Paccar Profit Dives 92 Percent

Truck manufacturer Paccar earned $26.5 million in the second quarter compared to $313.5 million earned in the comparable period a year ago. The 92 percent dive was the result of lower gross margins, temporary plant shutdowns and reduced build rates, the company said. Second quarter net sales and financial services revenue added up to $1.85 billion compared to $4.11 billion in 2008.

Without a one-time pretax gain of $47.7 million, which offset an operating loss from the truck segment of $36.5 million, Paccar would have been in the red.

“These results reflect the impact of a recessionary economy on freight shipments and truck purchases worldwide,” said Mark C. Pigott, chairman and chief executive officer.

“The recession continues to affect our business in North America and Europe as truck markets remain weak,” Pigott said. He said the challenging market conditions were likely to affect the second half of 2009, as well.

In response to those conditions, the maker of Kenworth and Peterbilt trucks reduced operating expenses, capital expenditures and dividends. The company also discontinued certain subsidies for post-retirement health care plans and recorded a one-time benefit of $30 million.

Class 8 industry retail sales in the United States and Canada are expected to be in the range of 100,000-110,000 vehicles in 2009, reflecting continued economic weakness, Paccar said.

“There are some encouraging signs as the ISM manufacturing index reached its highest level since August 2008, and freight tonnage improved slightly in June. Our customers’ profitability is benefiting from lower fuel prices and good availability of drivers,” said Dan Sobic, Paccar executive vice president.

The company’s European brand DAF achieved a market share in the above 15-tonne market of 14 percent in the first half 2009. Paccar lowered its estimate for 2009 industry sales in the above 15-tonne truck market in Europe to a range of 170,000-180,000 units, reflecting very challenging economic conditions throughout Europe.

“European industry truck sales in 2010 are difficult to estimate given the current economic uncertainty, but they could be in a range of 150,000-180,000 units, similar to industry sales in 1992,” said Aad Goudriaan, DAF president.

Contact Thomas L. Gallagher at tgallagher@joc.com.