With recently passed tax incentives in capital equipment, new emissions standards ready to take effect at the end of 2010 and one of the oldest U.S. truck fleets on record nearing a necessary replacement cycle, Martin Weissburg, the president and CEO of Volvo Financial Services, thinks the future is looking bright for the American trucking sector.
Martin WeissburgPresident and CEO, Volvo Financial Services
Martin Weissburg has spent his entire professional career involved in capital equipment, with most of it in leasing and financing. He joined Caterpillar’s management training program right out of college and, by 1984, began a short stint with the nascent CAT Financial. Leaving CAT, he took a job at Orix Credit Alliance, rising to the role of senior vice president, and taking time off to complete an M.B.A. at George Washington University. After school, he went to work at Heller Financial, then to Great Dane Trailers, a manufacturer of semi-trailers headquartered in Savannah, GA, where he was soon asked to launch a captive finance arm for the company.
After building Great Dane Financial from the ground up, Weissburg was asked to lead a turnaround of a manufacturing entity with common ownership to Great Dane, and was eventually named president of the unit, a position he held for three years. It was during his time there that he was approached by an executive recruiter with an opportunity he couldn’t pass up — to head up the North American captive finance arm of global truck manufacturer Volvo.
In what was dubbed by the company as a “planned succession,” Weissburg was asked to replace the retiring Jim Ryan and lead up the Swedish company’s North American finance business, which at the time was known as Volvo Commercial Finance, Region the Americas.
“When Volvo found me, I was ready to get back to the equipment leasing and finance business,” he says. “What attracted me to the position as the North American leader were the great brands. Growing up in the industry in the U.S., we had the Mack brand, we had the Volvo Truck brand, we had Volvo Construction Equipment; so for me it was a terrific opportunity, having come from the construction and transportation business my whole career, to be able to again serve both industries with strong brands and strong distribution.”
Two years ago, the Volvo organization began ramping up Weissburg’s position, first giving him oversight of the Latin American markets and South Africa, and finally, in May 2010, he was asked to lead the global financial services group, taking over for Volvo Financial Services president and CEO Sal Mauro, who was appointed head of the Volvo Group’s representation office in New York.
With his new role, Weissburg, now 48, was given oversight of the entire Volvo Financial Services operation, which is active in 43 countries throughout Europe, the Americas, Asia and Australia, and its team of roughly 1,250 employees. Volvo Financial Services provides financial services for all of the Volvo Group’s truck brands.
In conjunction with the appointment, he became a new member of Volvo’s Group Executive Committee. He travels regularly to Sweden for meetings with the Committee and with his boss Volvo Group CEO Leif Johansson. Always on the move, he has also spent time in Latin American, Africa and Asia. Concurrent with Weissburg’s appointment, Volvo Financial Services decided to relocate its global headquarters from Montvale, NJ, to Greensboro, NC, which is the center of Volvo Group’s North American truck and financial services operations.
A father of three teenage daughters, Weissburg quickly adopted Greensboro as his new home. He is active in several local community groups and sits on the board of trustees of the University of North Carolina at Greensboro. He is also a member of the board of directors of the Greensboro Partnership, an economic development committee.
It’s no secret that the trucking industry, particularly in the U.S. and North America, took a significant hit during the economic crisis. From 2007 through 2009, nearly 2,000 trucking companies went out of business, while many more reduced the size of their fleets, according to market research firm, the Bedford Report.
Data from Morningstar shows 2009 was the worst year on record for Class 8 sales in nearly three decades, and things are only slowly getting better. FTR Associates reported that North American Class 8 truck orders in September totaled 14,872, up 21.6% over August and nearly 40% year-over-year. But even with the increase, the company said it doesn’t expect strong truck sales growth in 2011.
“Net orders for September came in about where we expected, and while better than August, they aren’t indicative of any significant shift in fleet buying plans that would result in strong growth next year,” said FTR president Eric Starks. “We’ll closely watch the next two months because they are typically the strongest in the seasonal cycle. If orders don’t come in at close to 20,000 in October and higher in November, that will be evidence in our view that many fleets will continue to sit on the sidelines until they are more comfortable of a sustained economic recovery.”
