Chicken Little or the Canary in the Coal Mine; Times are Changing….

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June 20, 2012 by Minuteman Trucks

By: Dick Witcher, CEO of Minuteman Trucks & Chairman of ATD
Article Featured: Truck Corner of Massachusetts Auto Dealer

Don Sudbay and I attend the NADA Board meeting June 12th to the 14th. The meetings were “testy” at times, emotions were running high but after some initial tension all of the Board and the Executive Committee got down to expressing themselves in very impassioned and professional ways. I think a positive attempt to change the Association Bylaws bobbled over a desire to change the leadership direction of the Association.

During the last five years, back to Chairwoman Annette Sykora, the leadership of the Association was forced to focus on saving dealers and dealerships – remember “cash for clunkers” and the auto bailout. Those were great times! Unfortunately, the bankruptcies gave some OEMs the impression they have the right to do whatever they want to dealers. Well, the facility renovation programs and two tier pricing are causing the NADA Board to take new approaches to dealing with some manufacturers. Manufacturers need to treat all dealers fairly: big, same, urban and rural. Times are changing……..

Times are changing in the commercial truck business but, I don’t know if I just think the sky is falling or if we are breathing poisonous economic gases. As many of you know commercial trucks are frequently a precursor to events which take place on the retail automotive side.  Here are some examples of events in my industry which I think are a precursor:

  • Orders for new commercial trucks year over year have fallen for five straight months.
  • Build rates for all commercial truck manufacturers are at their fastest since 2010. The averages are approaching four months.
  • Kenworth reduced staff in at least one of their plants by 10%.
  • FTR, an economics and consulting firm for the commercial truck industry, recently published a study which says that even at reduced production rates truck OEMs cannot sustain operations.
  • Shipped tonnage has fallen for the last two months.
  • The projected need for commercial drivers has been revised significantly down.
  • Diesel fuel prices have fallen nearly $0.70 in the last eight months indicating a reduced demand.
  • The Federal Reserve revised growth for the remainder of the year to under 1.5% and the growth for next year to under 2.0%.

Then there is this list of things that are about to happen of which I believe the average retail consumer is unaware:

  • By the time this article is published, the Supreme Court will have made some decision(s) about the Affordable Health Care Act – no matter the decision there will be economic impact on business in the future.
  • Americans are about to experience the largest federal tax increases (to my knowledge) in history. Further, one of the great stimuli to purchases of commercial trucks was bonus depreciation: which has partially expired and will completely expire by the end of the year  .
  • Sequestration is about to further assist in dampening the economy even though our outstanding debt is helping to do just that today.

The combination of these last three events has caused some “experts” to forecast a 4 to 5 percent decrease in GDP. If the “experts” are right the combinations would wipeout any growth and return us to a recessionary rate of 2 to 3.5%. It is my belief the average retail consumer is not thinking ahead but, I believe business leaders do look forward for planning purposes. Therefore, I see the economic examples listed at the beginning of this article are a sign the canary is beginning to have trouble breathing and may soon fall over.

I pray that I am wrong in my outlook but I know tough times are ahead for truck dealers and I think car dealers need to exercise lots of caution.


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