Picking partners

| July 24, 2001

Truck makers, having embraced the idea that less is more, are narrowing the engine choices for their vehicles. The move started four years ago, and it has accelerated in recent months. It’s intended to help manufacturers lower production costs and keep a lid on retail costs while optimizing the performance of selected components.

Volvo took the first steps in this direction in 1997 when it stopped offering Caterpillar power. Late last year, the company signed an exclusive supplier agreement with Cummins and dropped Detroit Diesel. Cummins is also the exclusive outside engine vendor to Mack.

Officials of Paccar, parent company of Kenworth and Peterbilt, in February made Cummins the company’s default engine and indicated that ties to Detroit Diesel would be severed by mid-summer. Freightliner buyers can still spec engines from Cat and Cummins, as well as Freightliner’s sister companies, Detroit and Mercedes-Benz, but it appears that menu will shrink.

What’s driving these alliances? Corporate mergers, emissions standards and market conditions – major issues for the manufacturers, but of little concern to buyers, many of whom have strong loyalties to truck brands and engine brands.

Paccar, parent of Kenworth and Peterbilt, made Cummins the company’s default engine, giving Caterpillar a secondary status. Paccar officials have also indicated that ties to Detroit Diesel would be cut this summer.

Dan Meyers, owner of Three-D Transport in West Unity, Ohio, runs 20 Kenworths that pull covered wagons across the Rust Belt. All but two of his trucks are Detroit-powered. But that mix is going to change, partly because of a good working relationship he’s established with his Kenworth dealer. “Any piece of equipment is only as good as the service you can get for it,” he says. “There tends to be more maintenance issues on trucks than engines. If it were the other way around, I might be inclined to stay with the engine instead of the chassis.”

Meyers says other buyers he’s talked with want to see how the alliances shake out. Tom Stone is in that category. The owner of Shenandoah Motor Express in Versailles, Ohio, started converting his fleet to Detroit-powered Kenworths three years ago. Now, he must choose between the two products. “I’m not sure what I’ll do,” he says. “These are new rules, and I have to determine how I want to play the game. It’s not business as usual. I’m being forced to make the changes by things I cannot control or even influence.”

Stone says he was stunned when he heard that Paccar was shedding Detroit Diesel, but he’s “come to realize that this isn’t the end of the world. I know that every engine manufacturer makes good products,” he says. “Sure, these alliances might take away some of the flexibility we had in the past, but maybe that flexibility has cost us a bunch of money over the years.”

Cost is just one problem associated with a wide selection, says Laura Wenzler, a marketing director for Cummins. Manufacturing complexity grows with the number of component suppliers, resulting in generic assemblies and diluted component performance. With a narrower range of choices, she says, engine makers can work much closer with truck makers to “integrate a total solution in the vehicle, and end users benefit from that.”

Cummins, having contracts with Mack, Volvo and Paccar, has been the most successful player in striking deals with truck builders. Its long-term supplier agreement with Paccar, which makes it the company’s default engine, has caused considerable head-scratching in the industry because Cat accounts for about 65 percent of Kenworth and Peterbilt installations.

Kenworth General Manager Ed Caudill says the Cummins deal allows the companies to “take out some of the costs” of truck production. At the same time, Caterpillar has been a “great partner” and “the marketplace will determine what engines go in our trucks,” he says.

Dave Semlow, Cat heavy-truck marketing manager, says his company is in discussions with Paccar, International and Freightliner regarding increased integration. “We fully intend to be a full player with those three,” Semlow says.

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