It’s Not Really About the Name on the Box

Denise Rondini

Fleets have so many more options today when it comes to parts for their trucks. There has been a proliferation of private label, all makes, price point, aftermarket parts and on and on. Things can get confusing when a truck is down and a part is needed to complete a repair. Which part is right in a given situation can be hard to tell, and often it has nothing to do with whose name is on the box the part comes in.

For one thing, the same part made by the same manufacturer can show up in multiple boxes. “The company that built the OE or ‘standard' part is probably also building parts for the aftermarket,” explains Bill Wade, managing partner of Wade & Partners, marketing consultants to the aftermarket. “The part may go from a component supplier to a distributor [or dealer] as a branded component. It may also go to the distributor under the distributor's private label, but it is still the same part. However, the distributor's private label may be a will-fit part from China or Europe. And it also may go through an all-makes program from the OE.”

In short, it can be difficult to determine whose part is actually in the box.

Plus, which part you want may change based on things such as the age of the truck, when you expect to trade it in or sell it, and the duty cycle. It is important to continually “evaluate the requirement of the part for your application,” according to John Blodgett, vice president of sales and marketing at MacKay & Co., a management consulting and market research firm focusing on the heavy-duty aftermarket.

Every truck parts manufacturer offers some kind of field sales support, and fleets should leverage the knowledge of those professionals to make sure they have the information they need to select the part that is right for their application.

However, Wade contends that it's not the fleet manager's job to do due diligence on the products that are available. He sees that as the job of the dealer or distributor selling the part. Jim Pennig, vice president, business development at Vipar Heavy Duty, agrees, saying, “Fleet managers should make sure they are partnered with the right people who can guide them to purchase the right parts for their needs.”

There are distributors and dealers who have a great deal of knowledge about the options available. “Having a critical source of supply is critical in today's marketplace,” Pennig says.

Wade says dealers and distributors talk to lots of fleets on a regular basis so have a keen understanding of what's actually working and what isn't. His advice is to look for a supplier that “can talk quality, can talk about the design of parts. You want to find real parts people, not just people who are selling an SKU. There is a difference.”

While a big-box seller of automotive parts may carry some heavy-duty parts, do they really know enough about the heavy-duty market to ensure you get the part you need? Wade thinks not. “But if you go to someone like a Midwest Wheel … or if you go to someone like a Rush Peterbilt, you are buying a part because they know about that piece of metal or plastic you are buying. The automotive retailer knows the part number, which can be kind of like someone being able to tap the picture of the cheeseburger on the cash register when someone says that is what they want.”

In short, the key to getting the part you need is to find a supplier you can rely on. You care about unit availability and uptime; therefore you have to count on your supplier — whether that is a dealer or a distributor — to assist with that. If you can't count on that company for product selection, then you need to get a new supplier, because sometimes it is hard to know exactly what is in the box — and the wrong choice can cause big problems.

Related: Independent Aftermarket Getting Poised for the Future

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Earnings Watch: Covenant, Knight, Roadrunner See Lower Profits

Phrases such a “challenging freight market” and a freight environment that's “less attractive” continued to be some of the buzz words Wednesday as another raft of second quarter corporate earnings washed ashore, while one company defied the trend with its net income soaring more than 300%.

Covenant Profit Falls By More Than Half

The parent a handful of trucking operations, Covenant Transportation Group Inc. (NASDAQ:CVTI), reported its profit fell to $3.6 million, or 20 cents per share, compared $11 million, or 60 cents per diluted share in the second quarter of 2015.

Total revenue declined 9.5% to $158.8 million, due in part to a reduction in its number of power units. Freight revenue, which excludes revenue from fuel surcharges fell 5.1% to $144.4 million while operating income totaled $7.3 million compared to $18.8 million a year earlier for the Tennessee-based company.

“The quarter was characterized by a challenging freight market as well as specific items that impacted our results. From a freight market perspective, demand was lackluster for the quarter,” said Chairman, and CEO David R. Parker. “Capacity was plentiful industry-wide, and a segment of the shipping community became more rate conscious, which pressured our average freight revenue per mile as well as our volumes where we were not willing to match some of the rates quoted by competitors.”

Despite this, he said there were some positives in the weak freight market including the company's average freight revenue per loaded mile improving approximately 0.9 of a cent per mile, and it completed bringing on two significant new dedicated customers. Also, it's number of team-driven tractors increased, which Parker said should position the company well duing the peak shipping season.

