DBRS Confirms PACCAR Group of Companies at AA(low) R-1(mid)

Dominion Bond Rating Service (“DBRS”) has today confirmed the ratings of PACCAR Inc (“PACCAR” or the “Company”) and affiliated ratings at AA (low) and R-1 (middle). The trends are Stable.

The strong upturn in the world-wide commercial vehicle market is allowing the Company to generate record levels of revenues and earnings and has strengthened the Company’s financial profile. The recovery in demand for heavy duty trucks began in North America in late 2003, then spread to all of PACCAR’s major markets including continental Europe. DBRS notes that the upturn followed a three-year severe cyclical downturn (2000-2002) most evident in the North American market. Even in the severe downturn, the Company still maintained profitability. In addition to benefiting from the strong cyclical upturn in the heavy duty truck market, PACCAR continues to expand its market share, with share gains recorded in North America (U.S. and Canada) in both the Class 8 and Class 6 and 7 markets, and in Europe in both the 15 tonne and above market and the six to 15 tonne market. Further market share gains were made in Mexico and Australia where PACCAR is the leader in both markets. The market share gains a reflection of its strong brands and new product introductions.

DBRS expects demand for heavy duty trucks is forecast to remain very strong in 2005 with the Company’s earnings expected to reach a cyclical peak in late 2005 or early 2006. The Company, assisted by its strong financial position, has continued to focus on cost control and investments in technology, products, and manufacturing facilities, and is well prepared for growth during the next downturn.

Historically, the Company maintains a very conservative financial profile. The balance sheet (financial services on an equity basis) has been virtually debt free (cash exceeds debt) since the mid-1980s. Strong internal cash generation capability enabled PACCAR to declare a special cash dividend and also undertake a share repurchase program in the first half of 2005. Going forward, capital expenditures are expected to rise, but could be easily funded with internal cash generation. DBRS expects the balance sheet to remain very strong. Moreover, the Company’s strong liquidity position (US$1.8 billion in cash and marketable securities at the end of June 30, 2005) provides it significant financial flexibility.

Note:
The ratings for PACCAR of Canada Ltd. and PACCAR Financial Ltd. are based on parent, PACCAR Inc.