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Alasdair McNellan

MT: Truck sales on both sides of the border are gathering steam and are expected to continue growing the next two years. How are you keeping up with the demand? Are there specific plans to increase production?


MT: Truck sales on both sides of the border are gathering steam and are expected to continue growing the next two years. How are you keeping up with the demand? Are there specific plans to increase production?

McNellan: Cummins is experiencing strong demand for all of our new heavy duty and midrange engines from NAFTA truck and bus customers. We are working with our OEM partners to meet their needs. Cummins heavy duty engines are produced at the Jamestown plant, New York, which has achieved major improvements in productivity this year thanks to Six Sigma-based efficiencies and the addition of new resources.

MT: What’s your read on the engines you currently have in the field? I’ve heard a lot of different figures from fleets and manufacturers on fuel efficiency loss. I realize that it’s dependent on application but overall, from your own data collection, what are you finding in terms of fuel performance?

McNellan: Cummins has done a very good job in Canada the last year and a half securing new business. One of the reasons we are getting this business is because we have been honest about the degradation of fuel economy, which is anywhere from 0% to 5%. Have we seen better than that? Absolutely. In fact some fleets have seen their fuel performance come pretty close to the previous non-EGR performance. We have also taken the initiative that any issues with the 02 engines we would get directly involved, and if needed we will send technical support managers to evaluate and figure out what’s going on with fuel economy. As best we can, we make sure the ECM is set correctly to each specific customer’s requirements, road speed is set at what the customer expected, gear down is set, tire revs etc. If these parameters, and others, are not set correctly, there’s no point in trying to figure out any fuel consumption issues.

MT: Is there anything that can be done to improve fuel efficiency as EGR technology evolves?

McNellan: There are a lot of things that can be done. There are 7 to 8 items in the ECM, I mentioned previously, but also items such as a load-based speed control, gear-down protection, Smart Torque etc., that are crucial to fuel economy. We’ve worked very hard over the past two years to make sure that they are set right. In fact we predict that by 2007 we should have the same fuel consumption as today’s EGR engines. The other thing fleets can do is perhaps slow down. You often see trucks exceeding 70mph. You can’t operate a flat nose truck, drive it a 74 mph and then complain about fuel consumption. Engine technology can only take you so far; you have to have the operational commitment in place. Slow down, spec the truck and engine for the application, buy an aerodynamic truck, and don’t have all the gizmos hanging on it. The other issue is that there are a lot of otherwise sophisticated fleets that could improve their fuel consumption monitoring.

MT: How about repair costs? You had a limited window to test the EGR engines. Based on the company’s own expectations, how are the engines holding up in the field so far?

McNellan: The numbers show that the ISX EGR 02 engine was the best launch in history in terms of repairs per 100. I think overall customers are very happy with the reliability and performance even though you see articles claiming it’s going to take $15,000 to maintain 02 and 07engines. That’s not right; it’s fear mongering. What are those claims based on? There is no added maintenance on an 02 engine today. The oil changes are the same as non EGR engines. Oil drain intervals are the same – 25,000 miles with the opportunity to go 35,000 and higher depending on the oil used and the application, with close monitoring. Oil filter changes are no different; air filter changes are no different.

MT: The Cummins distribution centres in Quebec and Atlantic Canada were recently merged with the Cummins Ontario distribution centre. Can you explain the reasoning behind this move and what impact it will have on your customers?

McNellan: The idea is that we are going to have larger distributors and Cummins will own a percentage of them. We’ve gone from five distributors in Canada down to two. We have Cummins Western Canada, and now Cummins Eastern Canada. This way our customers will have more options with stocking of more parts in certain locations. And the people we have in place with the two distributors know the business they are in and are both former Cummins people.

MT: I understand Cummins is also refocusing the way it approaches the market place?

McNellan: Three years ago we signed a Long-Term-Agreement (LTA) with Paccar, Volvo, and International designating them our heavy-duty partners, We work closely with our OEM partners and their dealers – but are also increasing our level of direct contact with the truck customer. We’ve instructed our distributors to be knocking on doors and to make sure they are available to answering specific engine questions, getting involved in the gearing specs etc. We have also added corporate field staff across North America for this new initiative.