Weissburg says that with concerns like portfolio quality, collections and remarketing largely a thing of the past, Volvo Financial Services can now place its focus on sales. And while he puts significant stock in analysts’ numbers, he believes it’s only a matter of time before America’s aging trucking fleets need to be replaced. “The average U.S. fleet is over eight years old. So there is a great need for the replacement cycle to really kick into gear, and that has started already,” he says, adding Volvo Financial Services is currently focused on staying in tune to its client base to anticipate the coming shift.
“There is a big replacement need for a lot of our good customers, so our priority is to stay very close to those customers, understand their needs of fleet replacement over time, and work the credit capacity and solutions with them in a collaborative way,” he says.
But Weissburg says that as a global company it’s important to see Volvo Financial Services’ strategy in a broader perspective, and that the company’s vast scope means that with every challenge in one market there is a parallel opportunity in another. “It’s good to be globally diversified from a geographic standpoint. We have different priorities and different key points of focus depending upon which part of the globe we’re talking about,” he says.
For instance, he says that in Western Europe the fleet age is not as significant an issue as it is in the U.S., so addressing pent-up demand there requires a more nuanced approach; in Eastern Europe, meanwhile, where recovery is progressing at a slower pace, the focus is still on portfolio management. And in the BRIC nations of Brazil, Russian, India and China, Weissburg says the challenge is keeping staffing levels up to meet robust demand.
While new orders may be a good indicator of how the trucking industry is doing now, data on freight tonnage offers a glimpse at where the sector may be in the future. On that front, things still look relatively bleak. In August, the American Trucking Associations’ adjusted For-Hire Truck Tonnage Index fell 2.7%.
“We look at freight tonnage in all our major markets,” Weissburg says. “That’s one of the economic indicators that we watch very closely. [But] we’re not banking on increases in tonnage to allow us to achieve our volume plans. I would much more tie it to fleet age. There are just some trucks that need to be replaced. Of course tonnage is key. If it drops off a cliff than all these other factors are a lot less important.”
In any case, Weissburg says that he is hearing from his customers that they are starting to see improvements on both loads and freight rates; and some, he says, are even experiencing driver shortages again. “We’re finding that our customers are increasingly optimistic and working or planning on working on that fleet replacement cycle.”
Like all manufacturers and financiers of capital equipment, Weissburg has watched with interest the movement of new small business legislation that includes an extension and expansion of the bonus depreciation tax credit. The legislation, which was signed into law by President Obama on September 27, contains $12 billion in small business tax incentives, including the extension of the bonus depreciation tax write off to cover 100% of the cost of most capital equipment. Backers estimate the incentives could provide up to $300 billion in new small business credit in the coming years.
But like most commentators on the law, Weissburg says the new benefits, though positive, will not amount to a magic pill to recovery. “It can only be a good thing,” he says. “[But] I don’t think it will create a surge [in new truck purchases] but it will allow the industry to maintain the current decent momentum on fleet replacement so it might be a good offset on any dips that come; but again, even with the good benefit of bonus depreciation, each customer will have to make their own fleet replacement decisions on the economic trade off.”
Beyond new incentives, analysts expect new Environmental Protection Agency (EPA) engine emissions guidelines, set to take effect at the end of the year, to spur demand for new engines. The EPA set two deadlines for reducing particulate and nitrogen oxide levels in diesel emissions. The months leading up to the first deadline in 2007 saw a spike in new truck purchases and the industry is hoping for a repeat as the second deadline approaches. It may be wishful thinking, but Weissburg says Volvo is ahead of the curve on emissions standards, which means the company is well prepared to meet the strong demand that is sure to come as the replacement cycle accelerates.
“We’ve been waiting for this,” he says. “We are a top global industry leader in terms of fuel efficiency and environmental care — those are among our core values and our OEM partners have very strong products. The business cycles don’t always cooperate but now here we are at this part of the cycle and we’ve got great products, we have really outstanding customer acceptance and a lot of them are looking for captive financing.”
Christopher Moraff is associate editor of the Monitor.
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