RESULTS OF OPERATIONS:



                                     Three Months Ended             Six Months Ended
                                          June 30                       June 30
                                    2009           2008           2009           2008
     Net sales and revenues:
     Truck and Other              $ 1,602.3      $ 3,782.0      $ 3,332.7      $ 7,403.0
     Financial Services               243.5          330.5          498.3          647.9

                                  $ 1,845.8      $ 4,112.5      $ 3,831.0      $ 8,050.9


     Income before taxes:
     Truck and Other              $     7.4      $   364.7      $    20.7      $   696.3
     Financial Services                15.6           58.7           30.9          126.0
     Investment Income                  4.9           22.6           12.9           47.3
     Income taxes                      (1.4 )       (132.5 )        (11.7 )       (263.8 )

     Net Income                   $    26.5      $   313.5      $    52.8      $   605.8

     Diluted Earnings Per Share   $     .07      $     .86      $     .14      $    1.65

Overview:

PACCAR recorded lower sales and net income in the second quarter and first half of 2009 compared to year-earlier levels. Second quarter 2009 total net sales and revenues decreased 55% from the prior year to $1.85 billion. Second quarter 2009 net income was $26.5 million ($.07 per diluted share) compared to $313.5 million ($.86 per diluted share) in the second quarter of 2008. First half total net sales and revenues were $3.83 billion, 52% lower compared to the first half of 2008. First half net income was $52.8 million ($.14 per diluted share) compared to $605.8 million ($1.65 per diluted share) in the year-earlier period. During the second quarter of 2009, PACCAR discontinued certain subsidies for postretirement health care plans and recorded a one time pretax benefit of $47.7 million ($30.0 million net of tax or $.08 per diluted share).

Compared to 2008, second quarter and first half 2009 total net sales and revenues and income before income taxes were negatively affected by the translation of weaker foreign currencies, primarily the euro and British pound. The translation effect decreased second quarter 2009 sales and revenues by $155.1 million and income before income taxes by $7.8 million compared to the second quarter of 2008. For the first half, the translation effect decreased sales and revenues by $358.7 million and income before income taxes by $26.0 million compared to 2008.

Net sales and revenues in the Truck and Other businesses of $1.60 billion in the second quarter of 2009 were 58% lower than the $3.78 billion in the second quarter of 2008. For the first half of 2009, Truck and Other net sales and revenues decreased 55% to $3.33 billion. The decrease in second quarter and year-to-date for 2009 primarily reflect decreased truck unit and part sales in all markets due to lower demand for the Company's products from the global recession.

Truck and Other Cost of sales and revenues were $1.49 billion in the second quarter of 2009, down 53% compared to $3.20 billion in the second quarter of 2008. Cost of sales and revenues were $3.05 billion in the first half of 2009, down 51% compared to $6.28 billion in the first half of 2008. Cost of sales and revenues declined in both periods primarily due to the approximately 60% decline in world wide truck deliveries. This decline due to volume was slightly offset by higher costs primarily due to lower fixed cost coverage caused by lower factory production volumes. Also included in cost of sales are severance costs of $6.4 million for the second quarter of 2009 compared to severance costs of $.9 million in the second quarter of 2008 and $14.5 million in the first half of 2009 compared to $1.1 million in the first half of 2008.

Research and development (R&D) expenditures decreased to $52.8 million in the second quarter of 2009 from $90.7 million in the second quarter of 2008 and to $105.1 million for the first half of 2009 compared to $173.6 million in the first half of 2008 primarily due to lower spending on engine development programs. R&D is expected to continue to decline in the second half of 2009 compared to the prior year.

Selling, general and administrative (SG&A) expense for Truck and Other of $79.2 million in the second quarter declined by $48.3 million and $167.6 million year-to-date declined by $86.0 million. Lower spending is a result of focused efforts to reduce costs in response to the continued decline in global economic conditions and consist primarily of lower staffing costs, lower sales and marketing spending and lower travel costs. In addition foreign currency translation effects reduced SG&A by $6.7 million and $13.3 million for the quarter and six month periods. Severance costs included in SG&A were $4.1 million in the second quarter of 2009 and $5.6 million in the first half of 2009 compared to $.1 million in both the second quarter and first half of 2008. As a percentage of sales, SG&A increased in the second quarter to 4.9% in 2009 from 3.4% in 2008 and increased to 5.0% in the first half of 2009 from 3.4% in 2008 due to lower sales volumes.

