With 2017 entering the history books, commodity prices remained low, currencies were relatively stable, and housing markets and overall growth were strengthening. Never mind that this has happened during the first year of one of the most controversial U.S. presidencies ever — there’s a strong sense that, ups and downs aside, it’s mostly business as usual. What, then, might be in store for the service truck sector in 2018? We asked industry insiders for their sense of things:
Based in Virgil Illinois, near Chicago, Sauber Mfg. Co. produces flatbed trucks, fiberglass service bodies, aerial lift equipment and step vans for utilities, municipalities and other customers in the Chicagoland area and neighbouring states.
“Our truck equipment sales went up and we have a lot of active quotes,” said marketing manager Mike Blaser. “Every single suburb has its own municipality, and they have their own fleet of trucks to service their area, so going into 2018 we’re looking at an increase in truck equipment sales for sure.”
Still, the Illinois economy has struggled and Sauber is feeling the pinch. “We haven’t been able to balance a budget, so there’s not a lot of state money available for vehicle purchases and everything else,” Blaser said.
Equipment turnovers anticipated
On the other hand, local governments and independent contractors are turning over equipment, and states like Indiana and Wisconsin have proven more stable.
“Things are going to get better and we’re already starting to see a loosening,” Blaser said. “You can only hold off a fleet and limp for so long before you’re forced to buy new equipment, and a lot of our customers are at that stage.”
With a stable base of nearly 70 employees, Sauber maintains a separate trailer business and has weathered the storm by retrofitting new equipment onto old chassis. “There’s always improvements you make when you’re remounting,” Blaser said. “We might redesign a new bumper and put some additional things on there that they wish they had the first time around. So it’s a win for customers and it’s a win for us because it’s additional business.”
In Sioux Center, Iowa, Service Trucks International president Walt Van Laren reported fairly
Walt Van Laren, president of Service Trucks International, says a big challenge has been finding people to grow with his company because of a low unemployment rate.
steady growth through 2017.
“The industry as a whole is quite busy and healthy today — probably the healthiest it’s been in close to a decade,” Van Laren said.
STI isn’t too far from North Dakota’s Bakken oil patch, which has struggled for several years thanks to rock-bottom oil prices that have risen only marginally over the last year. Van Laren said his company hasn’t suffered directly because service providers in the Bakken source most of their truck equipment from Oklahoma and Texas, not upper-midwest states like Iowa.
“What does affect my business is that we have some very good distribution in western Canada, and business can be very good when oil is better and the dollar is closer to par than it has been.”
Will 2017 mirror 2018?
Orders from Alberta and British Columbia are down from 20 to 25 per cent of STI’s volume of business to the low single digits, though Van Laren said a weaker U.S. dollar could potentially induce more Canadian cross-border orders.
Meanwhile, STI has countered these losses with agricultural, construction and other markets. “The biggest challenges have been finding people to grow with — our unemployment rate here is exceedingly low, like in the two percent range or less,” Van Laren said.
Van Laren worries some kind of large-scale calamity could upset financial markets, yet he expressed optimism. “I believe 2018 will probably be a mirror of 2017, which would be awesome. All the signals are that business is going to continue as it has.”
Myron Holzwarth — sales manager for Teamco Inc., maker of Feterl service bodies — says agriculture is driving much of his company’s business.Photo: Teamco Inc.
Tea, South Dakota is also relatively close to the Bakken, but Teamco Inc. sales manager Myron Holzwarth said his company’s sales of Feterl-branded service bodies has been largely unaffected by oil troubles.
“We do sell some up there but they’re not the bulk of our sales by any means,” Holzwarth said, describing Teamco’s sales as mostly nation-wide.
“We’ve had a gradual uptick in sales,” Holzwarth said. “We came out with a new service body design several years back, and that’s caught on.”
Farm business promising
While customers include resource companies, most sales are to other vertical markets. Commodity prices remain weak, but farming operations have grown in size and scope and equipment needs to be serviced regularly. “They know they have to keep servicing and maintaining their equipment, so we’re still selling a fair amount into the agriculture industry,” Holzwarth said.
Heavy construction, meanwhile, has picked up considerably. “That’s what we’re seeing a lot of — that’s where our trucks are going,” Holzwarth said.
Holzwarth also has his eye on government. “After the election we’ve kind of come to the realization that life is going to continue,” he said. “I hear people saying that since Trump got in they feel that industry is going to continue to grow, and that they know what they’re dealing with for the next several years, so they feel better about it.”
