‘Geographic smoothing’ the path for major supplier

TROY, Mich. — If late 2006 was underscored by anything, it was the rapidfire announcements of cutbacks. Freightliner, Volvo, Navistar –one OEM after the other told the world that they’d be curtailing manufacturing at plants around North America. The pre-buy was taking its toll, they said.

Mike Pennington, Global Marketing Communications and Industry Relations for truck component supplier ArvinMeritor Commercial Vehicle Systems, says that since so many fleets purchased new trucks in the pre-buy of ’06, companies like his are being forced to re-examine their aftermarket end of the business.

When it comes to the aftermarket, he says, “Grow it if you have it.”
“While we expect the market to be somewhat softer in the next few years due to the large number of new vehicles purchased prior to ’07 (and a corresponding drop in average vehicle age),” he says “we do have many new and focused programs to continue the excellent growth that we have seen in recent years.”

ArvinMeritor predicts a major halt in North American
business for the next 18 months

Like others, when Pennington’s talking growth in ’07, he’s thinking cross-border and overseas growth. “We see growth in international markets like Mexico, Europe, Australia, and Brazil.”

And, he recommends others think likewise. He calls it “geographic smoothing” and he sees opportunities galore in places such as India with, as he says “its insatiable need to move goods, and a solid political infrastructure. There are lots of opportunities in sourcing, joint ventures, acquisitions, and strategic alliances. You’d be surprised how many parts and components in today’s North American trucks are coming from India and Turkey.”

As for the home front, ArvinMeritor is one of many suppliers that is bracing for slowdown in heavy truck orders in North America in the next few months, with a significant pick-up unlikely until 2008, the company’s chief executive said recently.

“We are anticipating a trough, do see it coming in the March-April time frame, and do see it continuing for a couple of quarters and then picking up from there,” CEO Chip McClure said at an analyst’s conference in Detroit.

ArvinMeritor, for one, expects a slight uptick in orders in its fourth quarter, which runs July through September, but does not expect a real increase in heavy truck orders to start until its second quarter next year.

The Troy, Mich., company expects light vehicle sales in North America and Europe to be essentially flat overall the next five or six years with a continued shifts in market share among its automaker customers, McClure said.