The operator welcomes participants to PACCAR's Third Quarter 2023 Earnings Conference Call and introduces the company's CEO, CFO, and Controller. The call will contain forward-looking information and the company's SEC filings can provide more details. The CEO highlights the record third quarter financial results, including a 60% increase in net income and a 23% increase in revenues. The company's investments in new trucks, technology, and manufacturing contributed to this strong performance. PACCAR Parts also saw an increase in revenues during the third quarter.

In the third quarter, PACCAR Parts had a 10% increase in pretax profits compared to last year. PACCAR Financial also had a strong income. The Class 8 market in the US and Canada is estimated to be between 295,000 and 315,000 trucks this year and 260,000 to 300,000 next year. Customers are choosing Peterbilt and Kenworth models for their efficiency and fuel economy. In Europe, the truck market is estimated to be between 310,000 and 330,000 vehicles this year and 260,000 to 300,000 next year. DAF trucks are popular for their aerodynamics, fuel economy, and features. In South America, the truck market is projected to be between 105,000 and 115,000 trucks this year and next year. DAF Brazil has a record 10% share in the market. PACCAR is also participating in a new battery cell joint venture in the US to create value for customers and help them achieve their operational and environmental goals.

PACCAR's employees and dealers are achieving great results for customers, with a projected delivery of 48,000 to 51,000 trucks in the fourth quarter. PACCAR Parts and PACCAR Financial Services have also performed well, with strong gross margins and innovative programs. The company has introduced multiple new truck models in the last 2 years, with plans for a new flagship model in 2024.

PACCAR's strong financial performance is attributed to its capital investments in new facilities, innovative products, and new technologies. The company's return on invested capital has improved to an industry-leading 35%. PACCAR plans to continue its investments in the coming years, including a joint venture in battery cells. With a strong truck range, efficient investments, and a growing aftermarket parts and financial services business, PACCAR is well-positioned for the future. The company expects parts growth to be between 7% to 9% in the fourth quarter and the opening of a new PDC in Germany will have an immediate positive impact on the business.

Preston Feight explains that the PDC (parts distribution center) allows for closer contact with customers and quicker delivery of parts, benefiting their businesses. When asked about decremental margins for next year, Feight mentions the success of new products such as the Peterbilt Model 589 and how they will continue to monitor market developments. In response to a question about the launch of the new Peterbilt, Feight emphasizes the company's focus on providing value for customers and the excitement surrounding the new product.

The speaker discusses the new Peterbilt 589 truck and its potential impact on the company's production. They also mention the Financial Services division and how higher interest rates may affect their portfolio. When asked about engine rebuilds, the speaker states that they have good visibility into the life of their engines and expect to see an increase in rebuilds as their population ages.

The speaker discusses the company's approach to managing growth in the air pocket in 2024 and mentions their focus on research and having the right products in place. They also mention the potential for a stronger vocational market and a strong medium-duty market, with the LTL market being particularly strong.

The speaker discusses the importance of customers keeping their fleet age low and continuing to purchase new trucks. They also mention their investment in proprietary battery cells and their belief that a variety of technologies, including clean diesel and hydrogen, will play a role in powering trucks in the future. The cost of the vehicle is heavily influenced by the cost of the battery in a battery electric vehicle.

The company believes that being vertically integrated is beneficial for customers and gives them control over the battery and energy management system. They have chosen LFP technology for its safety, durability, and cost structure. The first quarter of 2024 is filling up quickly and the company expects to see a decrease in U.S./Canada sales by 8% year-over-year. The company is focused on ensuring customers understand the value of their products, which factors into pricing.

The speaker discusses the competitive nature of the market and mentions the upcoming earnings report. They also mention the current positive sentiment and uncertainty about the next few quarters. The speaker then answers a question about the order book and discusses the success of the new product portfolio in Europe, which has doubled profitability. They mention that the majority of trucks being sold in Europe are the new model and that they plan to bring it to other markets in the future.

The company plans to sell the new DAF in all markets where they currently sell DAF. In North America, the 589 will replace the 389 and there are plans for more new products in the future. The company is also investing in battery electric technology, but the rate of adoption will depend on various factors such as regulations, energy, infrastructure, and price. PACCAR's priority is to offer the best solutions to their customers, regardless of the adoption curve.

In response to a question about the high margins seen in the quarter, Preston Feight explains that the steadiness of supply and strong performance in rest of world markets are contributing factors. He also mentions smoother builds and some impacts from suppliers. When asked about cost indications for 2024, Feight acknowledges various commodities moving in different directions and potential labor pressure. The cost for the new battery plant will likely flow through R&D costs.

Tim Thein from Citigroup asks about PACCAR's Parts sales in 2024, given the decline in truck volumes and potential pressure on trucker profitability. PACCAR's CEO, Preston Feight, believes that their parts team has successfully transitioned from parts providers to transportation solutions providers, which has contributed to their consistent growth over the past 20 years. Feight expects this trend to continue in the medium and long-term, thanks to the team's use of technology and analytics.

The speaker acknowledges the sensitivity to market conditions and agrees to consider the outlook for 2024. They also discuss the inventory levels at dealerships and the appetite for stocking in 2024. In Europe, the market is softer and there is more contemplation among customers, leading to a forecasted decline in sales for next year. In the US, the speaker mentions hearing from customers, but does not provide specifics.

PACCAR's President Preston Feight discusses the current state of the trucking industry and how different sectors are performing. He notes that the vocational, LTL, and medium-duty markets are strong, while large truckload carriers are considering their options for the next few years. Feight also mentions the benefits of new trucks, such as fuel economy and driver satisfaction. When asked about PACCAR's 2024 U.S. and Canada Class 8 forecast, Feight and Harrie Schippers believe their strong presence in the vocational segment could lead to better performance than the overall industry forecast.

Preston Feight, CEO of PACCAR, discussed the company's forecast for the next year and mentioned that they gave a range of 260 to 300 based on their own projections. He also mentioned that if there is a higher mix of vocational trucks in the future, it would not affect their margins or manufacturing process as their truck plants are adaptable and skilled at building any type of truck. Jeff Kauffman from Vertical Research Partners asked about the joint venture and the potential for $600 million to $900 million in CapEx, to which Preston Feight responded that they would need to get all the necessary approvals and that it could potentially result in $1 billion or more in total firm CapEx for 2025 and 2026.

Harrie Schippers confirms that the investment in the joint venture will not be included in the company's capital investment plan. Jeff Kauffman asks about the potential number of vehicles the plant could produce and Preston Feight confirms that the math is accurate. Scott Group asks about the mix of sales and Feight explains that it varies, with truckload being a large part and vocational and LTL also playing a role.

PACCAR's gross margin for this year is projected to be over 19%, which is significantly higher than their historical average of 16%. This is due to the hard work and dedication of their team, as well as the strong dealer network and value provided to customers. PACCAR aims to maintain this high level of gross margin in the future.

The speaker expresses caution about predicting the future, but is optimistic about PACCAR's future prospects. The operator thanks everyone for participating and the speaker concludes the call.

This summary was generated with AI and may contain some inaccuracies.