President Bob Hews (right) of The Hews Company — shown here with Drew (left) and Charlie Hews — says he is concerned that supply might get ahead of demand.Photo: The Hews Company
In the northeast, The Hews Company maintains a staff of more than 40 employees and distributes service trucks and other vehicles, including Maintainer and Reading lines. “We’re a fairly small market,” company president Robert Hews said, describing customers as far afield as Boston, Hartford, and the Canadian province of New Brunswick.
“The economy in New England is still strong,” Hews said, describing 2017 as “one of our better years” but noting that vertical markets vary — mining and forestry remain weak while construction and waterworks are faring well.
Cheaper fuel means bigger trucks
“We’re looking for 2018 to be similar to 2017,” Hews said. “Lead times are up and there’s still pretty good demand for ordering now, but it’s hard to tell what’s going to happen even in the second half of next year. My concern is that there will be more supply than demand in the work truck market, that the supply is getting ahead of demand.”
Increased players and suppliers tightens competition, especially for Class 5 trucks. “With bigger trucks, you have to have a little more design and engineering, and customers are looking for features and benefits,” Hews said.
Even in the east, low oil prices are having an impact. However, away from the oil patch, that impact is opposite to what’s happening inside the patch. “When oil was up, people wanted their trucks lighter so they wouldn’t have to spend a lot on fuel,” Hews observed. “It was all about fuel economy. Now that conversation’s not going on because fuel prices have been so reasonable.”
The view from Canada is equally hopeful. Milton, Ont.-based Wilcox Bodies Ltd. custom manufactures service and utility vehicles and vice-president David Dick said sales are rising steadily.
Full schedule already
“It seems like it’s a strong marketplace right now,” Dick said. “Every year we seem to be a little bit higher than the year before, and we’re finding U.S. sales are also increasing — probably due to exchange rates but showing that the economy down there is also definitely strengthening.”
It helps that Wilcox hired a U.S. sales rep several years ago. Dick said the company focuses coast-to-coast in Canada and throughout the eastern U.S., but also has nation-wide representation through a Pennsylvania distributor. U.S. sales account for nearly one-quarter of sales, Dick added.
“We’re booking into March right now. Our schedule’s already full, so we’re hiring for multiple shifts.”
Reps from North America’s two truck associations also expressed hope. Don Moore, director of government and industry relations with the Canadian Transportation Equipment Association, described 2017 as reasonably good.
Infrastructure investment helps
“The economy seems to be coming around and things seem to be picking up,” Moore said. “Certainly, on the heavy side, Class 8 sales are up, and it’s been a better year even for oil and gas in Alberta, where things were really dicey (in 2016).”
Moore has his eye on talk about renegotiating the North American Free Trade Agreement as well as planned Canadian government infrastructure investments and tax reform proposals.
“We’re dealing with companies that are small and medium-size. They’re innovative and fast moving, and to really upset the apple cart by throwing tax disincentives at them — this isn’t a good time for that, well there’s never a good time. So it’s just finding good middle ground.”
Still, Moore acknowledges that taxpayer investments in things like infrastructure also help the work truck sector and the economy overall. “Housing starts have been fairly strong across the country, and that’s probably a good sign for the vocational truck sector.”
Moore added that stable currency rates have also proven positive. “As long as it’s not fluctuating too much, as long as it’s staying in around 75 cents (to the U.S. dollar), that seems to be a good place for it. It makes our products attractive to Americans but doesn’t hurt us elsewhere.”
NTEA expects more growth
South of the Canadian border, National Truck Equipment Association communications director Summer Marrs consulted several subject matter leads in her organization and, in a written statement, said commercial truck chassis sales declined in the first quarter of 2017, in line with a decline in the larger capital equipment market, but rebounded in the second quarter.
“Since then, sales have grown steadily, and will likely end the year about six percent ahead of 2016,” Marrs wrote.
Marrs added that the NTEA expects commercial truck chassis and truck-mounted equipment sales will continue growing along with capital and consumer expenditures.
And, while low oil prices had a negative impact on commercial truck chassis sales from 2015 to 2016, an accelerating global economy is creating increased demand for oil. Marrs said some upward pressure on oil prices could likely lead to existing wells and exploration coming back online, and this in turn would increase demand for commercial vehicles within the energy sector.
One telling, final thought: The biggest challenge in 2017, Marrs wrote, was finding qualified labor. She anticipated this will likely carry over into 2018.
— Saul Chernos