Yes - you read that right, and, unaccustomed as we are to public displays of optimism, we reckon that the end is now in sight.
Back in June of last year, we said that it was all going to go wrong, and, we like to think, we got that right. And now, following the Volvo Q1 call earlier today, we're pretty confident that the worst is now behind us.
The analogy here is a forest fire. Back in June of last year, it was difficult to see the smoke for the blind optimism; ludicrous double order numbers and a myopic view on Eastern Europe created an entirely false picture. The flames became visible some time around September, and, during the first couple of months of this year - along with Q4 08 - there was a lot of ash in the atmosphere.
This is now clearing. Q1 witnessed a meeting of payables versus receivables that was so out of sync that the black and white numbers are the stuff of biblical prophecy. But underneath this, we have to assume that a lot of dead wood has been cleared, and the ground is now fit for planting once more. A pre-buy in North America now looks a given, some European markets are holding up reasonably well, and, according to Volvo's numbers, order intake is beginning to steady itself.
We are seeing a gradual return to normality here. But key to the upturn is its shape. We stand by our oft-repeated view that the truck market that emerges from the past few months is going to be a very different place from that which entered the chaos last June. Return to trend but not a return to shape. We reckon that the winners here will be those companies who have seized the opportunity to do some brush clearance. The losers will be those who delude themselves that things will go back to the way they were before. That isn't going to happen.
One of LJ's comments today stands out above all others. He appeared to slap Cummins pretty hard, and we wonder if this offers the strongest evidence to date that EPA 10 will usher in the dawn of full verticalisation in North America.
The downturn isn't over yet, but we can se the bottom. Our predictions are for a NA upturn beginning Q3 2009, and a flattening of the downturn in Europe beginning Q4 2009, with both markets turning up - albeit at a measured pace - by Q2 2010.
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