When Clean Air & Economy Collide
Already reeling from economic crisis, fleets are facing a one-two wallop from new emissions requirements.
STEVE STURGESS
SENIOR EDITOR
Also contributing to this report: Deborah Whistler, Editor & Ed Thomas, Contributing Editor
Truck users, incredibly battered by current economic events, are faced with one of the biggest purchasing unknowns ever to come down the pike. And their confusion and caution has major implications for the beleaguered truck and component manufacturers and their dealers.
At issue is the Environmental Protection Agency's acceleration of the deadline for the next emissions requirement for heavy duty diesel engines.
Problems posed by moving up stricter emissions regs is pitting truck customers, engine manufacturers, truck OEMs and dealers against each other as the reality of today's economic situation clashes with the EPA's air quality mandate.
Originally, the timeframe for engine manufacturers to reach lower levels of Nox and particulates was set for model year 2004. The schedule would have allowed for an orderly development of emissions reduction strategies. The 2004 emissions requirements were seen by engine builders as just a stepping stone toward developing engines that would be able to accommodate exceeding low levels of emissions slated for 2007 and 2010 deadlines.
But the 2004 deadline was moved up by 15 months as punishment for engine builders, who EPA said dodged earlier emissions requirements.
The headlong rush to meet the stepped up October 1, 2002 deadline has caused a divide between engine makers on what technology route to take. Potential buyers have become wary of the technology and the speed at which it was developed.
The technology of choice of most U.S. diesel manufacturers is cooled exhaust-gas recirculation (EGR). But many think EGR is an interim technology that very well could go away with development of engines to meet both 2007 and 2010 emissions goals.
First among truck operators to take a public stand on the issue was Don Schneider, chief executive of the company that has his name on the doors of 16,000 orange trucks. Schneider shook EGR engine makers with his announcement that he planned to buy used trucks, not new, in order to avoid dealing with the problems he suspects will come with EGR engines.
In recent times, Schneider National has bought an average of 4,000 new trucks a year, so what Don Schneider says obviously has an immediate impact on his suppliers. He is also considered an opinion leader among his peers and competitors.
And while Schneider was the first to make public his fears about the new engines, many others in the industry share his concerns. The issues are so complex and the implications so controversial, many of the players in this emissions war refuse to go on the record at this point.
HDT editors talked to numerous trucking and supplier executives — on and off the record. Their comments make it clear that development of EGR created a maze of concerns. Among them:
• Reliability and durability of EGR engines has not been adequately tested due to such a short development period.
• Fuel economy may be as much as 5% worse than existing engines.
• Maintenance costs could be higher with EGR because new oil formulations for the engines will be more costly.
• EGR engines will also be more costly to maintain because they require shorter oil drains intervals.
• Because they will require more preventive maintenance than existing engines, EGR engines could disrupt fleets' existing maintenance schedules.
• Technicians will need retraining.
• Service tools will have to be updated.
• Engines will weigh more and adversely impact payload capacity.
• EGR engines will each cost more than existing engines.
• EGR engines, say many in the engineering know, will run hotter and place more impact on other components, potentially causing them to fail prematurely.
• Having EGR engines may adversely impact the resale value of a truck.
In The Line Of Fire: Users
Truck buyers say they are worried about being saddled with an unproven technology. Many still recall the economic and operational nightmares of the mid-'70s, when the government forced antilock brake technology on the industry before its time.
After the systems were required to be installed on new trucks and trailers, technical problems, maintenance woes and severe accidents were blamed on them. Antilock suppliers and fleets alike lost millions as a result, and the situation went on until the Supreme Court nullified the requirement.
And many fleets feel the new engines could pose similar issues since there has been no time to run adequate test miles on EGR.
Today's issues aren't only with reliability and durability. Don Schneider predicts fuel economy will be worse on these engines.
Max Fuller, co-chairman of US Xpress, has said in the past that a fuel penalty is the price fleets have paid with the introduction of every new lower emission-level engine. So, although engine manufacturers say they hope to see no fuel economy impact, many fleet executives fear the EGR engines will be less fuel efficient.
Lubricant formulators have developed a new oil category CI-4 to accommodate EGR. But they also predict that the ability to extend drain intervals beyond 50,000 miles — now the norm for fleets — is unlikely under the special demands of the new engines, which will run hotter and burn oil quicker.
