Labor remains the largest barrier to growth for commercial vehicle suppliers, dealers and the aftermarket but also the industry’s strongest data point against a recession, the Heavy Duty Manufacturers Association (HDMA) and MacKay & Company reported Wednesday in HDMA’s monthly Pulse webinar.
During presentations by HDMA’s Senior Director of Market Research and Analysis Richard Anderson and Dave Kalvelage and Bob Dieli with MacKay & Company, the experts shared the results of their market surveys and research that indicate while business growth has slowed in the commercial vehicle component space, the overall market (and economy) appear to have not yet entered a recessionary phase in the business cycle.
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Kicking off the webinar, Anderson reported HDMA member companies have scaled down their business projections for the rest of 2022 and into next year. He says HDMA’s most recent Pulse survey uncovered members predicting 11 percent year over year sales growth in Q3 and 15 percent for Q4, with an overall prediction of 11 percent for the year as a whole. Anderson says those third quarter and year end guesses are down from earlier this year — 2022 sales predictions were as high as up 17 percent in April — but closer in line to predictions made at the end of 2021.
In its most recent survey, Anderson says 47 percent of HDMA members cited labor as its biggest barrier to higher sales. Commercial vehicle suppliers continue to struggle to attract and retain talent. He says HDMA members surpassed 90 percent overall employment for the first time in two years in April. At the time, Anderson says HDMA members hoped surpassing that barrier would lead to 95 percent employment (which HDMA views as a normal level) but in the months since the industry has backslid. Employment fell back to 89 percent in HDMA’s most recent survey and production staffing is down to 87 percent.
In asking attendees Wednesday to cite the greatest reason for their reduction in business projections from Q2 to Q3, 42 percent of responders said labor, with supply chain disruption and inflation tying for second at 25 percent. Anderson adds that’s how polling has been for most of the past several months. “It seems to depend on the day and the supplier as to which [challenge] is the largest,” he says.
As such, Anderson says HDMA members are anticipating labor cost projections up 6 percent in 2023, with production staff costs up 10 percent. Anderson says he is unsure if those raises will be enough to fill the industry’s open positions but is certain if suppliers want to reach full employment they will have to pay their way there. He says all HDMA research points to higher wages as the only way to raise employment.
