Specs In The New Environment
Engines 2003 The Deals
Cash back, extended warranties, breakdown guarantees, cheap financing are among the incentives truck and engine makers are dangling to entice truckers to buy now.
STEVE STURGESS
EDITOR
The emissions deadline — Oct. 1, 2002 — is done. Now fleets are living with the aftermath. The first consequence is that trucks cost more: $3,000 to $5,000 appears to be the spread. The impact of the additional costs is in itself a disincentive to buy. But there are also concerns about the reliability and durability of the new engines.
To alleviate the pain of the additional pricing, there is a raft of incentives from the truck manufacturers to convince customers that now is the time to buy. Truck OEMs and engine manufacturers have communications programs to reassure customers. More than that, though, an array of programs give potential customers additional peace of mind. These range from service guarantees to truck rentals when repairs cannot be completed in an acceptable time.
Caterpillar makes much of the fact that the base C-15 is unchanged at present; Detroit Diesel points to its successful experience with EGR bus engines; and Cummins rolls out impressive mileage totals for its fleet of development engines.
Judging from reports at the American Trucking Assns.' annual meeting last fall, these programs appear to coincide with a general improvement in the freight situation, prompting a lot of quote activity and some major sales. However, most buyers are expected to be cautious: Lief Johannson Volvo's chief executive was recently quoted in the FinancialTimes terming truck sales as "flat to improving," echoing remarks by International President Steve Keate that it will take 'til the second half to get into gear. Both see improvement as customers put aside fear of new equipment failures and realize they simply have to have trucks to satisfy a slowly strengthening economy.
But with sales likely to heat up in the second half, many of the incentives are short lived, timed to generate order activity right now. The end result is that now could be the time to be in the purchasing mode, gaining from the incentives, while still being able to strong-arm the manufacturers who would like to see better volume.
You can pretty much tell how much each manufacturer is charging for the emissions upgrades because most have chosen to show the impact of the latest mandate as a surcharge. Freightliner's invoice, for instance, shows a separate charge for the engine to reflect its higher cost and an engineering charge for the upgrades to each truck's chassis.
To accommodate the new technologies — most of which are generating more heat to the cooling system — there are new designs for either radiators, or whole systems including radiator, shroud, cooling fan and fan drive. In the case of Volvo, there's a whole new hood treatment to optimize underhood airflow. There also have been chassis/engine packaging issues, where some components have been moved to allow for additional engine plumbing associated with exhaust-gas recirculation, or for whole new exhaust systems with the addition of a catalytic converter in the case of Caterpillar engines.
International took time out to address other chassis issues — for instance, widening the front spring base to make wide-track axles common across all models and "taking weight out wherever we could touch the vehicle," said Jordan Feiger, vice president and general manager of International's Heavy Truck Center.
The most extensively updated chassis of all is Volvo's new VN, which combines underhood air management with improved exterior aerodynamics in an effort to cancel out the loss of fuel mileage that comes with EGR technology. Volvo also elected to use the Hendrickson Airtek front suspension and fabricated steering axle, which more than offsets the 100-plus-pound weight penalty of the new engines. With its own Volvo power or the Cummins ISX, the significantly updated and re-engineered VN shows a surcharge of $3,500 for EPA-related costs.
Uniquely, Caterpillar requires additional engineering for its exhaust aftertreatment device that is part of the "bridge" engine technology. This interim introduction is to carry Caterpillar through to its anticipated roll-out of the full ACERT (non-EGR) engines in the coming fall. Cat has been very close-lipped about ACERT technologies, but it is likely that there will be both catalytic converter and particulate trap to accommodate, along with major fuel system changes. In the interim bridge engine, there's very little different mechanically — a fact that seems to appeal to the market right now, for Caterpillar has been running flat out through the fourth quarter 2002 to meet demand for its C-15 engine.
And here's another interesting wrinkle. Some fleets are looking at an early wave of purchasing as they contemplate the future. There is yet another round of emissions requirements tabled for 2007, and they are much tougher than the 2002/2004 limits: both particulate matter and NOx are to shrink to a tenth of today's levels as the rule phases in over the three-year period to 2010.
Since the technologies to get there are still in the laboratory, there is, again, precious little time to get the next engines ready and tested. Our prediction is that many fleets will be only too glad to have the 2002 EGR units, or whatever ACERT turns out to be, in preference to the next level of emissions technology.
The time from early 2003 to late 2006 is a relatively short turn as fleets look to run trucks longer. But there may be a big incentive to get the trucks bought now so they can be traded against the last of the current technology before the next regulations bite in January 2007.