Mack's EGR engine project leader Steve Heffner says E-7 EGR engines require an extra eight quarts in the oil pan to stay with the current recommended 50,000-mile drain interval.
Mack engines are the long-drain leader today and require the least amount of oil among the big-bore engines. The fact that Mack's EGR engines will require a 25% increase in oil capacity speaks loudly to the service issue. Competitive engine brands will likely require even more expensive drains or more frequent drains.
This causes quite a dilemma: A fleet using both older engines and new EGR engines will have to make a decision. They can tag the EGR trucks for different oil change intervals, causing maintenance and logistics nightmares. Or bring the whole fleet into line with EGR drains, thus increasing maintenance costs on older engines. Either way, it's a costly proposition.
Another indisputable fact: Trucks with EGR engines are going to cost between $2,500 and $5,000 more to buy. And they will weigh more — say 100 pounds for on-engine equipment, in addition to more oil and coolant necessary for the requisite larger vehicle cooling systems.
Another issue is truck value. Many fleets are already upside-down on their equipment due to depressed values. They are reluctant to invest in new vehicles with engines that have technology that could turn out to be obsolete before the truck is due for trade.
One knowledgeable fleet executive who buys Peterbilt and Kenworth power units told us he pays a premium when buying equipment, but expects that to be more than offset by the price he receives on resale. He fears EGR engines could be worth nothing upon resale. Buying trucks with EGR would be taking it in the shorts both going in and coming out, he said.
User Options
For users who don't want to buy EGR, there are several options.
Many fleets with excess truck capacity will simply hold on to older trucks and ease them into service as required. Or, if they have the capital available, fleets can pre-buy new trucks that have existing technology. Many said they plan to run existing fleets longer and wait and see what develops with EGR. Let someone else be the guinea pig, in other words.
It appears some fleets are already trying to avoid the whole issue by buying used, as Schneider says he plans to do. Earlier this year there were lots of nearly-new used trucks on the market. Those supplies now appear to be drying up.
If a fleet wants to pre-buy new trucks with pre-EGR engines, they will have to ensure that the engines are manufactured prior to October 1, 2001. Under the consent decrees with engine manufacturers, EPA has oversight to ensure engine manufacturers don't pre-load the production process with current engines. Trucks in dealer inventory are obviously fair game.
Some carriers, like Swift President/CEO Jerry Moyes, say they plan to accelerate some purchases to stay with current technology but will also buy some EGR to get experience.
Another option: Repower existing trucks with remanufactured or rebuilt engines. This is an option only if you bring the engines to at least the existing emissions level.
The Foreign Factor
Another alternative: truck customers can spec trucks with European engines, which are unencumbered with the EPA edict.
From the Freightliner camp —Freightliner, Sterling and Western Star — is the possibility of spec'ing Mercedes-Benz 4000 engines. Because Mercedes-Benz was not a signatory to the consent decrees, its emissions deadline remains at January 1, 2004.
It's pure speculation at this point, but it's possible that by the end of this year Peterbilt/Kenworth products may be available with exempt DAF engines from PACCAR's European subsidiary. These are 12.6-liter unit pump engines with power ratings up to 530-hp and 1,740 pounds-feet of torque.
Also, not impacted by the legal wranglings is International. International's 466, 530 and 530HT engines will still be available for vocational users and in the new 7500 and 8500 International models, since those engines also get until 2004 to comply.
Engine Manufacturers
U.S. engine manufacturers that signed consent decrees with EPA in 1998 had to accelerate development of compliant engines by a crucial 15 months. (International's consent degree does not have this provision).
Most are publicly saying they are ready, in terms of emissions, performance and fuel economy. But, off the record, many engineers throughout the development period have complained they really needed more time for development.
The problem with engines today is that they last so long that to do reliability and durability testing in real-world situations takes time. When EPA moved its deadline to 2002, that time just wasn't available.
The new engines were extremely costly to develop, especially with the acceleration of the deadline. Those costs simply have to be passed along to the truck builder and the end user.
But despite the pressure for rapid development, EGR engines do work, their builders say. Cummins has been the leader and most vocal in saying the technology is ready. Engines in test fleets, Cummins says, have shown they are at least as reliable and fuel efficient as conventional Cummins power.
Caterpillar has taken a different path from other diesel engine makers and decided to go its own way, challenging EPA's edict.