Financial Services segment revenues for the second quarter of 2009 decreased to $243.5 million from $330.5 million in the second quarter of 2008. Revenues were $498.3 million in the first half of 2009, compared to $647.9 million in the first half of 2008. The decreased revenues in both the second quarter and first half of 2009 resulted from lower earning asset balances and lower yields in all markets. Second quarter Financial Services income before income taxes was $15.6 million compared to $58.7 million in 2008 and first half income before income taxes was $30.9 million compared to $126.0 million. The decrease in both time periods was primarily due to lower finance margins resulting from the lower average earning asset balances, higher credit losses and lower yields, slightly offset by lower operating expenses.

Investment income declined to $4.9 million and $12.9 million for the second quarter and first half of 2009 compared to $22.6 million and $47.3 million for the second quarter and first half of 2008 due to lower invested balances and lower market interest rates.

The effective tax rate was 5.0% and 18.1% for the second quarter and first half of 2009 compared to 29.7% and 30.3% for the second quarter and first half of 2008. The lower effective tax rate in 2009 reflects a larger percentage benefit from permanent differences such as the R&D tax credit and favorable provision to return adjustments in the second quarter which reduced taxes by $5.7 million and the tax rate by 20% in the second quarter of 2009.

The Company's return on revenues was 1.4% and 7.6% for the second quarter of 2009 and 2008, respectively and was 1.4% and 7.5% for the first half of 2009 and 2008, respectively.

Truck

PACCAR's truck segment, which includes the manufacture and distribution of
trucks and related aftermarket parts, accounted for 86% of revenues in both the
second quarter and the first half of 2009 compared to 91% in the second quarter
and the first half of 2008. In North America, trucks are sold under the Kenworth
and Peterbilt nameplates and, in Europe, under the DAF nameplate.



                                              Three Months Ended                        Six Months Ended
                                                    June 30                                  June 30
                                        2009           2008      % change        2009           2008      % change
Truck net sales and revenues:
U.S. and Canada                       $   815.3      $ 1,311.2        (38 )    $ 1,638.8      $ 2,627.2        (38 )
Europe                                    575.7        1,840.4        (69 )      1,276.5        3,565.6        (64 )
Mexico, Australia and Other               193.3          591.0        (67 )        371.4        1,133.1        (67 )

                                      $ 1,584.3      $ 3,742.6        (58 )    $ 3,286.7      $ 7,325.9        (55 )

Truck (loss) income before taxes      $   (36.5 )    $   365.8       (110 )    $   (11.1 )    $   701.1       (102 )


The Company's new truck deliveries
are summarized below:

                                              Three Months Ended                        Six Months Ended
                                                    June 30                                  June 30
                                        2009           2008      % change        2009           2008      % change
United States                             6,517         10,214        (36 )       12,793         20,244        (37 )
Canada                                      767          1,974        (61 )        1,500          4,227        (65 )

U.S. and Canada                           7,284         12,188        (40 )       14,293         24,471        (42 )
Europe                                    5,223         16,482        (68 )       11,694         32,669        (64 )
Mexico, Australia and Other               1,278          4,980        (74 )        2,411          9,679        (75 )

Total Units                              13,785         33,650        (59 )       28,398         66,819        (58 )

2009 Compared to 2008:

PACCAR's worldwide truck sales and revenues of $1.58 billion in the second quarter of 2009 was down by 58% compared to the second quarter of 2008 due to lower demand for the Company's trucks and, to a lesser extent, aftermarket parts in all markets reflecting worldwide recessionary economic conditions. In the first half of 2009 PACCAR's worldwide truck sales and revenues of $3.29 billion was down by 55% compared to $7.33 billion in the first half of 2008 also due to lower demand for the Company's trucks.

Sales and revenues in the U.S. and Canada during the three- and six-month periods ended June 30, 2009 decreased compared to the prior periods in 2008 due to lower new truck deliveries which reflected a lower market size and lower market share. Industry retail sales in the heavy duty market in U.S. and Canada were 31% lower in the first six months of 2009 compared to the first half of 2008. PACCAR's heavy duty market share was 21.9% compared to 27.6% in the first half of 2009 and 2008, respectively.