International's "Catch It While You Can" sales incentive sort of sums it up. Qualified buyers can avail themselves of zero percent financing for the first year of a five-year contract, and up to 8.6% on the outstanding 48 months. That translates to an effective APR of 4.99 or 5.49% depending on truck model and could amount to a savings of more than $8,000. Even though the program doesn't have interest assessed in the first 12 months, the payments are constant throughout the 60 months with the first 12 all going toward the principal.
For customers who find the increased cost of the new engines a big hurdle, there is an alternative of a $2,500 trade-in allowance or a $2,500 parts and service credit.
To alleviate worries over engine performance and reliability, International is offering a free breakdown service for trucks purchased in the first three months of 2003. This is part of the Diamond Plus Support package, which is available free of charge — an up to $2,000 value — for every new International 8000 and 9000i series Diamond SPEC truck sold or ordered before March 31. In addition, there's a two-year/200,000-mile warranty. This package also includes a 24-hour emergency breakdown repair assistance for as long as the customer owns the truck.
International President Steve Keate says the company is confident that these will help get customers thinking about orders. He says he feels especially good about the International programs coupled with the fact that around 70% of International's heavy-truck customers order Cummins engines and Cummins also has a replacement truck guarantee for any truck down more than 24 hours. Also, says Keate, International has "a great service network."
"We have confidence within our company. Nothing talks louder than vehicles performing. And they are performing as expected."
Cummins' Uptime Guarantee program is for its heavy-duty on-highway truck engines. The program is obviously to reassure customers that its new engines will meet performance and reliability needs.
Under the guarantee, if any part on a customer's ISX or ISM engine fails and can't be repaired within a 24-hour period, Cummins not only will pay for the repairs, but also will provide a rental vehicle at no cost.
"The ISX engine is proven, tested and reliable. We certified this engine early, we've tested it thoroughly, and we're pleased to offer our customers an Uptime Guarantee on the ISX and the ISM," said Tom Kieffer, Cummins executive director of marketing.
According to Cummins industry communications manager Amy Davis, there have been a few issues crop up with the early production of the '02 engines "But we haven't rented a truck yet," she said. She also pointed out that more Cummins resources had been deployed in the EGR development than any previous Cummins engine launch. This point was also made by Kieffer: "The cooled EGR subsystem, based on the already proven performance of the ISX and ISM engines, has undergone more real-world testing than any new product launch in our history," he added.
The Uptime Guarantee applies to Cummins ISX and ISM engines purchased between Oct. 1, 2002, and March 31, 2003, with coverage from the date of purchase through Dec. 31, 2003.
Cummins also announced three new extended warranty options for its heavy-duty engines. All the new components are fully covered in Cummins' base warranty.
These days, Detroit Diesel incentives programs are handled under the Freightliner umbrella and they are apparently working: Detroit Diesel started 2003 by adding a second shift. And while the company does not make its deals public, a recent 2,100-truck J.B. Hunt order made the news recently because a big slice of the business included the Mercedes-Benz MBE4000 engine. By no means are all Detroit sales 4000 Series. Adding up the business that DDC has likely booked, orders for EGR Series 60s may well run to five figures.
Freightliner Trucks' current incentive program is essentially a niche program, says Bob Cariglia, vice president of sales for Freightliner Trucks. It is intended to get individuals and small fleets who usually purchase at retail motivated to look at what's available, he said. "We've had a lot of quotation activity in the fourth quarter, with quotations actually increasing," Cariglia said. "Customers are testing the waters and order intake is not at all bad."
The offers for the smaller fleets include low percentage financing or cash back, but they are restricted to certain models and specs, says Cariglia.
Available on 2003 Class 8 Century Class S/T, Classic, Classic XL, Columbia, Coronado and FLD 112 Severe Duty trucks and tractors, the offers are for current production with Series 60 Detroit Diesel, MBE4000 or CAT engines only. Included is 0% financing for 12-month contracts, or rates as low as 5.89% for 48-month contracts, or 6.49% for 60-month contracts from DaimlerChrysler Services-Commercial Vehicles on the specified vehicles. An alternative is a choice of up to $3,500 cash back on Series 60, or up to $2,500 on CAT engines.
Also conditional is the specification of Eaton transmission, Meritor axles, Accuride wheels, Fontaine or ConMet fifth wheels (if a tractor) and Michelin tires.
The offer is good through the end of June 2003.
