Paccar posts record 2006 profit

A rush by trucking firms to beat tough new engine-emissions rules translated into a record 2006 profit for Bellevue-based Paccar.

The company, which builds heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates, earned nearly $1.5 billion last year, 32 percent more than the $1.13 billion it made in 2005. Truck sales, lease income and other revenue rose 17 percent to nearly $16.5 billion.

"All in all, a wonderful year," Mark Pigott, Paccar's chairman and chief executive, said Tuesday.

But with the new emissions rule having kicked in on Jan. 1, Paccar and other truck makers are expecting 2007 to be considerably slower.

On Tuesday, the company restated its previous projection that heavy-duty truck sales in the U.S. and Canada this year will come in between 200,000 and 230,000 units. Paccar estimated that 320,000 trucks were sold in 2006.

"We're at the tail end of a big order bubble," said J.B. Groh, an analyst who follows Paccar for the D.A. Davidson brokerage in Lake Oswego, Ore. Groh doesn't own the stock, and his firm hasn't done investment banking for Paccar.

The truck business is normally cyclical, Groh said, but the recent up — and, now, the down — has been exaggerated by the new emissions rules, part of a multiyear effort by the federal Environmental Protection Agency (EPA) to clean up diesel engines.

The truck maker has eliminated one shift each at its Kenworth plant in Renton and its Peterbilt plant in Tennessee in anticipation of lower demand. About 1,000 workers were laid off, 340 of them in Renton.

However, Groh said, Paccar should be better equipped to weather a downturn in the U.S. market than the last time a similar dip occurred five years ago.

The company has worked to build up its overseas businesses, especially the DAF brand. Europe now accounts for 28 percent of the company's total revenue, and the rest of the world — excluding the U.S. — provides 20.5 percent.

DAF had 14.5 percent of the European heavy-duty truck market last year, compared with 13.7 percent in 2005. The company's goal is to drive DAF's share above 20 percent, Pigott said.

The company sees a brighter picture in Europe, at least in the near term: It raised its 2007 industry forecast to a range of 250,000 to 270,000 heavy-duty trucks, up from the 230,000-to-260,000 its range three months ago.

Paccar also has expanded its parts and service business, Groh said.

Earlier this month, the company announced plans to build a $400 million engine factory in the southeast U.S. When it opens in 2009, Paccar will be able to offer customers its own truck engines, as well as the ones it buys from Cummins and Caterpillar.

The company's per-share earnings of $1.52 were just shy of the Thomson Financial consensus of $1.54.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com