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Articulated trucks--fewer players, more business.

Four years ago in this space, I wrote a column headlined "Articulated Trucks--More Players, Less Business." Today, it's the other way around. How that turned 180[degrees] is an interesting story and the result of a couple of important things.

First, the market for "artics" has ballooned, growing more than 250% since 2002. Secondly, two suppliers that had decided to offer articulated trucks--LBX and New Holland--checked out after a few short years in the business.

The major suppliers that have been around for years include Caterpillar, Volvo, Komatsu, John Deere, Terex, Moxy, Case (CNH) and JCB. Several of these OEMs have been in the truck business for a long time, while a few are newcomers in one form or another. All of the companies, however, have been offering articulated haulers for the last five years.

New Holland (CNH) and LBX, which were part of the pack back in 2002, dropped out of contention, both phasing out products in 2003. One newcomer since 2006 is Hydrema of Denmark, which started showing customers trucks in 2006 and is supposedly selling units this year. That leaves us with nine suppliers offering these machines in North America at the current time.

As far as the market, it is interesting to note that industry sales exceeded 4000 units in 2006 as compared to volumes of roughly 2000 units or less in 2002 and 2003. Sales caught tire after the midpoint of 2003 and started climbing out of control. Demand had never before risen as fast or as high for this product, catching all of the OEMs by surprise (as well as this writer).

The articulated hauler is a workhorse for many contractors involved in highway and construction site development and they are also used widely in aggregate quarries, moving materials around. Artics come in a number of sizes ranging from about 10 metric tons carrying capacity to 50 tons. JCB and Hydrema are offering the smaller range of haulers under 24 tons, while the other companies are primarily offering products rated over 24 tons to 40 tons. Moxy is the only company at present with a 50 ton machine and it is relatively new to the market.

Roughly 80% of the articulated haulers sold in North America are imported. Volvo, Caterpillar, Terex, Moxy, Case, JCB and Hydrema import 100% of their machines. Komatsu makes some of its haulers in the United States and imports some, while John Deere manufactures all of its trucks domestically in Davenport, Iowa. An interesting note is that Volvo formerly produced all of its trucks for North America at its factory in Asheville, N.C., but phased out manufacturing for the trucks just before the market exploded. Volvo now gets its trucks from Brazil and Sweden.

On a similar note, Caterpillar had been planning on moving its production of artics to the United States from the U.K. about five or six years ago, building a facility in Waco, Texas, for that purpose. However, weak market conditions during the 2000-2003 period discouraged management from pulling the trigger on that move and Cat is still making haulers in the U.K. Ironically, the market took off shortly after Cat made its decision, which is too bad since all imports from the U.K., and other European countries, are pretty costly these days considering the weak dollar.

This leads to the question of how long it will be until Caterpillar and Volvo, to name two big players in this market, set up production of artics in the United States? Considering the decisions made a few years ago, it is probably unlikely that either company will reverse its thinking until more pressure develops to be more competitive in pricing or to gain higher profit margins on sales.

At the moment, Komatsu and Deere are the only two OEMs making artic haulers domestically. Deere is no longer importing its trucks as of 2007, even though some machines were imported during 2006 and all prior to that time. Komatsu is still importing about hall of its units from its facility in Japan, meeting the balance of its North American demand from its factory in Chattanooga, Tenn. Seems to me that Komatsu and Deere have the best position in the market for competing pricewise, considering currency exchange and import and transportation costs on trucks shipped from Europe, Brazil or elsewhere. We are talking about a $1.4 billion wholesale market, with roughly 80% of the trucks being imported at premium costs to the importing OEMs.

In 2006, Caterpillar was the leading OEM in the marketplace, followed closely by Volvo. John Deere moved into third position during the past two years after being at the bottom of the pack just five years back. Komatsu was fourth and Terex fifth. The other companies (Case, JCB and Moxy) shared the balance of 8% of the overall market.

With all the commotion about markets for machinery in light of the housing and credit crunch, I am expecting a decline in sales this year from last and a further drop in business in 2008. Just how much of a back-down will occur is difficult to say, but likely in the range of 15 to 18% by the end of 2008. A large portion of the hauler sales each year go to rental operations and that industry is currently reducing its capital expenditures for a number of machines until the dust settles in the construction industry, which I believe will impact articulated trucks over the next 18 months.

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Title Annotation:TRENDLINES
Author:Yengst, Charles R.
Publication:Diesel Progress North American Edition
Date:Oct 1, 2007
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