In the second quarter and first half of 2009 European truck segment net sales and revenues decreased to $575.7 million and $1,276.5 million, respectively, from 2008. Lower net sales and revenues primarily resulted from the decline in DAF truck deliveries during the second quarter and first half of 2009 due to lower truck market demand, lower truck selling prices and lower parts sales. DAF's 2009 market share of the 15 tonne and above market for the first half of 2009 was 13.8% compared to 14.1% in 2008.

Net Sales and Revenues in Mexico, Australia and other countries outside the Company's primary markets declined 67% to $193.3 million in the second quarter of 2009 due to lower new truck deliveries. Truck unit deliveries in Mexico, Australia and other countries outside the Company's primary markets decreased 74% in the second quarter of 2009 compared to 2008. Net Sales and Revenues in Mexico, Australia and other countries outside the Company's primary markets declined 67% to $371.4 million for the first half of 2009 due to lower new truck deliveries. Truck unit deliveries in Mexico, Australia and other countries outside the Company's primary markets decreased 75% in the first half of 2009 compared to 2008 due to lower overall market demand.

Truck segment income before income taxes decreased to a loss of $36.5 million in the second quarter of 2009 from $365.8 million of income in the second quarter of 2008. During the first half of 2009 the Truck segment recorded a pretax loss of $11.1 million compared to income of $701.1 million in 2008. The loss in both periods was due to lower truck sales and margins in all markets somewhat offset by lower research and development spending as well as lower sales, general and administrative spending.

                                   FORM 10-Q

                          PACCAR Inc AND SUBSIDIARIES



Net sales and revenues and gross margins for truck units and aftermarket parts
are provided below. The aftermarket parts gross margin includes direct revenues
and costs, but excludes certain truck segment costs.



                                              Three Months Ended                            Six Months Ended
                                                    June 30                                      June 30
                                      2009            2008         % change        2009            2008         % change
Net sales and revenues:
Trucks                              $ 1,119.9       $ 3,141.3           (64 )    $ 2,371.3       $ 6,150.0           (61 )
Aftermarket parts                       464.4           601.3           (23 )        915.4         1,175.9           (22 )

                                    $ 1,584.3       $ 3,742.6           (58 )    $ 3,286.7       $ 7,325.9           (55 )

Gross Margin:
Trucks                              $   (43.5 )     $   359.8          (112 )    $   (39.1 )     $   685.5          (106 )
Aftermarket parts                       150.9           212.2           (29 )        309.5           419.0           (26 )

                                    $   107.4       $   572.0           (81 )    $   270.4       $ 1,104.5           (76 )

Gross Margin %
Trucks                                   (3.9 )%         11.5 %                       (1.6 )%         11.1 %
Aftermarket parts                        32.5 %          35.3 %                       33.8 %          35.6 %
Truck segment                             6.8 %          15.3 %                        8.2 %          15.1 %

Total Truck segment gross margins for the second quarter of 2009 decreased to 6.8% from 15.3% in the second quarter of 2008. Gross margins for the first half of 2009 were 8.2% compared to 15.1% in the same period of 2008. Gross Margins were negatively impacted primarily by lower gross margins on trucks. Gross margins on trucks declined to negative 3.9% and 1.6% for the three and six month periods primarily due to lower selling prices from competitive market conditions driven by lower industry demand and lower absorption of fixed costs resulting from lower truck production. 2009 Parts gross margins declined from the prior year due to a sales mix shift to lower margin replacement parts.

Truck Outlook

Worldwide recessionary economic conditions are currently forecast to continue to dampen demand for heavy-duty trucks for the remainder of 2009 which will result in continued low truck segment revenues and income for the Company compared to 2008. 2009 research and development spending will be reduced to $180-$200 million from $341.8 million in 2008 and will continue to focus on engine development and new product programs. The Company expects the decline in selling, general and administrative expenses compared to 2008 to continue as it reduces costs throughout the organization to align with lower demand during the economic downturn. Western and Central European heavy-duty registrations for 2009 are projected to decline 50% from 2008 levels to be 170,000-180,000 units. While it is difficult to estimate given the current economic uncertainty, truck sales in these European markets in 2010 could be in the range of 150,000 - 180,000 units. In North America customers continue to adjust their freight capacity due to the continued declining economy and the Company expects industry Class 8 retail sales to be in the range of 100,000 -110,000 trucks in 2009. Industry retail sales in 2010 are expected to improve slightly and be in a range of 110,000 -140,000 units. International markets are also expected to continue to be weak in 2009. See the Forward Looking Statement section of Management's Discussion and Analysis for factors that may affect this outlook.

