said Tuesday. "We have prioritized all engineering programs around return on invested capital (ROIC) and eliminated or put on hold programs that don’t contribute. Next, we are looking at all noncore businesses. Those businesses not contributing to (core) North American truck, engine and parts" operations will undergo financial review. "Projects that don’t have sufficient ROIC capability and aren’t a strategic fit will be fixed and sold, or closed."

Paccar Inc., Bellevue, Wash., delivered 31,200 trucks during the third quarter, about 17 percent below second-quarter deliveries. U.S. and Canadian Class 8 industry retail sales and production are expected to be flat in the fourth quarter, Paccar chairman and chief executive officer Mark C. Pigott told investors, but 2012 sales will grow about 9 percent vs. 2011 while European sales are expected to fall between 6.6 and 10.8 percent.

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