Picking partners

| July 24, 2001

The next round of emissions cuts, effective October 2002, gives truck makers another incentive to work with fewer engine suppliers. “With the upcoming emissions mandates, it gets pretty expensive to engineer a host of engines into a chassis,” says Frank Bio, a director of marketing for Volvo. “The changes in 2002 won’t be so bad, but the next level, in 2007 – that’s when we’ll have real issues with installations.” Bio says this complexity will compel truck makers to compromise or optimize their designs.

In introducing its system for reducing emissions, called ACERT, Cat recently announced that it had stopped developing cooled exhaust gas recirculation, which is seen as the standard for cutting emissions.

Caudill noted that cooled EGR – the strategy favored by every other engine manufacturer – could cost $1,000 to $1,800 for the engine hardware and another $2,000 to $3,000 on the truck. Using ACERT would require less new engineering, Caudill says.

Unfortunately, ACERT won’t be ready for the market until the fourth quarter of 2003 – more than a year past the deadline set by the Environmental Protection Agency. Cat is now appealing to the EPA for an extension. Regardless of what happens in the short term, Cat officials are confident, Semlow says. “We wouldn’t have gone to ACERT if we didn’t believe it was a better solution.”

If Cat succeeds with EPA, the Cummins-Paccar pact will have little effect on most Pete and KW buyers – even those who choose vehicles from dealers’ stock. Rick Hendricks, a salesman at Inland Kenworth in Albuquerque, N.M., says most dealers understand customer preferences, and they’ll continue to spec the components that have the broadest appeal. If that means ordering a yellow engine, so be it. “We never get a base-model truck,” he says. “We probably couldn’t sell it.”

Meanwhile, industry consolidation, especially since last year, has increased the pressure for more integrated truck manufacturing. Freightliner, which already owned Sterling, acquired Western Star; Volvo AB acquired Mack Trucks. DaimlerChrysler, Freightliner’s parent company, purchased Detroit Diesel Corp.

That move, said Freightliner President Jim Hebe in January, signaled increased integration at Freightliner. “It’s pretty safe to say we will have a strategy to deal with engines, transmissions and axles,” he said. “Does that mean we’ll be totally integrated? No, but that means we will probably have fewer partners.”

The company is holding off on post-2002 engine offerings to see what results from engine makers’ talks with EPA, Hebe says. “If the agency decides against extending the deadline, we will be trimming some engines.”

Not many truck makers want to install parts made by their competitors, so while Detroit Diesel has the inside track at Freightliner, it is essentially out at Volvo, Peterbilt and Kenworth. Keith Brandis, vice president of marketing for Volvo Trucks North America, says almost a third of the company’s Class 8 buyers spec’ed Detroit Diesel, so customers were unhappy when that option was eliminated. “We met with them face to face and told them we could not share that information with our competitors,” Brandis says.

International hasn’t disclosed much about its plans. “We’ll have to weigh the cost of [reducing engine choices] vs. the potential loss of not having a certain brand,” says Dennis Webb, vice president and general manager.

No one expects the North American truck market to copy the European model, in which engine, transmission and suspension are predetermined by truck brand. Nevertheless, vertical integration “is definitely a trend, and I think you’re going to see more of it,” says Nick Panza, Peterbilt’s general manager. “And you will probably see more of it from us as well.”

Volvo is also moving in that direction, Brandis says. “We had the benefit of seeing both methods of manufacturing, thanks to our European influence. Our vision was to move closer to the middle of the two camps.”

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