                                   FORM 10-Q

                          PACCAR Inc AND SUBSIDIARIES



Financial Services

The Financial Services segment, which includes wholly owned subsidiaries in the
U.S., Canada, Mexico, Europe and Australia, derives its earnings primarily from
financing and leasing PACCAR products.



                                            Three Months Ended                      Six Months Ended
                                                  June 30                                June 30
                                       2009         2008      % Change        2009         2008      % Change
New loan and lease volume:
U.S. and Canada                      $   197.9   $    529.4        (63 )    $   336.9   $    889.5        (62 )
Europe                                   110.2        280.1        (61 )        197.6        532.3        (63 )
Mexico and Australia                      80.4        231.1        (65 )        137.2        400.6        (66 )

                                     $   388.5   $  1,040.6        (63 )    $   671.7   $  1,822.4        (63 )

Average earning assets by country:
U.S. and Canada                      $ 4,768.8   $  6,007.5        (21 )    $ 4,940.0   $  6,061.0        (18 )
Europe                                 2,547.6      3,084.6        (17 )      2,622.1      2,970.6        (12 )
Mexico and Australia                   1,306.3      1,693.8        (23 )      1,324.6      1,640.8        (19 )

                                     $ 8,622.7   $ 10,785.9        (20 )    $ 8,886.7   $ 10,672.4        (17 )

Revenue by country:
U.S. and Canada                      $   117.7   $    153.1        (23 )    $   243.3   $    311.8        (22 )
Europe                                    78.6        118.8        (34 )        160.2        220.7        (27 )
Mexico and Australia                      47.2         58.6        (19 )         94.8        115.4        (18 )

                                     $   243.5   $    330.5        (26 )    $   498.3   $    647.9        (23 )

Income before taxes                  $    15.6   $     58.7        (73 )    $    30.9   $    126.0        (75 )

2009 Compared to 2008:

PACCAR Financial Services (PFS) income before taxes in 2009 of $15.6 million and $30.9 million declined from the $58.7 million and $126.0 million earned in 2008. Income before taxes was negatively impacted by lower earning assets in all markets and lower yields on earning assets partially offset by lower interest costs. In addition, the lower income before taxes reflects a higher provision for losses on receivables, somewhat offset by lower selling, general and administrative expenses.

                                   FORM 10-Q

                          PACCAR Inc AND SUBSIDIARIES



                                            Three Months Ended                      Six Months Ended
                                                  June 30                                June 30
                                       2009         2008      % Change        2009         2008      % Change
Average earning assets by product:
Loans and finance leases             $ 5,925.2   $  7,539.0        (21 )    $ 6,050.0   $  7,544.5        (20 )
Dealer wholesale financing             1,232.1      1,703.8        (28 )      1,332.9      1,615.3        (17 )
Equipment on lease and other           1,465.4      1,543.1         (5 )      1,503.8      1,512.6         (1 )

                                     $ 8,622.7   $ 10,785.9        (20 )    $ 8,886.7   $ 10,672.4        (17 )
Revenue by product:
Loans and finance leases             $   112.1   $    150.9        (26 )    $   227.2   $    295.8        (23 )
Dealer wholesale financing                13.6         27.9        (51 )         29.6         55.0        (46 )
Equipment on lease and other             117.8        151.7        (22 )        241.5        297.1        (19 )

                                     $   243.5   $    330.5        (26 )    $   498.3   $    647.9        (23 )

Revenues:

