News Analysis: Fleets Learning More Ways to Cope With Emission Rules
ORT LAUDERDALE, Fla. — The Diesel Engine Emissions Summit II showed just how quickly the trucking industry has learned how to live with the new federal laws governing heavy-duty diesel engine emissions. And with that knowledge, the attendees were shown, comes possible leverage.
Four trucking company executives on a panel at the March 16 summit here showed a firm command of issues raised by the complicated series of rule changes — beginning with the 2002 lower-emission engines; to ultra-low-sulfur fuel in 2006; still lower-emission engines in 2007; and even-lower-emission engines in 2010.
Those four executives, whose companies own almost 80,000 Class-8 tractors, told 1,100 of their colleagues that fleets have lots of options as they face the next hurdle: the engines that will be introduced to power 2007-model trucks.
Last time around, fleets began to realize — just months before the first phase of the new rules went into effect in October 2002 — that they had few weapons to combat what they believed to be unreasonable risks posed by the new, and barely tested, new engines.
Their options by then were to run their existing trucks longer, buy the best used trucks on the market instead of new ones or buy loads of current-model new trucks that were to be phased out when the new rules took effect. The biggest, quickest fleets did all three, quickly depleting inventories of premium used trucks and current models.
This time around, the summit panelists said, there is ample time to map out strategies that will protect their fleets and allow them to both abide by the law and protect their fleets’ ability to deliver freight economically.
There was clearly broad agreement among summit fleet representatives here that the government should provide financial incentives in some form to mitigate the additional costs carriers face as a result of the new rules and new equipment.
Without that, many fleet executives said they would take steps to minimize the financial exposure of their companies by avoiding the new engines as long as possible, which could delay the effectiveness of new environmental rules.
“A lot of us have taken a gamble over the last two years” by buying and operating the new engines, said Marty Fletcher, director of technology and training at U.S. Xpress Enterprises. “I wish I could say that we had broken even.”
Industry suppliers have warned that another buying boom-and-bust cycle could have a devastating impact on them, even greater than what occurred during the pre-October, 2002, pre-buy.
Several truck makers, interviewed later at the Mid-America Trucking Show in Louisville, said they would not invest in brick-and-mortar expansion to increase capacity in the next few years, over concern that there would be a sharp falloff in 2007 sales. The truck makers said they were wholeheartedly joining the fleets’ call for incentives, and that they hoped to reduce any pre-buy by providing test engines and trucks by early next year.
According to fleet panelists at the summit and others, the 2002 engines are costing them in many ways. The new engines cost around $5,000 more to buy, get substantially worse fuel economy and are less reliable than their predecessors.
The 2002 experience shows that the fleets that bought the first generation of new engines suffered through the most problems and parts failures. And while fleets almost universally report that engine suppliers worked quickly and diligently to resolve problems, the new trucks have suffered more downtime than fleets are used to dealing with or prepared to accept.
Steve Duley, vice president of purchasing at Schneider National, the largest U.S. truckload carrier, said his company spent about $4,500 more per engine for the 2002-compliant models.
He said Schneider suffered a 3% to 5% loss in fuel economy (which was among the lowest reported at the summit) for an added life-cycle cost of $5,500 per truck, and expected to pay $6,000 more in maintenance and lose $4,000 in resale value over older models. He said that meant an eventual total cost of about $20,000 more per vehicle compared with earlier models.
Duley said the company was projecting that 2007 models would cost $31,300 to $42,300 more than a comparable pre-2002 model over its lifetime at Schneider.
“Barring an incentive [from the government], we are planning on a pre-buy” of current-model equipment before the 2007 engines are made mandatory, he told the summit.
Dennis Beal, vice president of physical assets at FedEx Freight, said, “We’ve had a lot of pain and the cost has been extraordinary” in operating the 2002 engines. He said, however, that FedEx Freight was not at this time planning on a massive pre-buy, but that the company supported proposals to provide incentives to buy the new equipment.
Schneider’s Duley presented the strongest case for incentives by showing that fleets could easily make their existing trucks run economically for eight years or about 1 million miles, with one major rebuilding of the engine and primary systems. Duley said the rebuilds would cost fleets around $15,000 a truck, well below the incremental cost of buying a new 2007-model vehicle.
As a result, Duley showed that Schneider could retool its fleet in the years before 2007 models are introduced, and not have to buy new trucks until several years after sales of the 2010 models begin.
The summit testimony thus illustrated how much better prepared the trucking industry will be before the 2007 engines roll out. By having a firm handle on their costs, the fleets will be able to prepare strategies to help them through the historic changes mandated by the Environmental Protection Agency’s emissions rules.
What remains to be seen is who will champion the industry’s call for incentives.
This story appeared in the March 29 print edition of Transport Topics. Subscribe today.
