Class 8 Specs
A New Ball Game
Economics, emissions are causing fleets to rethink their spec'ing strategies.
This last year has dealt a double whammy to equipment managers and truck specifiers: The three-year trade cycle has gone and the emissions deadline is here.
Those fast turns on tractors and trailers — courtesy of the guaranteed buy-backs by some manufacturers — have for the most part disappeared. Add the disastrous residual values of the recent past and it's easy to see what's causing fleets to consider a different business model: running tractors for four or five years and stretching trailer turns from five to seven years.
The Oct. 1 emissions deadline is also forcing fleets to reconsider purchases over the next several months. Cautious managers will be watching and waiting for the new generation of clean engines to prove themselves in the hands of fleets.
It all adds up to a rethink, or at least a major re-evaluation, of the specs for new vehicles. And it means taking a savvy approach to older but still good equipment. For some, buying used might have to stand in for new purchases for awhile.
Getting The Value Out
A particularly interesting round-table at last summer's meeting of the refrigerated division of the Truckload Carriers Assn. put an enticing spin on longer trade cycles. With John Kaburick, president of Henderson Trucking, Salem Ill., chairing, the session was put together to allow fleets and industry suppliers to air opinions on what should be the target for extending turns, and what would be the likely implications.
The difference, though, was less of an emphasis on the bad news of what has been lost. Instead, the panel looked at how extending the trade cycle might actually benefit the fleet by getting more useful life out of the asset by exploiting the durability and reliability of modern heavy duty components.
In his opening remarks, Kaburick pointed to the value locked up in a truck that is wasted in a fast turn of the asset. That value can be used to pay down debt, he said, a real positive for an industry that is, as a whole, too debt-laden. One of the biggest pluses: "If you don't have any debt, you can't go broke," he said.
The subject was evidently close to attendees' balance sheets. This was the second of two well-attended roundtables on the topic. Among the panelists was Jerry Moyes, president and chief executive of Swift Transportation. Moyes had recently become a member of the reefer division through his purchase of Dick Simon Trucking. His temperature-controlled operation is called Central Refrigerated and is being run as a division of Central Freight Lines. To Kaburick's comment that today we no longer do in-frame overhauls at 200,000 miles - or even at 650,000 miles - Moyes stated that Central has trucks running to a million miles.
In fact, that target is the subject of an ongoing program at Swift. Moyes said management likes what it is seeing - no accelerated cost to 700,000 miles.
He did sound a caution: There are some soft issues such as driver retention that can be impacted. It was not just the fleets spoiled by the guaranteed buy-backs and short turnarounds of equipment. Drivers were also happy to always have new or nearly new equipment under their backsides.
Don Digby, chairman of Colorado-based Navajo Shippers Inc., said that there are other issues, too. For Navajo there are pluses in playing the market to take advantage of any conditions that benefit the carrier. Thus, while there is a general move to stretch out to 48 months from current 36- or 42-month trades that are basically "walkaways," used truck values in the future will likely determine where the ideal turn will occur for Navajo.
Component Considerations
Contributing to the power side of the discussion (there were many reefer trailer concerns expressed that we'll return to next issue) John Martin, general manager for Freightliner's central sales region, responded on behalf of truck manufacturers. He said many fleets have indicated that many think the ideal cycle is five years and 650,000 miles. For practical purposes, though, four years and 480,000 miles allows owners to bring in the truck for trade and, by going for add-on warranties, make the trades look more attractive in the used market.
For the moment, there are a couple of scenarios out there, he said. There are fleets that spec for three years and are trying to stretch to four, and there are those already spec'ing the four-year trade cycle.
Fleets looking to buy used trucks to fill in for post-EPA '02 new trucks should be particularly aware of Martin's comments, since many of those low-mileage vehicles probably were spec'ed for a short-term trade.
Differences between the specs include, for instance, fuel/water separators. These are not critical on the three-year cycle, but Martin said there has been an issue with corrosion in the injector tubes with trucks that have been retained in longer service than originally planned. This usually occurred where fleets were unable to trade in those trucks because used truck values were so upside-down.
