Sterling to exit truck market in 2009
In response to depressed demand in the weakening truck market, Daimler Trucks North America has announced plans to discontinue the Sterling Trucks brand and consolidate its manufacturing network.
As a result of these changes, Daimler expects annual earnings improvements of $900 million by 2011, with estimated program costs of $600 million.
Effective March 2009, truck manufacturing operations will cease at the St. Thomas, Ontario, plant, where Sterling medium- and heavy-duty trucks are produced.
According to Daimler, Sterling models have substantial overlap with Freightliner Trucks’ product offering. Since its launch in 1998, the company says Sterling has achieved one-fourth of Freightliner’s market penetration.
While the Sterling dealer network is expected to continue to perform warranty repairs, offer maintenance services, replacement parts and technical support, dealers will stop accepting truck orders on January 15, 2009. New truck sales will continue until present dealer stocks are depleted, according to Daimler.
Daimler also plans to close its Portland, Oregon, manufacturing plant in June 2010. The company’s Santiago, Mexico, plant will produce Western Star trucks, while Freightliner-branded military vehicles will be produced at one of the manufacturing facilities in the Carolinas in 2010.
An estimated 2,300 workers at the St. Thomas and Portland plants will be laid off, including 720 St. Thomas workers, who will be laid off in November. Daimler plans to reduce 1,200 salaried positions, with more than half directly related to the Sterling brand.
Production will begin at Daimler’s new Saltillo, Mexico, manufacturing plant as planned in February 2009. The company’s headquarters will remain in Portland.
– Barbara Cox
CARB begins enforcing anti-idling rules
The California Air Resources Board said October 9 that its staff began hitting the road earlier in the week to enforce the agency’s anti-idling program, which generally limits idling to five minutes. California ARB staff and local air quality officials throughout the state will enforce the idling regulations by monitoring commercial on- and off-road diesel vehicles where they operate.
First time violators will receive a minimum civil penalty of $300. Subsequent penalties can be from $1,000 to $10,000. Owners, renters or lessees will be responsible for the penalty.
Regulations limiting idling of on-road commercial diesel-engine vehicles to five minutes have been in effect for several years and for sleeper berth trucks since January of this year. The regulations addressing the idling of off-road diesel vehicles took effect in June. California ARB granted a grace period to allow managers and employees to learn the new requirements.
Because of the nature of those operations, enforcement officials will first contact the operator and site supervisor for off-road vehicles to determine the reason for idling in excess of five minutes before levying the fine. If the reason is not exempted, as some clauses of the regulation allow, and the instance is a first time violation, a $300 per day citation will be issued to the owner, renter or lessee of the vehicle.
– Avery Vise
EPA set to create rule on stormwater discharge limits
Numeric discharge limits for stormwater runoff at construction sites – previously limited to certain states – may soon be in effect for all construction projects of 1 acre or more. EPA is currently reviewing options for an effluent limitation guideline, or ELG, which could add erosion and sediment controls to stormwater permits.
EPA put its proposal into motion after the Ninth Circuit Court of Appeals voted last month to uphold a 2006 California federal district court ruling, in which the Natural Resources Defense Council won a suit against EPA for not issuing construction and development ELGs.
Originally, EPA decided against an ELG rule as it concluded sediments in stormwater were not toxic pollutants, as opposed to industrial plants’ or other harmful discharges.
A Small Business Advocacy Review panel, including representatives from the Associated General Contractors of America and the National Association of Home Builders, has been discussing ways to lessen potential problems, should the EPA select an across-the-board approach.
At present, EPA looks to specify a numeric discharge limit for stormwater pollutants running off construction sites, such as total suspended solids or turbidity. If selected, the EPA option would include monitoring and sampling requirements.
According to AGC, EPA researched technologies available for treating construction stormwater runoff, which could meet an effluent turbidity limit. The agency believes active treatment systems to be the most reliable so far.
In a statement made by AGC and NAHB to the EPA, however, the industry associations say EPA has “significantly underestimated the cost and impact on the industry from such systems” and states a non-numeric ELG would provide additional flexibility, where a numerically based ELG could not.
AGC and NAHB prefer an ELG based on best management practices or active control measures according to the construction area. The organizations say this approach includes not only required restrictions and the best conventional treatment technology, but would also be nationally applicable and reasonably priced.
EPA plans to review the panel’s suggestions and propose a rule by December 1.
– Barbara Cox
Why now may be the time to buy
How to use current economic conditions to your advantage
By Mike Groves, senior vice president, North American sales, IronPlanet
It’s time to review some of the advantages to fleet replacement while there is still time left this year.
The Economic Stimulus Act
As part of the economic tax stimulus package, contractors buying new equipment in 2008 have the option of depreciating 50 percent of the overall cost of the equipment in the first year, in addition to the normally depreciable amount, as long as equipment meets the criteria outlined in the act.
Contractors going this route should be prepared to demonstrate that equipment purchased was placed in service prior to January 1, 2009. For more information, go to www.deprectiationbonus.org.
Like-Kind Exchanges
In addition to bonus depreciation and higher expense limits, contractors replacing their fleet may be eligible to take advantage of IRS Section 1031. Section 1031 allows contractors to defer federal taxes on the sale of old equipment when the money is reinvested in new or used equipment, provided that the transaction meets certain criteria.
For example, if you sell a late-model compact excavator for $20,000 and you’re in a 30-percent federal tax bracket, you have approximately $4,500 ($20,000 at 30 percent, less fees related to the exchange) more cash to invest in the replacement property if the taxes are deferred until the replacement property is sold.
Section 1031 requires a qualified intermediary to conduct the exchange, in order to take advantage of the tax deferral. For contractors, a qualified intermediary is an independent party that holds proceeds from the sale of used equipment to fund the purchase of new or used replacement equipment. After the sale, the qualified intermediary holds the money in a bank trust account on behalf of the client until replacement property is found within the set time limits. The qualified intermediary then completes the transaction, using the funds in the trust account to pay for the replacement property. Contractors can find more information on like-kind exchanges as well as a listing of qualified intermediaries by state on the Federation of Exchange Accommodators website (www.1031.org) under “Member / QI Locator.” In addition, some equipment resale companies regularly work with qualified intermediaries and can point you in the right direction.
Contractors replacing aging equipment can gain a competitive advantage by deferring income or capital gains taxes when purchasing new or used machines. Consult a tax professional to confirm that state tax laws mirror Section 1031.
The Global Market
Maximizing resale value is an important part of budgeting for new equipment as well. Used equipment demand is still high overseas, in part because many developing countries are rapidly building infrastructure. Selling equipment to these international buyers helps contractors to offset struggling domestic markets.
International buyers are in an excellent position to take advantage of a weakened dollar, while still offering domestic sellers a premium price for their used equipment. A sluggish economy doesn’t have to make fleet replacement impossible. A combination of the potentially permanent deferral of Section 1031, the temporary impact of the bonus depreciation and a broader market offered by international sales channels allows you to continue to grow your business in a difficult business environment. With the tax advantages offered this year, make sure you’re armed with the right equipment to meet the demand.
Like-Kind Exchanges gain popularity
Contractors across the country are rapidly adopting Like-Kind Exchanges to defer taxes on the sale of depreciated assets, reports Accruit. Although the company says all sizes of Like-Kind Exchanges can be managed in their patented software, one example of an LKE looks like this:
Depreciated Equipment Sale Price: $100,000
Remaining Basis on Equipment: $20,000
Gain Recognized on Sale: $80,000
Income Tax Rate: 40%
Tax due without LKE: $32,000
Tax due with LKE: $0
For more information on LKEs, contact Accruit at www.accruit.com.
