Truck News spoke to Cummins Diesel of Canada's general manager Alasdair McNellan, on the field performance of the '02 engines, plans for the '07 engines and why another pre-buy is not a smart idea. The following is the third part of McNellan's exc...
ENGINE TALK: Alasdair McNellan discusses the impact of pre-buying.
Truck News spoke to Cummins Diesel of Canada’s general manager Alasdair McNellan, on the field performance of the ’02 engines, plans for the ’07 engines and why another pre-buy is not a smart idea. The following is the third part of McNellan’s exclusive interview with Truck News.
TN: What trends do you see emerging in the North America 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.
TN: At 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 that 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?
TN: 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 per cent.
In Canada would there have been that much fuss about what the 2002 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.