The heavy-duty truck manufacturing business faces the dawn of a new era and the challenges that surround it are daunting, said Jim Hebe, former Navistar executive, during a luncheon address at the American Trucking Associations’ Executive Leadership Forum in Nashville.
“Truck brand and identity face the risk of a slow death,” said Hebe. “The traditional way manufacturers differentiated our products has changed dramatically.” New technologies and the integration of the truck into the operating environment will distinguish brands in the future, he added.
Hebe said truck manufacturing is overly influenced by European manufacturers and their consolidations of influence around the world, adding, “Manufacturers that can capitalize on globalization and deal with technological development, integration and changes in their workforces will be the big winners of tomorrow. Those that don’t will fail.”
In that respect, Daimler and Volvo stand out as manufacturers that have global reach as well as the inclination and strategy to specialize on a regional basis, Hebe said.
Hebe also addressed the ongoing speculation about the long-term future of Navistar, where he served as senior vice president of North American Sales Operations until 2012. “[Navistar] could continue as they are, but I think in the long term all it takes is to look at Daimler and Volvo and say to be a truly global player it’s going to take change in North America to do that, and the two most logical [players] are Volkswagen and Iveco.”
But Hebe quickly added there are plenty of barriers to keep Volkswagen or Iveco from entering the North American truck market. “What would they have to offer that’s better than what is here today?” said Hebe. “That is a tough question to answer, because in terms of technology I’m not sure either one of them could come into this market and offer much more than what we already have.”
Grim outlook for used truck market
Hebe said the industry soon will have to come to grips with a pending crisis in used truck sales. “It scares me to look at the inattention this industry pays to the used truck market,” he said. “The only time we pay attention is when business is bad. If there is no used truck market, there is no new truck market.”
The decline of the owner-operator in North America, from 30 percent of the market to only 3 to 5 percent today, has diminished demand for long-haul sleepers, said Hebe. The owner-operator and small fleet market is further impacted by lack of access to capital, with credit interests rates commonly at 18 to 22 percent.
With respect to state dealer participation statutes, Hebe said automotive dealers (particularly car dealers) are “the most protected species on the face of the earth,” adding state franchise statutes have limited manufacturers’ abilities to expand or develop a retail network to sell used trucks throughout the United States.
“If I were running an OEM truck manufacturer today, I’d be in federal court suing the states for the infringement of the Constitutional rights of the manufacturers to participate in interstate commerce,” he added.
Citing a 2015 Whitnell Analytics study, Hebe said used truck demand is relatively constant at about 150,000 trucks per year. “Every year we build 220,000 or 250,000 new trucks, hang on three years down the road. You are going to see dramatically increased supply over demand.
“To protect yourselves, the industry can’t continue to ignore the used truck business,” he added. It can’t be a problem we try to export. When you spec new trucks, spec what you know is going to sell, right down to the color.”
Hebe also said the economics of owning a truck going forward are going to change. “The used truck market isn’t going to give us the money for what we’ve paid for emissions.”
Today, at the average new price of $125,000, a four year-old sleeper is worth $45,000 to $50,000, Hebe said. “If you aren’t looking at depreciating a highway tractor somewhere north of 22 cents per mile, you’re kidding yourself.”