Westrux International: Truck Trade
Automotive
Written by John Zorabedian   
Tuesday, 01 April 2008
Westrux International: Truck Trade - American Executive - RedCoat Publishing
The Long Beach Port Authority wants cleaner-burning trucks.
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International Truck & Engine
The Port of Long Beach is one of the most congested in the world, and the thousands of trucks driving in and out of the port carrying containers have contributed to the infamous smog problem in Los Angeles and all of Southern California. But the Environmental Protection Agency’s 2007 strict air quality regulations requiring new trucks to come equipped with a $7,000 air particulate filter hurt truck sales badly in the last year.

Dave Kenney, president and CEO - Westrux International: Truck Trade - American Executive - RedCoat Publishing
Dave Kenney, President and CEO
Sales of heavy trucks dropped from 330,000 in 2006 to just 140,000 in 2007, as trucking companies and owner-operators made major buys in advance of the new truck emissions standards, said Dave Kenney, president and CEO of Westrux International, Inc. in Santa Fe Springs, Calif.

Like truck dealers across the country, Westrux responded by cutting back on sales staff. Fortunately for Westrux, California’s aggressive approach to regulating air pollution presents a huge opportunity to supply new trucks to the ports. A proposition passed in 2006, Prop 1-B, created a $400 million funding mechanism to subsidize truck-owners who scrap their old trucks and purchase the cleaner-burning models.

The Prop 1-B fund “is a pretty good deal for an owner-operator guy that is operating a ’94 truck and now he’s going to get a 2008 model that will help him with fuel economy,” Kenney said.

Furthermore, the Long Beach Port Authority issued RFPs in March seeking to replace up to 7,500 trucks over the next 18 months. Under a Clean Air Action Plan approved in 2006, the ports of Los Angeles and Long Beach have begun a Clean Truck Program to convert all trucks serving the ports to be in compliance with the 2007 EPA emissions standards by 2012.

The plan to take the old trucks off the road means scrapping them altogether. To qualify for truck replacement, owners must establish that 80% of their miles are accrued in the area around the ports, what is called the Southern California Air Quality Management District. Recyclers buy the old trucks and then sell off the steel, aluminum, and other scrap.

“In the next two to three years, we’re going to have a big rush of truck orders,” Kenney said. “No matter what happens to the economy, these laws will help us put new trucks into the system.”

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This year Westrux hired a regulatory specialist to manage the contracts involved in the government truck-buying program. “Instead of trying to get all salespeople to do it, one expert works out much better for our organization,” Kenney said.

Truck sales always follow the larger economy closely. “The truck business is a cyclical business. We are really tied to the economy and freight tonnage,” Kenney said. For its parts sales business, the company monitors its staffing levels by analyzing the dollar amount of parts handled per employee, cutting staff when the number drops below $40,000 per employee.

To a large degree, whether Westrux lands a major contract to supply trucks for the Port Authority is dependent upon how much weight the manufacturer, International Truck and Engine Company, can haul. Several other truck manufacturers and their associated dealerships will be vying for the contracts, including Paccar Inc.’s Kenworth and Peterbilt, Daimler’s Freightliner, and Volvo.

International makes 500,000 diesel engines a year, but truck manufacturers are still working out how to meet the demand with engines that can burn cleaner and more efficiently, without greatly adding to the cost. Fuels like biodiesel are not fully tested in how they will perform in truck engines, Kenney said.

Kenney is confident that International has “the right truck at the right cost,” he said. The company’s six dealership locations, with maintenance facilities and 130 technicians, would be able to service the contracts from a central location near the ports, which the company would acquire.

“One of the things the Port Authority is asking for is how fast you can start building trucks, and they’re also asking for maintenance for all these trucks so they don’t get out of spec,” Kenney said.

Industry projections put the number of trucks sold in 2008 at around 150,000, still less than half of those sold in 2006. While the state tries to figure out how to get the funding mechanism right, Kenney said it will be a while before the transition smoothes out. In the interim, Westrux still has strong parts and service contracts with truck leasing companies Ryder and Penske, and sales deals with Enterprise truck rental and large distribution companies like plumbing supplier Ferguson.

As the truck industry adjusts to new economic environmental realities, a dealership like Westrux will feel the pinch now and again. But as long as the global economy keeps container ships moving in and out of the Southern California ports, the demand for trucks will be there.
 
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