E&MU: Warming to Global Engines

By Frederick Kiel, Staff Reporter

This story appears in the November/December issue of Equipment & Maintenance Update, a supplement to the Nov. 24 print edition of Transport Topics. Click here to subscribe today.

Volvo AB and Daimler AG are producing global heavy-duty engine platforms for use in North America, Europe and Asia, and other manufacturers plan to introduce their own versions, pushed by converging emission regulations, the need to reduce research and development costs and to take advantage of economies of scale, according to industry analysts and executives.

“The truck manufacturers have taken the decision to fundamentally change the nature of the market place by ushering in global engine platforms,” Oliver Dixon, commercial vehicle analyst for consulting firm West End, which works in both North America and Europe, told Equipment & Maintenance Update.

It’s a high-stakes, potentially game-changing decision with implications for buyers as well as manufacturers.

The United States, Canada, the European Union and Japan have been imposing tougher and tougher emission restrictions on their trucking industries, especially during the past 15 years. These regulations are becoming so similar that, within two to four years, they will be practically the same — and this would let producers build essentially the same engines for all of these markets.

Many countries in the rest of the world are gradually adopting stricter standards for diesel exhaust, and their regulations are expected sooner or later to resemble those of the most-developed nations.

In October, for example, Mexican and U.S. federal government transport officials began talks to bring Mexico’s emission controls in line with U.S. requirements.

The truck manufacturers say they have to make huge investments in research and development as well as in retooling factories to meet these ever-more stringent rules, and the only way to achieve the new standards economically is to work with one basic design.

They want to save costs by selling the same engine models in all markets.

North American truck buyers who are accustomed to specifying dozens of options from different, specialized suppliers may have to change some of those practices. European and Asian fleets, in contrast, are used to buying trucks from “vertically integrated” companies, which build the engines, transmissions and drive axles they put into their own vehicles.

Until recently, the engines that global truck makers Daimler and Volvo built could be very different, depending on whether they were to be installed in the United States, Western Europe or Japan.

No longer.

“The Detroit Diesel 15, introduced last year, and the DD 13, presented this year, are the first of a new wave of engines built on a common platform to be shared globally,” David Siler, director of marketing for Detroit Diesel Corp., said.

Germany-based Daimler owns the Freightliner, Western Star and Sterling truck brands (Sterling is to be discontinued) as well as Detroit Diesel engines in North America, and worldwide truck-, auto- and engine-maker Mercedes-Benz. Mercedes truck diesels will not be sold here after 2009.

Volvo produces both Volvo and Mack trucks and engines here.

Siler said Daimler’s Japanese subsidiary, Fuso Trucks, will introduce its first engine from the global platform in 2009, and Daimler’s European truck brand, Mercedes-Benz, will come out with its first world engines in 2010.

Some time after 2010, Detroit Diesel will introduce its largest common platform — 15.6 liters — into North America, to be followed by 10.6-, 12.8- and 14.8-liter sizes.

“Each model will have a 90% commonality in parts,” Siler said. “That is, 90% of the parts of the 12.8-liter engine will be exactly the same for the Japanese, North American and European versions.”

Earlier, Volvo AB, headquartered in Sweden, rolled out the first models of its new global engine platform.

“Volvo Trucks North America introduced its family of engines for U.S. ’07 emission standards — the Volvo D11, D13 and D16 engines — in late 2006,” James McNamara, VTNA spokesman, said. “This family will be our U.S. 2010 offering as well.”

McNamara said that Volvo sells the same three engines in 140 different countries, “using the same three platforms but adjusting them to local conditions and regulations.”

Daimler and Volvo are the only two major manufacturers with global engines on the road in North America.

Another German manufacturer, MAN AG, also created a common platform that shares most of the same parts and is sold in regions worldwide.

MAN has a contract with Navistar International Corp., which builds International Trucks, to develop an engine for North America based on its European model. Navistar has branded them as their MaxxForce Big Bore, in 11- and 13-liter models. In September, Navistar opened a factory in Huntsville, Ala., to produce these engines.

MAN, which is controlled by car maker Volkswagen AG, does not have any ownership stake in Navistar, nor Navistar in MAN.

U.S.-based Paccar Inc., which makes DAF trucks and engines in Europe as well as Peterbilt and Kenworth trucks here, is due to open its first U.S. heavy-duty engine factory in the fall of 2009. It will produce two different engines based on DAF platforms.

Consultant Dixon said the decision by Paccar, which he believes has one of the “most conservative” business cultures in America, to bring a European design here was the clearest example of the urgency that truck makers feel to develop global platforms.

It means that starting in 2010, Paccar will seek to sell to North American truckers, themselves suspicious of change, a product with two huge unknowns, Dixon said. Few Americans have ever seen a DAF engine, and it will be coming with equally unfamiliar selective catalytic reduction technology, to meet 2010 emission standards.

“In poker terms, they have gone ‘all in,’ to launch a new technology with an unknown brand, which is a staggering risk,” Dixon said.

Paccar is building a $400 million facility with a 420,000-square-foot engine factory and technology center in Columbus, Miss., on a 400-acre site.

“We will introduce 9.2-liter and 12.9-liter engines that we currently already build in Eindhoven, Netherlands, for DAF,” Robin Easton, Paccar’s treasurer, said.

Paccar officials declined to go into more detail.

All North American truck ma-kers, except Mack, will continue to offer the option of installing an engine from independent manufacturer Cummins Inc.

Caterpillar Inc., the only other independent manufacturer of on-highway diesel engines, said that it would halt production of heavy-duties after 2009.

A key question is the extent to which North American fleets will buy vertically built trucks or choose an engine from independent engine manufacturer Cummins. Cummins engines became the favorite on-highway diesel purchase during 2007 and have grabbed more than 40% of the market this year.

“We have seen people try to standardize equipment before in the North American truck market but it has not always worked, because the fleets are very picky,” said Eric Starks, president of consulting group FTR Associates.

But he thinks conditions are more favorable for acceptance than before.

The manufacturers “have much more global experience,” Starks said. “They have been on both sides of the market and have seen what it takes to work in each place.”

Also, it’s not clear that truckers really care whether their vehicles are standardized to a single model.

“What it will come down to, eventually, is whether the engine is doing what the truck needs it to do,” Starks said. “What truckers care about is whether it works — and the price.”

Dixon said truck manufacturers could attempt to woo fleets by offering as many incentives as they could, such as tripling any engine warranty that Cummins puts on.

“There is no Plan B on this one,” Dixon said. “They just cannot go back to a situation where they are producing a different engine range for North America, Europe and Japan. It would be like driving a snowplow through all their stated strategies.”

Chris Brady, president of Commercial Motor Vehicle Consulting, Long Island, N.Y., believes the vertical integration will win out in North America.

“I think, five or six years ago, it was the same question,” Brady said. “Would fleet owners accept trucks from OEMs who put their own engines in? Volvo started from scratch, and over the years, their engines have become a larger share of power plants chosen for their truck production. Yes, I think they’ll accept the vertical integration.”

Also, internationalized manufacturers could exercise their growing power in paring the world engine to its physical core.

“I think over time the standard engine configuration will be a straight six, 13-liter displacement,” Dixon said. “There will be variations around that. We have some 15- and 16-liter sales in Europe, but they are mostly headline sales, with very small volume.”

Many North American fleets prefer larger engines today, but Dixon said that technology has advanced so much that 13-liter engines today have much greater performance than a similar-sized engine 20 years ago.