According to Parker, the company's Southern Refrigerated Transport operations saw its second straight quarter of operating at a loss and has enlisted company director and former Con-way executive Herb Schmidt as a consultant to work directly with helping turn SRT around, which is expected to take several quarters.

In the company's asset-based truckload operations, which include Covenant Transport, total revenue for the quarter decreased to $144.7 million, a drop of $18.1 million compared with the second quarter of 2015.

This decrease consisted of a $9.2 million reduction of freight revenue, along with lower fuel surcharge revenue of $8.9 million. The drop was also related to a 111 truck, decrease, or 4.1%, in the average tractor fleet and a 3.2% decrease in average freight revenue per tractor. Team-driven trucks increased to an average of 1,007 teams in the second quarter of 2016, an increase of approximately 5.9% over the average of 951 teams in the second quarter of 2015.

Covenant's non-asset based brokerage and other operations, including Covenant Transport Solutions, saw total revenue increase 11.7%, to $14.1 million while operating income was approximately $1.5 million, up from $600,000 a year earlier.

For the first half of 2015, CTG reported net income of nearly $8 million compared $21.2 million a year earlier while freight revenue declined 2.2% to $315.2 million.

Looking toward the rest of the year, Richard B. Cribbs, the executive vice president and chief financial officer said, “For the second half of the year, our focus will be on laying the groundwork to improve the performance of SRT, gaining commitments for the peak season from our key customers, and increasing the percentage of our trucks with drivers.

He said due to this, the company is not issuing earnings guidance for the second half of 2016 and covenant does not expect the the second half of 2016 to be as profitable as the second half of 2015.

Knight Transportation Profit Totals Nearly $25 Million Despite Decline

Also reporting lower earnings is truckload operator Knight Transportation Inc. (NYSE: KNX), which saw profit fall by 10.7% in the second quarter from a year earlier, totaling $24.7 million. Earnings per share dipped slightly to 31 cents from 33 cents.

The Arizona operation experienced an 8.5% drop in total revenue, hitting $276.3 million, while freight revenue excluding fuel surcharges fell 5.5% to $253.8 million.

In issuing the numbers, Knight said also released adjusted earnings, due $7.2 million in pre-tax expenses, or $4.4 million after-tax, it incurred a year ago related to two class action lawsuits. This resulted in even bigger drops in profits, with adjusted net income falling 23% from a year ago while adjusted earnings declined from 39 cents to 31 cents.

Knight's operating income slid 8.5% in the second quarter to $38 million while the decline in adjusted operating income is 23%.

“The freight environment in the second quarter of 2016 was less attractive than the same quarter a year ago. We attribute the change to excess trucking capacity in the markets we serve,” said Dave Jackson, president and CEO. “Although a surplus of trucking capacity remains currently, significantly declining new truck orders, increased bankruptcies, reductions in the driver workforce, low returns on invested capital, and additional regulatory burdens expected to phase in over the coming quarters has and will continue to reduce available capacity.”

According to him, Knight believes these latter developments will lead to “an improvement in the supply/demand relationship in the coming quarters.” However, Jackson noted during the second quarter,” the more competitive freight environment and fewer non-contract opportunities continued to pressure our overall revenue per loaded mile.”

During the quarter, revenue per loaded mile, excluding fuel surcharge, decreased 2.4% and negatively impacted the company's results by approximately 4 cents per share when compared to the same period last year, according to Knight, which said it also felt the affect of higher driver pay.

Like some other fleets, Knight trimmed its number average number of tractors in the second quarter to just fewer than 4,700 from a little more than 4,800 a year earlier.

In the second quarter, trucking segment revenue excluding fuel surcharges fell to $204 million from $212.4 million in the second quarter of 2015. Revenue from Knight's logistics segment declined 11.2% to $49.9 million.

In the first half of 2016, Knight reported a profit of $47.2 million down 17.4% from the first six months of 2015 as total revenue declined 7.4% and revenue excluding fuel surcharges fell 3.5%.

Roadrunner Net Income Plummets

On the asset light and logistics services side of trucking, Roadrunner Transportation Systems Inc. (NYSE: RRTS) reported sharply lower earnings and pulled back on its expectations.

Second quarter net income totaled $1.8 million, or 5 cents per share, compared to $16.5 million a year earlier, or 42 cents per share.

Revenues for the quarter decreased to $483.4 million from $517.9 million for the same quarter in 2015 while operating income was $8.6 million, compared to $31.2 million a year ago.