MT: Let’s look ahead to 2007. How is Cummins coming along with preparations for the 2007 emissions standards?

McNellan: The blueprint is in place in terms of where we are going. It will be the same basic engine as we have now. For the ISX it will be a 15L for the ISM it will be an 11L. The carcass will be the same. Crank, bore, stroke, etc., will be no different. Aftertreatment in the form of a DPF – Diesel Particulate Filter – will be utilized by Cummins and other engine manufacturers. Here, Cummins will have a unique advantage in that we are the only company who can design and manufacture a complete, integrated engine/aftertreatment system. With our Fleetguard subsidiary we have access to a world leader in filtration and exhaust systems. Cummins will initially have a minimum of 30 engines available – both ISX and ISMs – for customer field testing. We’ve had a commitment from the fuel companies that there will be a corridor for low sulphur fuel – this is required with the new 07 engines. To run these engine tests we have to make sure drivers can fill up with LSF.

MT: Why do you feel EGR will still be right for the North American market in 2007?

McNellan: The ISX was designed about a decade ago with the environment in mind. The ISX is capable of being around, like the N14 was, for over 30 years. The on-highway EGR application was the best way to go for RAM-air effect. This could not be done with a bulldozer but for highway applications it made far more sense to go with cooled EGR because the Ram-air effect was crucial. It was also technology we knew and understood from use in engines sold in California. And for the same reasons it makes sense to continue into 2007.

MT: What trends do you see emerging in the North American engine market over the next 10 years?

McNellan: We have to make sure our engines continue to do the job they are doing today and that we support the heck out of them. What’s also changing is the number of new people coming into the business at the fleet level. They are a different kind of manager. We were used to knocking on the doors of maintenance managers and their nails would be dirty and they would want to talk about engines, turbochargers etc., and when it came to ordering trucks they would pick a specific nameplate and ask for a specific engine. Now when we knock on the door we are seeing accountants and they don’t care as much about name brand as long as the reliability, price, up-time and fuel consumption are there. Is that a smart move? It probably is because now they will have some control over fuel consumption numbers and maybe they will be a bit more structured about which parts failed and which didn’t. That’s why we have to be there and to support our products and customers.

MT: At the recent TMC Steve Duley, Schneider National’s vice president of purchasing, announced his company is planning another pre-buy in 2007 to avoid the tighter emissions standards. Schneider is also considering if it can add two years to its traditional trade-in cycle. Does this thinking extend to many other fleets? Are we headed for another pre-buy?

McNellan: If we as an engine manufacturer are able to go out there and show our customers that reliability, performance, fuel economy with 07 engines will be the same or better than the 02s, and, perhaps incentives will be there, we make sure everything is supported in the field, the cost is not that much greater, why a pre-buy?

MT: In your view, why is it not smart to pre-buy?

McNellan: Some fleets are restructuring their purchase plans to skip 2007. They are changing their lifecycle from three years, on some applications, and they are spec’ing a little bit different to go five years. But that affects a lot of things, such as maintenance costs. Part of the reason we are seeing an emergence today of such a large order intake is that the maintenance costs when you get to 700,000-800,000 miles are incredible. That’s where it doesn’t make sense. The guys that haven’t realized that yet are going to be in trouble because they will still have to run those trucks this year and into next year (because of order backlogs). If they haven’t done their buying now, especially the larger ones, they will have to run their old trucks another year-and-a-half maybe. Is that a competitive advantage having newer trucks? You bet it is. Also, when buying plans are extended there are several market variables that could change over that time, such as the exchange rate. We’ve already seen the exchange rate change more than 20%. In Canada would there have been that much fuss about what the 02 engines would cost had we known the exchange rate would change that way? And, of course, it could change the other way. If you have a fleet of 02 engines today, of any brand that are doing a good job, you are satisfied with their performance, reliability etc., there should be no reason to have a pre-buy.


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