Cat says it will not meet the shortened deadline, and is staying on track for the launch of its ASERT technology engines in October 2003. Sources say we may even see some of these engines earlier.
Cat hasn't veered from the original emissions requirements, saying it will trade emissions credits. EPA promises fines on a sliding scale, according to how far outside the emissions box each Cat engine falls (see sidebar page 38).
The fines EPA promises Cat for not meeting the deadline are stiff, and it's speculated Caterpillar will take its case to Congress for legislative relief.
But competitive engine manufacturers — after paying dearly to develop EGR technologies — oppose any emissions deadline extension, claiming it gives Cat an unfair advantage.
EGR engine makers also feel that European engines like the MB 4000, have an unfair commercial advantage in the U.S. until 2004.
Looking To 2007
Cat's strategy is designed to meet 2007's stringent requirements, without ever flirting with EGR. This is the European approach, which says that new engine platforms will be needed for 2009. Most of the big seven in Europe are introducing new engine platforms with that design objective. And most are opting out on using EGR.
Germany's MAN is a standout. It is using EGR to meet Euro 3 and 4 emissions goals, but only because its engine is basically an old design.
International's engineering and technology vice president Patrick Charbonneau confirms that International is in a fortunate position because it is not bound by the consent decree, thus requires no hurry-up in development. Charbonneau says International will use the additional 15 months as "breathing room to mature the technologies." Example: the 530HT engine already has a variable geometry turbocharger, a component of the EGR that will be in International's plans both for 2004 and on through 2007.
Charbonneau says that EGR will remain an important component of International's plans through the 2007/2010 timeframe.
Which Strategy Will Users Choose?
Caterpillar's strategy leaves today's truck customers wondering: Will injection/combustion/aftertreatment technologies advance for the other engine manufacturers as well? That's another reason buyers are reluctant to invest in EGR. They question whether the technology will hold through 2007 emission requirements.
At least one lubricant manufacturer we talked to agrees with Caterpillar and the Europeans and predicts EGR will not make the grade for the next round of emissions rules.
If fleets choose to pre-buy to avoid EGR, it will mean a major manufacturing bottleneck at the engine plants. But then in October, when the ERG engines are forced, the market could go dead.
This will force engine makers to recall employees to compensate the pre-buy demand. Those employees would then need to be laid off again in October, when the old technology engines become obsolete.
This problem would apply not only to engine manufacturers. Much of the component industry has downsized production staff in pace with slow truck sales of the last year. At least one component supplier predicts that if there is a sudden rush for 2001 model trucks/engines, they will also be caught in a manufacturing bind.
Truck Dealers
Many dealers we talked to are gearing up for an expected flood of orders, although how much of a prebuy to expect is unknown, due to restricted available capital and depressed used-truck values. Some dealers are contemplating ordering and stocking trucks for fleets to purchase new off the lot after the deadline — but that may be a chancy proposition for dealers already suffering from slow sales. Another consideration is building up service capability either to handle additional rebuilding of older trucks kept in service or to refurbish used trucks to make them attractive as an alternative to new.
Numerous reports indicate that used equipment is already in demand with prices hardening.
And not everyone is doubting EGR technology. Susan Alt, vice president marketing, Volvo Trucks North America commented, "As the manufacturer, it is our responsibility to educate our dealers and the fleets to mitigate their nervousness around the performance and support issues of new engines.
"One of the benefits of being a global manufacturer is that we get to draw on technology being developed by our engineers all over the world. Thus, we are confident our solution to meeting '02 emissions will not noticeably affect our product's performance compared to today, and we will have to prove that to our customers to be successful."
But most OEMs are confident that installation of the new engines can be completed, there is speculation that some combinations of engines and chassis won't work due to cooling and other issues. Truck builders also face the same manufacturing concerns associated with massive pre-buying.
A potential run on used trucks is the only bright spot in the manufacturers' and dealers' future. The glut of used trucks that existed all last year could quickly disappear if there is an economic recovery through the year. Prices of good, nearly new used trucks are already hardening.
This gives fleets some respite on the value of equipment on their books and a market for their used equipment.
But the question remains: Will they buy new after October 1?
Sidebars
What Fleets Are Saying
What Fleets Are Saying (cont.)
What Fleets Are Saying (cont.)
High Price For Clean Air Violations