Mark DiBlasi, CEO of Roadrunner, said the decrease in revenue was “primarily due to continuing declines in freight rates and volumes across most end markets and lower fuel surcharge revenue of $20.1 million quarter-over-quarter.”

He said excess capacity and lower margins, especially in the company's ground and air expedite businesses, continued to negatively affect its truckload segment.

Roadrunner's truckload revenues decreased to $282.2 million for the second quarter of 2016 from $285.9 million for the second quarter of 2015, primarily due to lower fuel surcharge revenues across the entire TL segment, which were partially offset by increases in expedited ground freight brokerage revenues, according to the company. TL operating income decreased to $6.2 million for the second quarter of 2016 from $19.7 million for the second quarter of 2015.

LTL revenues decreased 11.9% to $122.3 million for the second quarter of 2016 The decrease in LTL revenues was attributed to a combination of lower fuel surcharge revenue, which decreased $5.3 million quarter-over-quarter, and weak freight demand in the general industrial markets Roadrunner serves, according to the company. LTL operating income was $800,000 million for the second quarter of 2016, compared to $8.4 million for the second quarter of 2015.

“Trends in our less-than-truckload segment remain mostly unchanged with continued market impacts from weak freight demand in the general industrial markets we serve and lower fuel surcharge revenue,” DiBlasi said.

For the first half of the year the Wisconsin based company's net income totaled $4.9 million, down dramatically from $30 million a year earlier as revenue fell by a much smaller margin, totaling $949 million compared to a little over $1 billion in the first half of 2015.

Because of the company's performance and due what Roadrunner said are continuing market trends and historically low freight rates in many end markets, it lowered 2016 guidance.

“We expect to achieve EBITDA, excluding downsizing costs of approximately $7 million, of approximately $110 million for 2016 and anticipate diluted earnings per share available to common stockholders, excluding the impact of downsizing costs, to be in the range of 70 cents to 85 cents for 2016,” said Peter Armbruster, chief financial officer.

He said this guidance assumes that historic seasonal patterns will increase volumes and slightly improve rates in certain end markets during the second half of 2016; new business awards will build throughout the year; cost saving initiatives will benefit results in the second half; and the company does begin any new acquisitions.

Echo Global Logistics Swings To A Profit

Meantime on the logistics side of trucking, things were bright for Echo Global Logistics Inc. (NASDAQ: ECHO) in the second quarter.

The Illinois company said its net income improved 383% to $1.9 million from a loss of $700,000 a year earlier while total revenue increased by 19% to $444 million from the second quarter of 2015.

Echo also reported big gains in earnings per share, moving from a loss of 3 cents a year ago to a profit of 7 cents in the most recent quarter.

"Echo posted another strong quarter of record volumes and revenue in a market with continuing soft demand and capacity," said Doug Waggoner, chairman and CEO. "We are very pleased with this growth and believe it highlights the value we bring to both shippers and carriers in any environment. We are excited to soon begin to enjoy the benefits of the full integration of our Command acquisition in the coming months."

For the first half of 2016 Echo's net income fell slightly to $2.2 million from 2.6 million a year earlier while revenue jumped to $849.1 million from $655.3 million.

The company also revised its full year 2016 total revenue guidance to be in the range of $1.7 billion to $1.76 billion, down slightly from between $1.7 billion to $1.78 billion, when it released its first quarter earnings.

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Isuzu opens new parts center in Keystone state

Isuzu Commercial Truck of America opened what it called its first “Center of Excellence” in northeastern Pennsylvania; a 100,000 sq. ft. parts distribution center containing over $8 million worth of inventory, along with a 30,000 sq. ft. training and technical assistance facility.

“This facility represents our continued focus on providing the best possible ownership experience for all Isuzu truck customers,” said Shaun Skinner, Isuzu's president, in a statement.

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Mercedes-Benz Breaks Ground on $500M Van Plant

Mercedes-Benz will shift production of vans it sells in the U.S. and Canada to North Charleston, S.C., by the end of the decade with a plant that nearly triples its existing manufacturing footprint.

Surrounded by dignitaries such as Sen. Lindsay Graham and Gov. Nikki Haley, Mercedes-Benz and Daimler leaders celebrated the start of construction at a July 27 ceremony and provided more details about their plans to stop importing the vans from Dusseldorf in a complex assembly process to avoid the "chicken tax" assessed on trucks build in Europe. The tax assesses a 25% tariff on the vehicles, Graham said.

