ROLLER COASTER FLATTENS FOR HEAVY TRUCK INDUSTRY

ROLLER COASTER FLATTENS FOR HEAVY TRUCK INDUSTRY

A strange new force is at work in the heavy truck industry for the first time in well over a decade. It's called stability.

For the industry as a whole, market demand seems rock-solid despite the hard knocks it occasionally gets from Wall Street and the economy. While the old roller coaster ride of cyclicality may never end, it certainly seems smoother than at any time since the early 1970s.Nearly all forecasts both by manufacturers and independent analysts now agree that U.S. retail sales this year virtually will ignore the Oct. 19 stock market crash, coming in at around 130,000 units and approximating last year's robust sales of 131,000.

Economic Consulting and Planning Inc., a New York research group, recently predicted sales of 129,000 heavy trucks both this year and in 1989, putting the industry squarely in the middle of a sustained period of relatively high production and utilization despite economic uncertainty.

With the exception of 1986 when the market puzzled over the effect of the then-new tax law, the industry has held the 130,000 level since 1984, narrowing the precipitous year-to-year swings that have characterized it since the start of the interstate highway system. John E. McGinty, a vice president with The First Boston Corp. in New York, says that while cyclicality in the heavy truck business continues, much of its treacherous volatility has been toned down.

One reason, highlighted by a recent First Boston report, is that the industry is mature, a characteristic that was seen as a drawback rather than an advantage just a few years ago.

Quoting a study by Cummins Engine Co. of Columbus, Ind., the report notes that average annual replacement demand for the past 20 years is about 113,000 units while new demand for heavy trucks is only about 27,000. Theoretically, it says, replacement demand is a steadying influence which reduces volatility.

Also theoretically making demand less fickle are two other factors. One is the rise of leasing as an alternative for private trucking fleets. The other is the concentration of buying power among fewer and larger fleets in the less-than-truckload segment of the business.

While these factors may have promoted stability more in theory than in practice, there are a host of other factors that seem to be pulling in the same direction.

The interstate highway system, a major force in the spread of over-the- road trucking, is now nearly complete.

Also, sudden shifts were created by the rise of intermodalism, deregulation, and the Surface Transportation Assistance Act of 1982. The resulting changes in equipment sizes and configurations are now largely accomplished.

The argument also can be made that if some buyers have been waiting for major gains in fuel economy as the result of new aerodynamic styling or engine technology, they will find many of the industry's cards already on the table.

Most of the new shapes are already out or soon will be released. Market reaction to high-priced engine technology to meet 1994 federal emissions standards may still be some years off.

For individual manufacturers, the relative stability hardly means a holiday. Truck makers continue to labor under heavy price-discounting pressures, which are partially a relic of past overcapacity and the result of extreme buyer sophistication. Each manufacturer pursues distinct niches and strategies in the market.

But for the industry as a whole, the good old days - in terms of dependable growth, plant utilization and labor needs - may be now.

Mr. McGinty says that a recession, seen as unlikely in the near term, could cause a drop in truck sales of as much as 15 percent. But barring extreme economic pressure, the industry's cyclical highs of past years will be not so high, with the result that its cyclical lows will be not so low.