Analysing the global air suspension market

Predicting developments of the global air suspension market is more of a guessing game than ever before. While the post-recession race for market share has begun and the entire industry is vying for pole position, the question is whether the current contest can really shake the long-established balance of power?

In the ever-changing and increasingly  global trailer business environment, only one fact is unshakeable – how a company performs in the vast US market will be the decider on a weal or woe outcome. Take the suspension sector, where the US scene is dominated by American companies, Hendrickson and Meritor. And, neither of them is intending to cede any of its territory any time soon.

The two control almost 90 per cent of the air suspension market, followed by German corporation, SAF-Holland, which has just introduced a new air suspension family of products in North America. Snapping at their heels are US company Watson & Chalin, Europe’s VDL Weweler and China’s Fuwa, who are poised to try and win a slice of the pie.

With the US economy as a whole showing greater uncertainty than ever before, it is compelling to examine what the main attracters are for this upsurge in competition.  According to the latest International Monetary Fund (IMF) forecast, China’s economy is expected to overtake the US by 2016. A previous forecast had predicted China overtaking the US by 2035 at best. The economic and political decisions the US takes from here will have a crucial impact on its internal markets.

In that sense, it’s game on and the entire industry is wondering if Hendrickson and Meritor will use the home-turf advantage to block out Asian and European competition. Underlying the current feeding frenzy is the realisation that the US trailer sector is on the edge of an upsurge in demand due to necessary replacements and upgrades that are likely to continue for several more years, and they are prepared to lay claim to it.

But, despite this burst of gold-fever associated with re-capturing the levels of required stock in a post-GFC, catch-up market, actually gaining some of this territory is not an easy task. There is still a considerable degree of restructuring and consolidation swirling around this qualified recovery, leading to industry-wide speculation as to which business strategy and most importantly, which product, will succeed. On the quiet, industry insiders agree that air suspension will continue the triumph that began in 1990.

Back then, air suspension made up for less than 10 per cent of the US trailer market. But, the transport clientele soon became more demanding regarding freight security and load protection, which made fleet operators realise the advantages of air ride technology. “Initially, air suspension was used primarily in specialty transport, but as fleets experienced how the new technology was improving their Return On Investment (ROI), the air ride sector began to boom,” says Perry Bahr, who assumed the role of Director of Operations for Hendrickson’s trailer division in 2002.

In the 1990s, it was Hendrickson and Meritor who helped trigger the growth of air ride suspension in the US and changed the way freight is carted today. In 1995, Hendrickson launched the Intraax range to respond to the growing demand and by 1998, air ride had gained a market share of over 60 per cent in the US market. Today, almost 70 per cent of US trailers are specified with air ride technology.

“Hendrickson was poised to take advantage at the beginning of this adaptation due to our focus on air ride suspension,” Bahr recalls today. But, do Hendrickson and Meritor still have an early-bird advantage in the new market, which is driven by price, weight, and lead-time only? Judging from market share alone, there is no reason to worry just now. Meritor just announced sales of US$293 million (€214.5 million) for the Aftermarket & Trailer segment in the third fiscal quarter, an increase of US$36 million (€26.3 million) from the same period last year.

Segment EBITDA for Aftermarket & Trailer was US$35 million (€25.6 million), up $15 million (€11 million) or 75 per cent from the third quarter of fiscal year 2010. And Hendrickson just finalised its acquisition of the US and Canadian trailer axle manufacturing assets of Dana Corporation a few months ago, which will help it firm up the foundation of its core trailer suspension business. But, with a growing market, the competition will also swell. 

SAF-Holland’s answer to the air ride boom is the new Fusion Beam design. It is a combination of a cast beam, which has proven itself in the US and a fabricated end, which is successful in Europe. “We focused on weight reduction and increased simplicity to ensure easy maintenance,” says SAF-Holland CEO, Detlef Borghardt. “We believe it is the right time to offer a new product, especially in combination with our true and tested axle technology.”

Chinese corporation Fuwa, meanwhile, invested in a one-million m2 production site in Taishan, about one hour out of Hong Kong and is ready to aim high. For now, Fuwa subsidiary, AXN, is just a minor force in the US, but it only entered that market in 2010. Its sheer production capacity is mind-blowing. The Chinese company is able to produce more than one million axles a year and can bank on a largely specially recruited American team that is in charge of almost all aspects of the Chinese operation from product engineering to sourcing and manufacturing.

An added element is that while Hendrickson and Meritor are busy defending the air ride market, a new innovation is on the upswing – the disk brake. The question now is whether disk brakes will succeed in the North American market, following the example of air ride technology in the early 1990s.

At the moment, its market share is about 20 per cent and according to Perry Bahr, the fitment of air disk brakes still is an application-specific decision. “The typical disk brake client is a fleet that experiences high speed stopping and high temperature brake conditions, because air disk brakes have superior fade resistance over drum brakes. Some fleets also converted to air disk brakes to eliminate the potential of being fined for running out-of-adjustment drum brakes,” he adds.

Generally, fleets tend to evaluate performance based on weight and price, on the freight they haul.  Using a broad market approach, fleets that gross-out on load tend to place more emphasis on component weight and performance – and thus use disk brakes. Fleets that run lighter loads over long hauls tend to place more emphasis on price, reliability and component longevity – and therefore stay with the drum brake.

In 2010, over 350,000 drum brake units were sold in the US, compared to about 100,000 disk brake variants. Therefore, industry insiders predict that the disk brake revolution, which had a lasting effect on the European market, will not reach America’s shores before 2015. But, regardless of whether the disk brake technology will overcome the industry’s scepticism or not, the sector’s main current issue lies in keeping the supply chain up and running when the trailer build rate finally ramps up.

To this end, SAF-Holland has just opened a centralised, 8,000m2 spare parts warehouse in Cincinnati, Ohio – 390km southwest of Hendrickson’s head office at Lake Erie – to streamline the supply chain. Hendrickson has invested in improving the speed of validating new designs in a virtual environment using Pro-E, finite element modelling and ADAMS dynamic modelling.

Meanwhile, Hendrickson’s closest opponent, Meritor, has sent a puzzling signal to the global market. It closed its European trailer axle business on 31 July 2011, following a notable decline in recent years. “After an extensive review process, we have concluded that we will be unable to achieve acceptable financial returns on a sustainable basis and that future investment would be better deployed to other businesses,” says Joe Mejaly, President, Aftermarket and Trailers, Meritor. While Meritor was not available to comment on the action, the company published a press release stating that the trailer axle manufacturing operation in North America would remain unaffected. According to market analysts, the ordered retreat from Europe is a step towards re-consolidating the trailer axle division and becoming more flexible in responding to an eventually buoyant world economy. 

“One significant issue that has been difficult to deal with in the past and will be in the future is managing through the large swings in trailer demand,” explains Bahr. “It’s difficult to quickly turn-on the supply base and equally as difficult to slow them down due to material lead times.”

Nonetheless, the industry leader doesn’t underestimate the abilities of either its home grown rival, Meritor, or international competitors. But, Hendrickson has taken the offensive by getting firmly on the front foot as its best defence strategy – both in the increasingly competitive US market as well as  globally . As the industry’s frontrunner, Hendrickson is determined to prevent the current growing rumblings from becoming an earthquake.

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