Instead, Mercedes-Benz will invest $500 million to expand its existing assembly plant to 1.1 million square feet from the 409,000-square-foot space. Mercedes-Benz will also construct a marshalling yard for finished vehicles of 2.8 million square feet.

The plant also helps Mercedes-Benz meet increasing demand for its Sprinter and Metris models. The company sold about 29,800 vans in 2015, a 16% increase over the prior year, said Bernie Glaser, vice president and managing director of Mercedes-Benz Vans.

"Over the last few years, we've seen very steady growth [in van sales]," said Volker Mornhinweg, head of Mercedes-Benz Vans. "This is what we're counting on in the future."

The new plant will create 1,300 new jobs at the plant and 400 new jobs at local suppliers, which will eventually include Auto Truck Group and Knapheide upfitting facilities.

The plant will simplify production of the Sprinter and Metris. Since 2006, Mercedes-Benz has been using a semi-knock-down process of building the vans in Germany, then disassembling them for shipment through the Charleston port. Van bodies, engine and powertrain kits, and other parts arrive separately and must be reassembled for being shipped to customers.

Elected South Carolina leaders praised Mercedes-Benz for investing in the region during remarks to a group of media members, plant employees, and company associates. During a light-hearted moment, North Charleston Mayor Keith Summey urged Mercedes-Benz to build a pickup truck at the plant.

"This is the deep South," Summey said. "I need for you to develop a line for a pickup truck."

Related: Mercedes-Benz Expands Van Offerings, Adds Ship-Thru

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New Isuzu Facility Aims to Serve Dealers and Customers

Isuzu's new Center of Excellence facility. Photo: Isuzu Commercial Truck of America

Isuzu Commercial Truck of America has opened a new complex that it is calling the Center of Excellence, comprised of a parts distribution center, training and technical assistance facility.

The part center is 100,000 square feet in size and is stocked with $8 million worth of parts, placing them close to a concentrated area of commercial vehicle dealers to reduce delivery time. The Center of Excellence is designed to put three major functions supporting dealerships and customer in the region under one roof.

The training and technical assistance area is housed in a 30,000-square-foot portion of the facility. The training center offers training to dealership service, parts, sales and customer satisfaction personnel. Through the Isuzu Truck University, the personnel will receive intensive, hands-on technical and lifecycle training.

“Our ‘lifecycle' business model is built on the premise that customers will look only to Isuzu for their commercial truck needs so long as we provide them the highest quality product, the least amount of downtime, and a level of service that exceeds their expectations,” said Shaun Skinner, president of Isuzu Commercial Truck of America. “To do that requires a very large level of support. That's what this Center of Excellence—and more like it in the future—will provide.”

The Center's location was strategically chosen because the Northeast region is home to one of the highest concentrations of U.S. Isuzu dealerships, Isuzu commercial trucks in operation and the company's annual parts sales.

Isuzu plans to build more of these types of facilities in the future and already has plans to open a second facility in the U.S.

“As impressive as it is, this center represents something much bigger,” said Skinner. “It represents Isuzu's commitment to the U.S. market, and our pledge to do everything we can to support our dealer body and our customers' ownerships experience.”

Related: Q&A With Isuzu's Shaun Skinner

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Kenworth Launches Essentials App for Mobile Devices

Kenworth Truck Company has launched the Kenworth Essentials app for Apple and Android mobile devices, offering relevant information on trucks, engines and technologies.

The app provides access to Kenworth news in real time and is filled with videos, brochures and galleries of multi-perspective images.

The app offers access to the Kenworth Dealer Locator with a “Find Nearby” feature that gives directions to the nearest Kenworth dealer. The locator can also search nationwide by city, state, province or zip code.

The app will recognize your current location and map directly to the Kenworth dealership chosen. A call to the dealership is also made easier with a “one-touch” dialing feature by tapping the phone number.

Kenworth will update the app regularly with new features, the company says. The app is available on the Apple App Store or the Google Play Store.

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EZ Drain Valve Made For Vaporizer Drain Systems

The EZ Oil Drain valve has a new application for a vaporizer drain system on propane-powered equipment.

The liquid petroleum gas regulator equipped on these units has a vaporizer drain on the regulator. The EZ Drain Valve can be used for this application, particularly the stainless steel version of the valve.

Some regulators and vaporizers have brass drain valve to remove oil and tar from the unit, but a stainless valve is required if any harsh chemical is present in the liquid to be drained to avoid corrosion. Many propane-powered unit maintenance protocols require the oil and tar to be drained every 100-150 hours, according to the company.

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