Saturday 22nd Oct 2016 - Logistics Manager

Truck market prepares for tougher times

The chaos in the financial markets over the past few weeks has contrasted sharply with the rather placid state of the economy as the rest of us have been experiencing it.

However, market conditions are getting tougher and evidence is accumulating of the more general slowdown in activity that we have all been expecting. Sales of commercial vehicles has historically been an early indicator of trends in the economy and the bad news is that CV registrations are slowing in the UK, according to the latest figures from the Society of Motor Manufacturers and Traders.

In September, regis-trations of vans were down 22.1 per cent to 36,512 pushing the market in the year to date down 7.3 per cent. The market for trucks over three and a half tonnes was healthier – registrations were up 3.6 per cent in September and 22.2 per cent for the year to date. But this should not be allowed to disguise the fact that the market is now slowing.

“September is a key month for registrations, but the credit crunch hit the figures,” says Paul Everitt, SMMT chief executive. “The summer’s spending cut meant a sharp drop in the month’s van registrations.

“We expect the van market will stay well below recent levels for some time. Trucks, stable for the month and well up for the rolling year, saw orders drop through the summer, so registrations will suffer soon. Overall, we expect a tough market for the next 12 months or more.”

Volvo Trucks is one company that is already taking measures to downsize capacity in its European production system to meet the declining demand for trucks in the European market.

It is now planning staffing cutbacks of some 1,400 employees at plants in Ghent in Belgium, and Gothenburg and Umeå in Sweden. A cost-reduction plan will also be implemented to meet the lower sales levels and increasing raw material cost.

Staffan Jufors, president and chief executive, says: “The planned reductions are not only being undertaken to rebalance capacity, but also to increase efficiency in production and to compensate for the higher raw material prices that we are now experiencing. To mitigate the impact of cost-inflation a cost-saving programme will be introduced throughout the entire Volvo Trucks organisation and it will include measures to improve efficiency in the commercial operations.”

Over the past few years Volvo has been increasing capacity to meet growing demand. Adding night shifts has been a costly temporary solution to reduce delivery times.

The company said: “The European truck demand is now slowing. The negative market development has been accentuated by the recent events in the financial markets resulting in financial uncertainty and credit restrictions. The company’s customers have become more conservative in replacement of vehicles and some are not being granted loans to finance new trucks.

“The adjustments will rebalance production capacity to more normal levels. The downsizing affects up to 400 temporary employees in Ghent, where the temporary night shift will close by the end of December this year. In Gothenburg, the ambition is to reduce the evening shift, which will affect up to 610 persons. In Umeå, approximately 370 employees are affected as the cab plant is planned to downsize in April next year.

Ironically, the SMMT figures show that Volvo has not done badly at all over the past year – in the UK at least – registrations are up some 57 per cent on last year (see table).

In the van market, Ford has cut production of the Transit at its Southampton plant with a 17-day closure, and General Motors has cut its van production at Luton. However, the commercial vehicle market is holding up better than the car market where GM last month announced plans to cut output by 40,000 vehicles in Europe.