It Starts: Production Cuts at Truck Maker Navistar
It Starts: Production Cuts at Truck Maker Navistar by Wolf Richter for Wolf Street
Transportation Recession progresses to next phase.
After orders by trucking companies for Class-8 trucks – the heavy trucks that haul trailers across the country – collapsed by 81% in July compared to July last year to the smallest number of orders since 2010, deepening a trend that has gotten worse all year, it would only be a matter of time before truck manufacturers announce production cuts and ultimately layoffs.
These heavy-truck makers – Peterbilt and Kenworth, divisions of Paccar; Navistar International; Freightliner and Western Star, divisions of Daimler; and Mack Trucks and Volvo Trucks, divisions of Volvo Group – have been eating through their historic backlog, accumulated during the record year of 2018, and they’re still delivering these trucks at near record pace, but that backlog is thinning out, and we’ve been waiting for the inevitable announcements of production cuts.
So now it starts – not with production cuts for Class-8 trucks but with production cuts for Class-5, Class-6, and Class-7 medium-duty trucks.
Navistar International [NAV] confirmed to FreightWaves that it will be cutting production of medium-duty trucks at its Springfield, OH, assembly plant, which builds trucks for Navistar’s brand International and for GM [GM]. The company blamed “the cyclical nature of the business.”
“This cycle is normal for our business, and this is not a shift of production to other locations,” the spokesperson told FreightWaves. But the company declined to disclose if the production cuts involve layoffs.
Navistar also builds medium-duty trucks along with Class-8 trucks at its assembly plant in Escobedo, Mexico, but the spokesperson declined to disclose if production is impacted at that plant.
Inventories of unsold medium-duty trucks have surged 30% to 55,400 units in June, and the current order backlog is still at about 63,500, after the ordering binge last year, according to ACT estimates, cited by FreightWaves. And orders fell 20% in June,