PFS revenues for the second quarter of 2009 decreased 26% to $243.5 million from $330.5 million in the second quarter of 2008 and 23% in the first half of 2009 to $498.3 million compared to $647.9 million in the first half of 2008. The decreased revenues in both the second quarter and first half of 2009 resulted from lower earning asset balances and lower yields in all markets. Average earning assets declined 20% in the three months ended June 30, 2009 to $8.62 billion compared to $10.79 billion for the second quarter last year and 17% year to date to $8.89 billion compared to $10.67 billion in 2008. The lower average earning assets reflected the effects of lower new loan and lease volume in all markets and a reduction in dealer wholesale financing of new trucks. New loan and lease volume was $388.5 million in the second quarter of 2009 compared to $1,040.6 million in 2008 and $671.7 million year to date in 2009 down from $1,822.4 million last year. The decrease in new loan and lease volume reflects both the lower truck markets due to the economic recession and lower finance market share. PFS market share on new PACCAR trucks delivered in the second quarter of 2009 was 21.5% and year to date was 19.8%, down from 29.2% and 28.0% in the corresponding periods in 2008 from an emphasis on credit quality and higher margins mainly in the U.S., Canada and Europe.

 At June 30,                                                       2009      2008
 Percentage of retail loan and lease accounts 30+ days past-due:
 U.S. and Canada                                                    2.8 %     2.9 %
 Europe                                                             5.3 %     1.3 %
 Mexico and Australia                                              10.0 %     3.8 %
 Total                                                              4.7 %     2.7 %

Worldwide PFS accounts 30+ days past-due at June 30, 2009 increased to 4.7% of portfolio balances, an increase from 2.7% at June 30, 2008 due to a decline in freight tonnage, freight rates and customer cash flows most significantly in Europe and Mexico.

                                   FORM 10-Q

                          PACCAR Inc AND SUBSIDIARIES



Interest income and other revenue in the second quarter and first half of 2009
declined from the corresponding periods in the prior year due to lower average
earning assets as well as lower asset yields summarized as follows:



                                    Three Months Ended        Six Months Ended
                                          June 30                 June 30
     Interest and fees - 2008       $             178.8      $            350.8
     Lower average asset balances                 (36.6 )                 (61.8 )
     Decrease in yield                            (16.5 )                 (32.2 )

     Interest and fees - 2009       $             125.7      $            256.8

The average earning assets decline was in loans and finance leases from lower new business volume as well as lower dealer wholesale financing due to a decline in dealer inventory levels in all markets. Yield declined primarily due to lower market interest rates.

Operating lease, rental and other income in the second quarter and first half of 2009 declined from the corresponding periods in the prior year from lower average assets, lower rental utilization, and a decrease in yields. The decline in average operating lease and other assets was due to lower new business volume. The lower rental utilization reflects the weaker economic environment and the decline in yields was due to competitive market conditions.

Expenses

Interest and other borrowing expenses decreased in the second quarter and year
to date from the comparable periods in the prior year due to lower average debt
balances and lower borrowing rates as summarized below:



                                                   Three Months Ended            Six Months Ended
                                                         June 30                     June 30
Interest and other borrowing expenses - 2008       $             104.9          $            200.6
Lower average debt balances                                      (19.0 )                     (29.8 )
Lower borrowing rates                                            (12.9 )                      (6.5 )

Interest and other borrowing expenses - 2009       $              73.0          $            164.3

Average debt balances decreased due to the lower level of funding needed from the decline in the financial services portfolio. Lower borrowing rates, were primarily related to lower commercial paper rates. Included in the $6.5 million effect of lower borrowing rates in 2009 year to date was $11.0 million of higher expense from mark to market adjustments for economic hedges and foreign currency balances.

In the second quarter and year to date 2009, depreciation and other expenses were $104.5 million and $206.4 million, respectively, compared to the $112.5 million and $220.4 million amounts in the same periods in 2008. The lower amounts in 2009 reflect lower operating expenses from a lower asset base, partially offset by higher depreciation. 2009 depreciation was $81.9 million in the second quarter and $160.2 million year to date compared to $74.9 million and $144.9 million, respectively, in the prior year. The higher depreciation results from both impairments on existing operating lease assets of $5.4 million and $7.4 million in the second quarter and first half, respectively, as well as losses on the sale of returned operating lease assets of $4.1 million in the second quarter and $6.7 million in the first half reflecting the impact of lower used truck prices.

Selling, general and administrative (SG&A) expense of $21.3 million in the . . .