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Regulations, driver deficit to hit orders: Navistar

Keywords: Tags  Navistar International, John Allen, Troy Clarke, truck build rate, Federal Motor Carrier Safety Administration, driver shortage, layoffs, plant closure North America Truck & Parts


CHICAGO — Class 8 truck and engine builder Navistar International Corp. plans to reduce its headcount and improve quality as it ramps up production on new models this year, Navistar executives said on a March 7 earnings call. But a persistent shortage of truck drivers and stricter regulations on U.S. carriers may cast a pall on future orders, they said.

“We just came back from the Truckload Carriers’ (Association) meeting, and the mood there was pretty darn optimistic: Freight is good, freight rates are good,” John J. Allen, president of subsidiary North America Truck & Parts, said. “But there are clouds on the horizon for these guys, and that’s making them tentative on capital outlays.”

For example, if more stringent hours-of-service rules issued by the Federal Motor Carrier Safety Administration go into effect July 1 as expected (amm.com, Dec. 28), “it is going to be a 10-percent to 11-percent immediate reduction in productivity,” Allen said.

“The driver shortage is not getting any better (either, so carriers) like the business they’re seeing now in terms of freight and rates,” he said. “But no one will step out here and make any big purchases beyond what their replacement needs are.”

In terms of Class 5-8 truck sales estimates for 2013, “If you take the last six months’ order receipts and annualize them, you come in at 212,000 (units). We anticipated 215,000 against 230,000 last year,” Allen said.

Several “big fleet customers” have cited “the influence that driver availability has” on truck orders, Navistar president and chief operating officer Troy Clarke said on the call. “If there was not a driver shortage in the industry, we would probably see a smoother flow of orders. There wouldn’t be this kind of lumpiness (in orders) that we have experienced over the past year.”

The Lisle, Ill.-based company also expects to lay off personnel this year, particularly with the closure of its Garland, Texas, assembly plant by the end of 2013.

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