Other components/systems that require additional consideration are cooling and electricals. With most truck OEMs switching to bigger cooling systems or greater efficiency designs, there is some concern over what will happen to them three and four years out. Maintenance and spec'ing for durability are issues there.
Water pumps will also be a more frequently serviced item. Even today they are a frequently replaced component even on fast-trade cycles. Fan drives will also be a concern on engines that will demand more cooling. Similarly, heating/ventilation/air-conditioning systems are often an issue in higher mileage trucks. Choosing premium specs on these components would be a wise move if you're planning to run it longer.
As far as electrical systems are concerned, alternators and batteries are most likely to be a concern. Again, specifying premium products is the best guarantee against having trucks either in the shop or at the end of a wrecker boom. Also, the use of deep-discharge protection devices should give additional life to batteries, helping stretch their useful life. However, Martin said he can see problems with the proration of battery life.
Chairman Kaburick agreed that warranties will be an issue. He recommended, based on his experience with Henderson Trucking, that extended warranties on engines are an important consideration in any attempt to extend trade cycles and run equipment longer. He suggested fan-to-flywheel warranties be in place, allowing for the option to extend them either to suit a trade period, or to make the truck attractive as a trade when it comes time.
And Kaburick stressed heating, ventilation, air conditioning warranties are absolutely essential. Half the cost of one failure makes the maximum extended warranty pay for itself, he said.
One way to cover the first owner is to take a bumper-to-bumper extended warranty. But often they are expensive, cautioned Martin. Far better in many cases is to take the individual component warranties.
Another concern raised by several panelists was the corrosion of brake parts. This is of concern when stretching tractor trades to five years, but is especially a concern with extended trailer trades.
Engine Specs And EPA '02
After Oct. 1, truck operators will be buying new trucks with engines complying with the new emissions regulations. However, it turns out there may be a breathing space 'til the end of the year.
The EPA deadline is effective at midnight on Sept. 30, 2002. However, the mechanism that determines the cutoff means there may be a considerable stockpile of engines in the production system that will carry the truck builders through for a while longer.
It appears the trigger for the deadline is the moment when the crankshaft is bolted into the block. Anything with a crankshaft in place before the midnight cutoff can be built as a current engine. Any crankshaft swung into an engine after must be built as an engine conforming to the new 2.5-g NOx regulation.
At Freightliner, Sterling and Western Star, for instance, the order level and the inventory of engines in the pipeline mean Freightliner LLC will be building trucks with current engines for a while after the deadline. According to Mark Lampert, senior vice president of sales and marketing for Freightliner, buyers of heavy trucks covered by these brands - up to 40% of the market - may not have to accommodate EGR or "bridge" technology engines until the new year.
Moreover, Freightliner, Sterling and Western Star brand buyers have a unique third option: Mercedes-Benz power.
Because Mercedes-Benz was not a signatory to the EPA's Consent Decree, it is not bound by the accelerated EPA deadline and has until January 2004 before it needs to come into compliance with the 2.5-g NOx requirement. Thus a customer for whom the MBE 4000 engine makes sense has the added incentive of an engine built to the latest technology standards but without the still-unknown issues of exhaust gas recirculation or technologies such as Caterpillar's ACERT.
Particular attributes of the MBE 4000 are light weight, ratings from 350 to 450 hp from a 12.8-liter displacement and familiar straight-six configuration. The engine has high torque of 1,350 to 1,550 pounds feet as low as 1000 rpm and a B-10 of 800,000 miles. John Merrifield, who is Lampert's equivalent on the Sterling/Western Star brands, commented that for the vocational operators - a strong focus for both nameplates - the 4000 Series is a home run.
Sterling dealers have a core of ex-Ford heavy truck experience and are used to dealing with a "captive" engine from the days of the Ford diesel.
Heavy Duty Trucking has had an opportunity to drive several trucks with the MBE 4000 and compare them with the recently EPA certified Series 60. Those driving impressions appear in the Equipment section (page 97).
In this first of a series of articles dealing with spec'ing equipment in the new environment. Next month, trailer durability will be the focus.
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