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Suppliers scrambling on lack of visibility, but recovery may be near

Keywords: Tags  Dana Holding, Allison Transmission, Roger Wood, Lawrence Dewey, commercial vehicle market demand, Heavy Duty Manufacturers Association, FTR Research, ACT Research order rates

CHICAGO — A lack of visibility has left suppliers to the heavy truck manufacturing industry scrambling amid a downturn in demand, according to Dana Holding Corp. and Allison Transmission Inc., although data from market researchers suggest a recovery could be in the offing.

"We saw some pretty rapid changes in the third quarter ... and we would probably have expected to have a bit more foresight on those changes than we did," Roger Wood, president and chief executive officer of Maumee, Ohio-based Dana, told investors.

"The way they (original equipment manufacturers) came to us were through taking out specific (unplanned) days of production as opposed to lowering overall volumes," which is why "we had to scramble a bit to catch up. Because of that shortness of visibility, we think the overall marketplace is going to show us, on aggregate, slightly lower volumes in the fourth quarter than we saw in the third quarter," he said.

The decline in commercial vehicle production—especially in Class 8 trucks—could be seen year over year and sequentially quarter over quarter, in North and South America and Europe. The heavy truck sector in the Asia Pacific region "remains depressed, especially in China," Wood said. "In light of this ... we’re not rushing into putting capacity in for the high growth that we thought once might be there."

Indianapolis-based Allison Transmission saw third-quarter sales fall 14 percent from a year earlier, "principally driven by decreased demand for North America off-highway products relative to the elevated demand we experienced in the prior-year period," the company said in its third-quarter earnings results.

The manufacturer’s on-highway, military, and service parts and support equipment units also experienced declines in North America. Higher sales in China offset lower sales in Europe, the company said.

Allison Transmission chairman, president and chief executive officer Lawrence E. Dewey attributed the company’s lower performance to a decline in the hydraulic fracturing market, as well as diminished production schedules for North American commercial vehicles. The markets Allison serves are plagued by heightened uncertainty, he said.

The Heavy Duty Manufacturers Association said preliminary orders for October reached their highest level since January, citing research from FTR Associates Inc. and ACT Research Co. LLC, which both cautioned against reading a trend into the numbers.


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