Freightliner's other nameplates — Sterling and Western Star — are both under Senior Vice President John Merrifield, who commented that his division was basically following the same lines as his competition: aggressive deals on low financing, interest-free introductory periods and extended warranties in conjunction with Detroit Diesel. "These programs are on first quarter orders for delivery before the end of the second quarter," he said. But he also granted that the cutoff was something of a moving target, designed to keep market interest up. "We have not cut the Sterling build rate one unit and we try to be optimistic about the market."
Customers who are looking at major price hikes for Caterpillar engines see the several thousand dollar savings with the Mercedes-Benz power — and they like what they see.
At Kenworth and Peterbilt, the incentives have just wrapped up. However, Kenworth is extending a discount program with Allison Transmission. Scheduled to run through May 7, 2003, there are special discounts on the HD4060, HD4560 and HD4070 in trucks built by June 30.
It applies to Kenworth T800 112- and 120-inch BBC, C500 and selected W900 models. While the transmission is more appealing to vocational customers and is targeted at loggers, concrete and ready-mix, dump, snowplow, mining, refuse and heavy equipment hauling, the promotion is available on trucks with sleepers. The discount is limited to 10 units per customer.
Kenworth spokesman Jeff Parietti says that there will be ongoing promotions announced through the year.
At Peterbilt, general marketing manager Scott Pearson indicated that there was a good chance the incentives would be dusted off for a second go around, despite their wrapping up on Dec 31. "We're in the process of looking at trucks on dealer lots, some pre '02 and some post '02, looking at extending the same incentives," he said. These included longer warranties on Cummins engines and Eaton components, and deals on weight-saving options like the unique Flex Air tandem suspension and aluminum wheels at no premium. "These are very beneficial to the dealer. It gives him a sales opportunity with the customer. But it's good for the customer as well. Saving money offsets concerns, eliminates a sticking point. But the incentives together address weight, reliability, warranty and expense."
Peterbilt offers both Caterpillar and Cummins engines. Weaned off Detroit Diesel over the past two years, customers decided a Pete with a different engine was still a better purchase — and Pearson notes that the relative penetration between Cat and Cummins hasn't changed. "There have been no defections, and we have had no real issues with either engine." While there have been some problems, "there have been none that have been disabling," Pearson noted.
Retail purchasers of new Volvo VNs and VHDs equipped with EPA'02 engines will receive a $2,000 cash incentive for trucks delivered by April 30, 2003.
In addition, Volvo Trucks North America Inc. is offering a three-year/300,000-mile extended engine warranty on new VNs and VHDs with EPA'02 engines. Both the cash incentive and the extended engine protection are limited to customers purchasing from one to five new Volvo trucks from U.S. dealers.
"Volvo wants to keep the tremendous momentum we built with the launch of the new VN going strong," said Scott Kress, senior vice president — sales. "Putting $2,000 in buyers' hands will help them purchase the new trucks they need in a tight economy, while the extended engine protection shows our confidence in the new engine technology. So buyers are getting a great truck backed up by Volvo's customer support, and a $2,000 sweetener for the deal."
The customer has a choice of how to receive the cash incentive: as a check to go in the customer's pocket; to be used against the purchase price of the new truck; or, to buy down the interest rate on a new truck loan, when the purchase is financed through Volvo Commercial Finance.
Volvo is offering an extended engine protection for Volvo VED12 and Cummins ISX engines at no charge as part of this promotion (all engines in this program meet EPA'02 emissions regulations). This added protection covers parts and labor for emissions control systems on the engines, as well as other components, including injectors and turbochargers, as well as towing.
As a final inducement, buyers who finance their new Volvo trucks in this program through Volvo Commercial Finance are eligible for additional incentives. They can delay their first payment for up to 90 days (some restrictions apply) and they will also receive a 10% base insurance rate discount through VFS Insurance Group.
And buyers who finance through Volvo Commercial Finance may choose one of four free premium financial service packages:
• A $1,000 pre-loaded purchase card (debit card) good for parts, services or accessories at any U.S. Volvo-authorized dealership
• Fuel tax and compliance service pre-paid for one year through Road Manager Financial Services
• GAP coverage for the life of the customer's loan
• Tax preparation and accounting service pre-paid for one year through Transport Business Solutions.
Volvo's subsidiary, Mack Trucks, has had an incentive program running since November covering units built before March 31. Unfortunately for new customers, some of the Mack program benefits are no longer available because the company has filled all order slots for its on-highway ASET engines.
So while you'll not be able to get the dealer free floor-planning savings or the 90-day delayed first payment, Mack is currently still waiving the chassis surcharge for its ASET engines, even though purchased outside the expiration date, which is a $1,200 saving. For those lucky enough to get into the program, which covers trucks built at the New River Valley plant, there are also extended warranties and towing protection.
