So Where Are We?

Cyclical. It’s a word commonly used to describe our industry. And as descriptors go, it’s about as accurate as you’ll get. We know valleys. We know peaks.

Truck makers understand these ups and downs only too well, and right about now there’s much buzz amongst them and major component suppliers as to how many trucks will be sold this year.

The bigger mystery, of course, is 2007, when another round of emissions standards kicks in that will raise the price of a truck by quite a few thousand bucks. Volvo has just pegged it at US$7,500, calling it a “surcharge.” Others have gone higher than that.

No matter the source, estimates for class-8 truck sales for ’06 are all above 300,000 units for Canada, the United States, and Mexico combined. People are smiling, records are being set. The grin soon changes to a look of mild confusion at best when they consider next year, however. Estimates seem to be all over the map, but in the context of recent history, it doesn’t look like a horrible year at all. I can remember a time when we dropped below 100,000, but we may not even fall much below 200,000 in 2007. The Cummins number, for example, is about 190,000, according to Jim Kelly, president of the company’s engine business. He says it’s likely to be “…a moderately decent year.”

There was a time when increases in demand like we’ve seen in the last year or so would have led truck makers to expand, at least by adding a shift or two if not by adding bricks and mortar. Nobody’s done that this time out. Lessons were learned, so this peak and next year’s valley are being managed pretty well, it seems to me.

That said, this particular stretch in the industry’s longer-term cycling is entirely artificial. It doesn’t reflect economic activity of a sort that puts more freight — or less — on a trailer. It reflects no more than the impact of environmental legislation as carriers buy trucks in advance of the ’07 price hike. Which means, in turn, that we’re getting no clues about the longer term from what’s happening today.

Predicting is a mug’s game nowadays anyhow, no matter the industry. Wars and terrorism and natural catastrophes and who knows what else can wreak havoc and change tomorrow in an instant. I can’t find anybody, honestly, who’s brave enough to paint a 10-year picture for me on the record. Nor a five-year picture. Hell, going beyond the first half of next year is too big a challenge.

Still, this being our annual Top 100 issue, I feel the urge to assess things and look at least a little ahead. As you’ll read elsewhere in these pages, the for-hire picture has changed. The fleets hovering around the number 100 mark are smaller than they used to be, reflecting consolidations at the top of the heap.

Does it mean fewer fleets in fact? No, apparently not. The latest Statistics Canada report covering the third quarter of last year says we had some 3,376 for-hire outfits with annual revenues of $1 million or more, which was — surprisingly, I think — an 8.4-percent rise from 3Q 2004. The good news in there is that revenues for the quarter were up by 9.5 percent while expenses rose by only 7.6 percent.

So the question is, can we sustain it? And do such figures really represent what’s happening?

On the first question… beats me, I have to say. It seems clear that problems on the automotive front, amongst the so-called Big Three at least, point to difficulty in the short term. That’s especially true for carriers in central Canada, of course. Rather severe challenges in the pulp-and-paper world appear likely to be more lasting, maybe permanent, and downright devastating for some carriers in Quebec and Atlantic Canada. Try getting an outbound load from New Brunswick these days.

And, by extension, try paying for an ’07 engine.

So if industry-wide numbers improve, to a large extent it will be on the increasingly broad shoulders of western truckers who work around the oil patch, though not necessarily directly involved in it. As you’ll read elsewhere in this issue, ‘gangbusters’ is the word to apply there. With no valley in sight, they’re enjoying life at the top of the cycle.

And with an Albertan Prime Minister to boot. Can’t get much better.