EuroWire July 2017

Transatlantic cable

among long-haul carriers, many of whom owe more on their trucks than they can expect to realise at resale. Large American long-haul trucking companies typically run a truck for three to ve years. Because repair and maintenance costs tend to soar after about 500,000 miles, the owner will generally seek to o oad the equipment before the warranty expires. This background was provided by Jennifer Smith of the Wall Street Journal , who recently reported on the glut of used big rigs that is oppressing USA trucking companies already a ected by a prolonged slump in the freight market. When transportation demand was booming a few years ago, eets bought scores of new trucks – main assets for many of them. “Then US manufacturing activity agged and import growth slowed as retailers rang up disappointing sales,” Ms Smith wrote. ”Freight volumes started stalling out in late 2015, leaving too many trucks competing for cargo.” Following one of the steepest plunges in used-truck prices since the recession, that pattern has been disrupted. (“Trucking Industry’s Tale of Woe: Too Many Big Rigs,” 12 th May) According to JD Power Valuation Services, the average retail price for a used Class 8 sleeper, the heavy-duty tractor used for long-haul routes, plunged some 22 per cent, to about $49,000, over the two years through March. As noted by Ms Smith, that translates to a decrease of some $140 million across a eet of 10,000 trucks. † In April, Ryder System Inc (Miami, Florida), a commercial-truck operator with a large leasing and commercial rental division, reported that its rst-quarter earnings fell 32 per cent from a year earlier. The company blamed in part the soft used-vehicle market, as well as weak- er-than-expected demand for commercial-vehicle rentals. “Some carriers that expanded their eets now are cutting the number of trucks they run,” wrote Ms Smith. “That feeds more vehicles into the market and works to keep used-truck values down.” † Chris Visser, senior commercial-truck analyst at JD Power, told the Journal that, while used-vehicle prices are showing signs of bottoming out, the supply of used big rigs is expected to remain substantial into 2020. If freight demand fails to improve, he said, pricing will remain depressed. A falcon 41 feet tall and with a 68-foot wingspan is made entirely of stainless steel – 36.5 tons of it Already home to the National Football League (NFL) team Atlanta Falcons and the professional soccer club Atlanta United, the huge Mercedes-Benz Stadium (seating capacity: 70,000) is about to welcome another impressive tenant – the world’s largest free-standing bird sculpture. The engineering marvel being installed on the main plaza of the stadium faces the city skyline and is vividly present to those approaching. As described by Joe Reisigl of Atlanta magazine, “It seems poised to intimidate any fans of the opposing team with its erce glare, razor-sharp steel plates stabbing out of its body like daggers, and talons seized tight around a bronze Steel

But, noted Mr Leggett, “Car makers do use a variety of software to regulate emissions control systems – to ensure that they only work at the correct temperature, for example. Otherwise parts of the system can be damaged.” Fiat Chrysler insists that it did not set out to cheat the testing process. Nevertheless, earlier this year it was informed of the EPA’s concerns and asked to provide an explanation. Mr Leggett summed up: “It seems the authorities, so far at least, aren’t satis ed with what they’ve heard.” General Motors may be quitting the Indian domestic market but it is bullish about exports of its cars from India Another car maker recalibrating its international ambitions is General Motors of the USA. Having determined on a global business restructuring, the rm on 19 th May announced that it would stop turning out Chevrolet cars for the Indian market by the end of 2017. Its plant in Maharashtra will continue making cars but exclusively for overseas markets, mainly in Central and South America. As noted by the BBC , GM had planned to invest $1 billion to boost its presence in India, but its sales for the year ended in March fell below one per cent of the market. The disappointing results were in striking contrast to another set of company gures for the same period. “In India, our exports have tripled over the past year, and this will remain our focus going forward,” GM’s international president Stefan Jacoby said in a statement. An irony of the decision is that it comes amid predictions that India will become the world’s third-biggest vehicle market by 2020. But GM, nothing daunted, has disclosed roughly similar export-centred plans for South and East African markets. The American car maker said it would stop o ering cars in South Africa and sell its manufacturing business there to Isuzu Motors. The Japanese maker of commercial vehicles and diesel engines will also purchase a 57.7 per cent share in GM’s East Africa operations, assuming management control. “As a result of these actions, GM expects to realise annual savings of approximately $100 million and plans to take a charge of approximately $500 million in the second quarter of 2017,” the company said in a statement. † As a small indication of possible ambivalence about taking itself out of the domestic Indian market forever, GM said it will continue to provide maintenance services to Indian owners of its cars.

‘Big rigs’

Owing more on their equipment than the resale value, long-haul carriers in the USA are stymied at a bad time for the industry The term “underwater” was heard often in the USA during the recession of 2007-2009, when a precipitous drop in the value of real estate left many owners with high-payment mortgages on low-worth properties. Similarly, now, a market glut of used heavy-duty trucks has brought “upside down” into common use

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July 2017