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- America’s $800 billion trucking industry has been in a recession since the beginning of 2019.
- That downturn is now affecting truck manufacturers and the people who work at them.
- Cummins, a manufacturer of heavy equipment based in Columbus, Indiana, told its employees last week that it would lay off about 2,000 workers worldwide. Cummins’ 2018 revenue totaled $23.8 billion.
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The data backs up Boblett’s claim, particularly when it comes to new orders of big rigs. According to the most recent data from FTR Transportation Intelligence, October orders of heavy-duty trucks were down by 51% from last year. October is typically the hottest month for new truck orders, and this October’s orders hit a three-year low, the weakest since 2016.
Steve Tam, the vice president of ACT Research, a leading publisher of commercial vehicle data, said that when it comes to trucks, we’re seeing the biggest volume change in nearly four years and the largest price drop in three years.
The market dip is forcing major layoffs at Cummins
Those market trends are affecting Cummins, a manufacturer of heavy equipment in Columbus, Indiana. It’s the largest manufacturer of Class 8 truck engines, claiming a 38.3% market share in 2018 over competitors like Daimler and Volvo/Mack and $23.8 billion in revenue.
Jon Mills, a Cummins representative, confirmed to Business Insider that the company, which employs some 62,610 people globally, would reduce its global workforce by about 2,000 by the first quarter of 2020.
It’s not clear which Cummins locations or departments will be affected by the layoffs.
“As we communicated to our employees last week, demand has deteriorated even faster than expected, and we need to adjust to reduce costs,” Mills said in an emailed statement.
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Cummins’ leadership informed shareholders last week of a plan to increase profitability amid the trucking downturn, including continuing investments in fuel-cell and hydrogen-production technologies. It said structural costs would be slashed by $250 million, reaching $300 million by next year.
“Unfortunately, we must do more to reduce costs because the downturn is happening at a sharper pace than we experienced in the previous two cycles,” Mills said.
“We understand this is incredibly difficult for those directly impacted and for all employees across the company,” he added. “Our employees are important to the success of our company and necessary actions like this are incredibly tough and disappointing. However, by taking actions now, we can navigate this downturn and emerge stronger when markets return just as we have done in the past.”
Layoffs and bankruptcies are becoming the norm this year
Meritor, a manufacturer in Troy, Michigan, said in September that it would slash payrolls by the end of the first quarter of 2020 “in response to an anticipated decline in most global truck and trailer market volumes.” Its core business includes drivetrain, braking, and other heavy-duty components.
Thousands of truck drivers and others in the industry have lost their jobs this year. Trucking has been in a recession since the first half of 2019, according to ACT Research.
In the first half of 2019, about 640 trucking companies went out of business, according to industry data from Broughton Capital cited by The Wall Street Journal. That’s more than triple the number from the same period last year, 175.
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2018, on the other hand, was a hot year for the trucking industry, with rates and new truck orders hitting unprecedented numbers. But that fervor likely heralded the downturn this year.
When demand is high, trucking companies tend to buy lots of trucks and hire new drivers in anticipation of profits to come. But once the supply of trucks and truckers catches up to demand, rates fall, making that investment hard to pay off.
“Part of the industry’s challenge, being cyclically driven as it is, is overcapacity,” Michael DiCecco, the president of Huntington Bank’s asset-finance sector, previously told Business Insider.
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