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back to index backAMERItalk January,  2006

U.S. Planes, Trains, Trucks, and Autos

U.S. producers of rail freight cars and commercial trucks did well in 2005, and aircraft-maker Boeing had a banner year, reporting record orders.

On the other hand, the Big Three automakers had another rough year, depending heavily on incentives to boost sales in the domestic market. Boeing production should take off in 2006, and truck and rail equipment manufacturers will gain additional ground. Light vehicles, though, will face some bumps in the road.

Volatility marked the U.S. light-vehicle market last year, as incentives once again roiled the month-to-month sales figures. At the end of the day, sales were roughly flat with 2004, at 16.9 million units, although import brands did gain market share. Light-vehicle sales are not expected to exhibit much strength in 2006. We believe the employee pricing scheme pulled some sales forward from 2006. Moreover, we expect that consumers will become more cautious, having felt the sting of higher energy costs, increasing debt, and decreasing savings over the past year. Finally, consumers know that if they sit on the sidelines, sweeter deals will eventually come their way. Thus, light-vehicle sales will remain quite lackluster early on, picking up slightly as the year progresses; sales should total 16.51 million units in 2006, down 2.3% from 2005.

While the auto industry will continue to struggle this year, things are looking up for the aerospace industry. Boeing reported net orders for a whopping 1,002 new planes during 2005, without much in the way of support from domestic airlines; it posted 272 net orders for commercial aircraft in 2004. Gross orders in 2005, which exclude cancellations and conversions, totaled 1,029. The 2005 total exceeds the 877 net orders reported in 1988, which includes both Boeing and then-McDonnell Douglas totals (the companies merged in 1997). The manufacturer has indicated that it will be boosting production in 2006 and beyond, as the long-awaited recovery in commercial air transports finally hits its stride. Boeing's competitor Airbus also had a banner year, with firm gross orders reaching a record 1,111 and net orders standing at 1,055. The previous record for Airbus was 1998, when the company reported 556 new firm orders.

U.S. railroads are in the midst of another big freight car-buying cycle, triggered by generally favorable expectations for traffic growth and enormous pressure to replace the older/smaller units in the fleet. New orders for freight cars surged in the fourth quarter, bringing the 2005 total to 80,703 units, compared with 70,626 units in 2004. Rail car manufacturers delivered 68,657 units in 2005, up from 46,871 in 2004. Car builders reported a year-end order backlog of 69,408 units, enough business on the books to keep plants humming throughout 2006.

Sales of commercial trucks surged 31.5% in 2004 and then advanced another 15.0% last year, reaching 496,700 units. Although demand for new equipment should cool in the quarters ahead, new EPA engine regulations taking effect in 2007 are expected to trigger a pre-buy that will make 2006 a better year for trucks than market fundamentals would suggest; 2007-compliant trucks are expected to cost more up front, as well as cost more to maintain and operate. Sales are slated to advance another 7.3% in 2006, to 532,800 units. But you always have to pay the piper—a sharp fall-off in sales is expected in 2007.

Source: Global Insight - GAI

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