Fleets Find Higher Costs, Uncertain Life Cycles

By Daniel P. Bearth, Senior Features Writer

This story appears in the Oct. 20 print edition of Transport Topics.

Six years after the first generation of Environmental Protection Agency-compliant diesel engines was introduced, fleet operators said there is little doubt the cleaner-burning engines cost more to maintain and operate.

Less clear is how long the engines will last, which is a key factor in determining residual value and equipment trade-in cycles, fleet executives and industry analysts said.

“Engine life cycle is very important. When we sell our vehicles, they still have a lot of life in them. This, along with our maintenance practices, allows us to get top dollar for the equipment,” said Mike Hasinec, vice president of maintenance systems and support for Penske Truck Leasing in Reading, Pa.

Penske operates more than 150,000 tractors and straight trucks in its leasing and rental fleet, and Hasinec said knowing how long an engine will last is critical to planning when to replace equipment.

Diesel truck engines manufactured and sold since October 2002 have been designed to emit fewer pollutants, principally by exhaust gas recirculation — routing exhaust gases through the engine to achieve more complete combustion — plus the use of ultra-low-sulfur-diesel fuel and the addition of diesel particulate filters.

In 2010, most truck manufacturers plan to offer heavy-duty diesel engines that use selective catalytic reduction, or SCR, in which urea is added to the exhaust stream, as a way to meet federal limits on nitrogen oxide emissions. One company, Navistar, however, has said it will use an enhanced EGR process to achieve the needed reductions.

While nearly all engine makers said they expected their new engines to last just as long as earlier models, fleet operators said they were seeing higher maintenance expenses and a high rate of failure among emissions-related components.

In a presentation earlier this year, Steve Duley, vice president of purchasing for Schneider National Inc., the nation’s second-largest truckload carrier, reported that trucks with post-2002 engines experienced 4.6 times as many repairs, 15% more towing and 20% more downtime than earlier models.

Although many of the breakdowns early on were due to “factory assembly issues,” Duley said, Schneider has experienced “early failures” with nearly every significant emissions-related component, including EGR valves, turbochargers, air-cooling devices, sensors and throttle valves.

“The base engine is reliable. Defects are with the aftertreatment system,” Duley said.

Bruce Plaxton, an industry consultant who works with fleets to develop equipment purchasing and maintenance strategies, said many breakdowns are related to the fact that the new engines run hotter and are “a lot less forgiving” than previous models.

“It’s not like it used to be, when being a pint down [on coolant] meant that you could run another 500 miles down the road without a problem. Now, if the cooling system fails, it takes other components with it,” Plaxton said.

The challenge “is to hold these engines within their design tolerances in the real world,” he said.

Adding to the cost of repairs is that emissions-related components, such as EGR valves and turbochargers, cost two or three times as much as comparable parts found on older generation engines.

“Overall, the cost of maintaining high-displacement engines has increased,” Plaxton said.

Tim Shick, director of business and product strategy for Navistar International Corp., acknowledged that the replacement cost of electronics, fuel system components and other emissions-related components “has gone up.”

But, he said, “These components also drive improved performance with increased responsiveness and reduced engine sound levels, resulting in cleaner, better performing engines.”

Shick said a check of warranty claims and repair data for Navistar’s medium-duty EGR engines show no difference in maintenance intervals or life expectancy compared with earlier models.

Scott Blevins, vice president of sales for Worldwide Equipment Enterprises, a truck dealership in Prestonsburg, Ky., said emissions components are considered “maintenance items” that need to be replaced every 400,000 miles or so.

“That may change in 2010 with the advent of urea to clean the exhaust,” he said, “because [selective catalytic reduction] will take some of the pressure off the tubes and sensors used for exhaust gas recirculation.”

Schneider’s Duley said he figures the cost of maintaining 2002-04 EGR engines is about $8,000 more than earlier engines, based on the company’s experience so far with about 1,100 engines. Schneider runs a fleet of about 11,000 heavy-duty tractors.

In addition, Duley said, it costs another $9,000 extra to maintain 2007 model engines, based on operating results for about 70 diesel-powered trucks with the latest emission technologies.

Combined with a higher price tag and reduced fuel efficiency, Duley said total operating costs have risen by $34,500 per engine since October 2002.

“It’s been a very costly change,” Duley said in a telephone interview.

Daniel Umphress, managing director of fleet maintenance for FedEx Freight in Harrison, Ark., said he has also seen a high failure rate of emissions-related components on some 6,700 trucks with 2002-04 EPA-compliant engines.

Emissions components on 2007 model engines have been more reliable, but Umphress said they also require additional maintenance because of the addition of a crankcase filter and the need to periodically reset computer codes that control the operation of diesel particulate filters.

Darry Stuart, president of DWS Fleet Management Services in Wrentham, Mass., and vice chairman of the Technology & Maintenance Council of American Trucking Associations, said that while he expects post-2002 diesel engines to run as many miles as previous models, the higher cost of maintenance and repairs will affect how long fleets keep the trucks in service.

“Fleets have come to expect 700,000 miles of problem-free operation for diesel engines,” Stuart said. “We had it at one time. We don’t have it now.”

Stuart said he expects the average trade cycle of between 42 and 48 months to “get closer to 60 months, maybe longer” as fleet operators attempt to spread the cost of buying and maintaining equipment over a longer time period.

Bruce Stockton, president of Con-way Truckload (formerly Contract Freighters Inc.) in Joplin, Mo., said his company experimented with trade intervals as short as three years and as long as five years but has settled on a four-year, 500,000-mile trade interval.

“That’s the sweet spot for us,” Stockton said. “It is where we can best see and track our total cost of ownership.”

To avoid potential maintenance and repair issues associated with new engines, Stockton said his company’s strategy was to buy as many tractors as possible ahead of, or well after, federal emissions deadlines took effect in 2002 and 2007.

“We want to let the wrinkles get ironed out,” Stockton said. “This year, we’re growing the fleet by about 300 tractors and we are replacing 140. Next year will be a different story. We’re going for about 45% replacement for our fleet.”

Another thing that Con-way has done to keep maintenance costs under control, Stockton said, is to purchase extended warranties to cover vital engine components for the entire time that the company owns and operates a truck. Engine manufacturers typically offer warranties for two years or 200,000 miles.

There is evidence that the life expectancy of commercial trucks has declined in recent years, although the reasons for the decline are only partially because of environmental regulations.

A 2007 survey by the Heavy Duty Manufacturers Association, Research Triangle Park, N.C., found that the average vehicle life of heavy-duty commercial trucks, measured by miles, has fallen almost 30% since 2004 for a variety of reasons, including high fuel prices and a slowdown in demand for freight hauling that affected demand for new vehicles.

Until recently, average vehicle life had trended upward at an annual rate of more than 25,000 miles a year, from an average of 451,000 miles in 1978 to as much as 1.1 million miles in 2004, according to the HDMA report.

In 2006, the last year for which data are available, the average vehicle life span was 809,922 miles.

Frank Hampshire, senior director of research for HDMA, said the large pre-buy of new vehicles prior to federal emission deadlines in 2002 and 2007 and a surge in exports of used trucks accelerated normal trade-in cycles, causing most of the shift in average vehicle life expectancy.

Hampshire said it is “too early” to assess the durability of post-2002 engines and their overall effect on vehicle life expectancy, although he maintains that reliability and durability “tend to go hand in hand.”

“Because durability will affect trade-in value, vehicle life expectancy will retain some level of importance,” he said.