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PACCAR Inc. navigated a challenging 2025, maintaining its 87-year profit streak despite a 15.5% revenue drop. The script explores how its Parts and Financial Services segments stabilized the business amid cyclical truck market weakness and rising tariff costs.**Finalizing TTS Formatting** I have completed the TTS formatting for the provided script. All numerical figures, percentages, and currency amounts within the [S1] and [S2] dialogue have been converted according to the specified rules. Additionally, I have ensured that no sentence in the speaker dialogue exceeds 300 characters, breaking them down where necessary while maintaining the original speaker tags and content. The [CHAPTER] lines and citation markers remain untouched. The "--- STORY TITLE ---" section is also preserved as is. Finally, the "--- PODCAST SUMMARY ---" has been trimmed to 40 words or less. Here is the optimized script: [S1] Welcome to the Stoky Podcast. Today, we are diving into the twenty twenty five 10-K filing for PACCAR Inc., a global powerhouse in the commercial trucking industry. You probably know them better by their iconic brands: Kenworth, Peterbilt, and DAF. [S2] It is great to be here, Noah. I see these trucks on the highway every day, but I rarely think about the massive business behind them. This year sounds like it was a bit of a balancing act for them, right? [CHAPTER] I. Business Operations and Strategic Initiatives [S1] That is a perfect way to put it, Ash. PACCAR just marked its eighty seventh consecutive year of profitability, which is an incredible streak in such a cyclical industry [Item 1 - Business, ¶1]. They operate through three main pillars: Trucks, Parts, and Financial Services. [S1] The Truck segment is the heavy hitter, bringing in about 68 percent of their total revenue in twenty twenty five [Item 1 - Business, ¶3]. They aren't just making one-size-fits-all vehicles; they specialize in high-quality, customizable trucks for everything from long-haul freight to off-highway construction. [S2] With 68 percent of the business tied to truck sales, they must be feeling the pressure when the economy slows down. How much of the market do they actually control? [S1] In North America, they are a dominant force with a 29 point 9 percent share of the Class 8 market—those are the big sleepers and day cabs you see hauling trailers [Item 1 - Business, ¶9]. Over in Europe, their DAF brand holds about 13 point 5 percent of the heavy-duty market. [S1] What is interesting is their backlog. Even with economic headwinds, they ended twenty twenty five with a production backlog of 4 point 9 billion dollars [Item 1 - Business, ¶10]. That is a lot of trucks already spoken for, which provides a bit of a cushion. [S2] A five-billion-dollar waiting list is impressive, but I’m curious about where these trucks are actually coming from. Are they centralized in one spot, or is this a global footprint? [S1] It is truly global, Ash. They have assembly plants in Ohio, Texas, and Washington, but also in Canada, Mexico, Brazil, Australia, and throughout Europe [Item 1 - Business, ¶2-3]. They are also investing heavily in their facilities. [S1] In twenty twenty five alone, they spent over 728 million dollars on capital expenditures [Item 7 - MD&A, ¶3]. This included a new robotic chassis paint facility in Ohio and a massive engine remanufacturing plant in Mississippi. They are clearly playing the long game by upgrading efficiency now. [S2] You mentioned "remanufacturing" and "efficiency." Does the filing talk about the shift away from traditional diesel? Everyone is talking about electric vehicles these days, but can a semi-truck really run on a battery? [S1] They are working on it as we speak. PACCAR is already producing battery-electric versions of Kenworth, Peterbilt, and DAF trucks [Item 1 - Business, ¶24-26]. They are also looking at hydrogen fuel cells and hybrid powertrains. [S1] One of their biggest strategic moves is a joint venture called Amplify Cell Technologies. They teamed up with Cummins and Daimler to build a 21-gigawatt-hour battery factory in Mississippi [Item 1 - Business, ¶26]. [S1] They are also using AI to improve their internal operations and developing autonomous driving systems. They spent 445 point 5 million dollars on R&D this year to make sure they don't get left behind as the industry goes green [Item 7 - MD&A, ¶3]. [S2] That sounds expensive. If the truck market dips, do they have other ways to keep the lights on? You mentioned two other segments earlier. [S1] Exactly. The Parts segment is their "secret weapon" for stability. It accounts for 24 percent of their revenue, or about 6 point 87 billion dollars [Item 1 - Business, ¶11]. Think about it: even if companies aren't buying new trucks, they still have to fix the ones they have. [S1] They have 21 distribution centers worldwide serving over 2,000 dealers [Item 7 - MD&A, ¶2]. Then there is Financial Services, which helps customers buy the trucks. They manage a 22 point 8 billion dollar portfolio and financed 27 percent of all new PACCAR trucks sold this year [Item 7 - MD&A, ¶4, ¶16]. [CHAPTER] II. Financial Performance and Profitability [S2] Okay, so they have a diversified setup, but you mentioned earlier that twenty twenty five was a bit of a "balancing act." When we look at the actual profit and loss statement, what does the story look like? [S1] The numbers definitely show the impact of a softer market. Total revenue for twenty twenty five was 28 point 44 billion dollars, which is actually a 15 point 5 percent drop from the 33 point 66 billion dollars they saw in twenty twenty four [Item 7 - MD&A, ¶2]. [S1] Most of that decline came from the Truck segment, where sales fell from nearly 25 billion dollars down to about 19 point 4 billion dollars [Item 7 - MD&A, ¶11]. People just weren't ordering new rigs at the same record pace they were the year before. [S2] A 15 percent drop in revenue sounds significant. Did that eat into their profit margins, or were they able to cut costs fast enough to stay ahead of it? [S1] It definitely squeezed them. In the Truck segment, gross margins fell from 13 point 9 percent down to 7 point 5 percent [Item 7 - MD&A, ¶13]. That is a big hit. They dealt with lower sales volumes, but also higher costs per truck due to new regulations and import tariffs. [S2] Wait, tariffs? I thought most of these trucks were made in North America. Why would tariffs be hitting their margins so hard? [S1] It is a complex web. Even if you assemble a truck in Texas, many of the components or raw materials might be subject to tariffs. PACCAR noted that these tariffs increased their costs by hundreds of millions of dollars [Item 7 - MD&A, ¶8]. [S1] On top of that, they took a one-time hit of 350 million dollars for a legal settlement related to European civil litigation [Item 7 - MD&A, ¶8]. When you add it all up, net income fell to 2 point 38 billion dollars, compared to over 4 billion dollars the year before [Item 7 - MD&A, ¶2]. [S2] So the bottom line took a punch. But you said they’ve been profitable for 87 years. Did the other segments help soften the blow from the truck sales slump? [S1] They absolutely did. While truck revenue was down, Parts sales actually rose slightly to 6 point 87 billion dollars [Item 7 - MD&A, ¶2]. And Financial Services saw its pre-tax income rise to 485 point 4 million dollars [Item 7 - MD&A, ¶17]. [S1] This is why the business model is so resilient. When new truck sales are down, the "aftermarket"—the parts and the financing—acts as a stabilizer. It kept their adjusted earnings per share at 5 point 01 dollars, which is still quite solid

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