J.B. Hunt Transport Services Inc., a leading truckload and intermodal service provider, announced with Navistar Inc. on May 11 that it would buy more than 5,000 Navistar trucks over the next five years. The agreement is the clearest sign yet that carriers concerned that shrinking truck capacity will leave them unable to accommodate growing freight demand are ready to ante up for new equipment.
The deal is also significant in that the power units will meet the federal government's stricter engine emission standards that took effect on Jan. 1. Many carriers were either holding off on new rig orders or had placed orders before the Jan. 1 deadline to avoid paying higher prices for vehicles equipped with engines in compliance with the tougher rules set by the Environmental Protection Agency.
Lowell, Ark.-based Hunt currently has 9,000 power units in its fleet. It is unclear how many of the new rigs will serve as replacements for older equipment. A Hunt spokeswoman did not respond to a request for comment.
"J.B. Hunt is continuously evaluating equipment alternatives to ensure we leverage the best solution available for our customers, our drivers, and the environment," Kirk Thompson, Hunt's president and CEO, said in a statement announcing the deal. "Through this supplier agreement with Navistar, we will be adding some of the most fuel-efficient and driver-friendly tractors in the industry to our fleet."
In recent months, trucking executives and analysts have raised concerns that the disappearance of truck capacity in response to declining freight levels of recent years will make it difficult to service the growing demands of shippers as the economy recovers and the severe freight recession that has plagued the trucking industry since late 2006 finally abates.
Orders such as the one placed by Hunt "suggest that the economic rebound and improved freight volumes are sustainable and tightening capacity will lead to improved profitability," said Ken Vieth, partner and senior analyst at ACT Research Co., a Columbus, Ind.-based truck research concern.
Meanwhile, ACT has raised its projection for 2010 heavy-duty, or Class 8, truck production, increasing its estimates by 6,000 units, a 19-percent year-over-year increase. ACT also boosted its 2011 forecast by 3,000 units, a 67-percent increase over 2010 projected levels.
"The deck remains tilted against a strong ramp-up of Class 8 production in 2010 as the projected growth is still well below replacement level demand," said John Burton, ACT's vice president-transport, in a statement.
Burton added, however, that the aging of many fleets has truckers "increasingly making comments" about upgrades. In addition, Burton said that the reserve capacity of many fleets is low after those fleets were effectively cannibalized during the prolonged downturn.
ACT has said previously that 2011 will be a banner year for equipment production and orders as a strengthening economy and a continuing tightening of capacity set the stage for a strong increase in demand.
