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DALLAS, Texas - As an independent engine manufacturer, Cummins faces the unique challenge of competing against its most important customers -the truck manufacturers who also offer their own engines.

DALLAS, Texas –As an independent engine manufacturer, Cummins faces the unique challenge of competing against its most important customers -the truck manufacturers who also offer their own engines.

How does the company plan to stay competitive? And what’s in store in terms of future engine technology now that EPA2010 engines have been rolled out? Executive editor James Menzies caught up with Jeff Jones, vice-president of sales and marketing communications with Cummins during the recent Commercial Vehicle Outlook Conference to discuss those issues and others.

TW: Cummins recently announced it has shipped more than 20,000 EPA2010-compliant engines with selective catalytic reduction (SCR). How are those engines being received in the marketplace?

Jones: The performance of those engines has been received very well. There has been almost universally positive feedback on the impression that they’ve left with drivers in terms of throttle response, noise levels, power and torque. Several of our OEM partners and their dealers have put demo trucks out, and at this conference a couple dealers have remarked how well the demos have gone. And there’s nothing obvious about the performance that would cause the customer to have any negative reaction to SCR; it’s a non-event when it comes to the driver.

The other thing that has been really good is that diesel exhaust fluid (DEF) availability is not an issue. It’s available in a lot of places. Some of the customers, the big ones I’ve talked to, seem to be able to get DEF at less than the price of diesel fuel, somewhere in the $2.50 per gallon range if they buy it in any kind of bulk at all. We believed that would happen, but I thought it might take a year. The suppliers of the fluid are out there getting product out on the shelves and people are able to get it in totes as well.

We have built 26,000 SCR engines by the end of August, about 60% of those are medium-duty engines and 40% are heavy-duty. A lot of those aren’t in service yet, but I’d guess a third of those are out there now and some of the showstoppers we were worried about like DEF availability haven’t been an issue.

TW: How about reliability?

Jones: It’s really too early to comment on reliability but we track every warranty claim, we investigate it, analyze it and try to determine what the issue might have been, and the rate of warranty incidences is dramatically lower than we saw on the 07 and 02 product launches at this stage of the game and there are no broad issues; no major systemic problems. It’s all been pretty minor stuff so far.

The thing that’s really tough to tell -because its seasonal and doesn’t show itself accurately until you get 40,000-50,000 miles -but we think we’re leaving a good impression on fuel economy.

We think a 5-6% improvement is there. The engine testing says that it’s there, some customers think they’re getting better than that and others can’t see it yet, but we believe it will prove itself especially as (fleets) get more than one or two trucks in service and are able to do before and after comparisons.

TW: Paccar has been promoting its own MX engine quite aggressively. How much of a threat is that engine to Cummins?

Jones: The reality for Cummins is that, at least in the North American truck market, among the global OEMs, anyone that offers a Cummins engine in their truck also offers their own engine.

So that’s the world we live in and that’s the world we compete in. In the case of Paccar, they’re our largest customer and I believe we’re their largest supplier partner and we team up with them on advanced engineering of future truck and engine technologies, so there’s a long-term partnership with Paccar.

We believe the opportunity for Cummins to complement the Paccar MX engine, which is aimed at the 13-litre market, with the Cummins 15-litre product, the 11.9-litre product and the Paccar-branded PX-6 and PX-8 Cummins products is a win-win opportunity. The 13-litre market is important to them and it was primarily a Cat market in the past for Paccar, so the MX, in some ways, is more of a replacement for the Cat C13 than it is a threat to Cummins. We will complement the Paccar engine strategy with the Cummins products that allow them to offer a full line of engines.

TW: Earlier this year, Cummins said that fuel economy will be the next battleground for engine manufacturers. Are waste heat recovery systems the next frontier and if so, how far are those systems from being developed?

Jones: I think the advanced technologies that are practical solutions, and waste heat recovery fits into that category, will be (available) in the second half of this decade, probably around 2017.

They’re developed enough, proven enough technologies that we are starting with the product development phase of that implementation. It’s no longer a technology that isn’t proven, we now have to develop it for real-world applications.

I think there’ll be ongoing improvements to engines. If you want to put things in two buckets and think about this decade, the second half of the decade will see the introduction of significant new technologies like waste heat recovery.

I think the first step though, in the first half of this decade, is the introduction of 2010 products. Because even though we were driven towards much lower emissions, the technologies are enabling us to deliver better fuel efficiency in 2010.

So that trend where lower emissions meant higher fuel consumption will swing in the other direction. In the next few years, say 2013-2015, we’ll continue to optimize the technology that’s on the engine today. SCR systems will get more precise in their ability to control NOx, combustion technology will continue to advance, variable geometry turbos will continue to advance. Divide the decade into two halves and think of it that way.

TW: There’s been more talk lately of natural gas as a viable fuel in Class 8 applications. Do you expect that to continue?

Jones: All the trends would say we’re going to see a significant increase in interest in natural gas engines. The ISL G 9-litre gas version of the ISL diesel has been in production now for four or five years and it’s been well received in the bus market and in non-attainment areas. I’m guessing we have close to 10,000 ISL Gs in service around the world, many here in North America.

What’s happening today, is gas is now being looked at not just as a way to meet environmental regulations in regional areas, but it’s being considered as a viable alternative to diesel because of economics. When you look at the price of gas versus the price of diesel, there is a significant spread there right now and it’s pretty easy to do the math. For a long-haul truck consuming 15,000-20,000 gallons of fuel per year at $3 per gallon, if you could consume gas at $1-$2 per gallon, it’s not emissions-driven, there’s a good payback.

There are some non-starters like availability of the fuel and range issues but I think many of those things are going to get addressed. We view gas as a key part of our product line and we’re looking hard at where to expand our gas products.

TW: What’s your overall outlook for the North American Class 8 market for the next year?

Jones: I think we saw a lot of information here over the last two days that I would agree with. I think the economy is driving more freight and I believe truckers are starting to use up their available capacity.

I think there’s enough uncertainty in the economy that people generally are very cautious about spending their capital on equipment right now and are continuing to run their older trucks longer, and that’ll continue for a while.

But there are enough things going right, like improving used truck values and in some cases financing becoming more available and I think the risk people perceived with the 2010 products will diminish.

Some of the numbers we saw this week, s
omewhere next year in the 180,000 to 210,000 range in terms of Class 8 production, that’s where most of the industry believes it will be. That barely keeps up with replacement demand.

TW: With Navistar continuing to challenge the effectiveness of SCR and trying to shift focus from fuel economy to total fluid economy, how confident are you that SCR is here to stay?

Jones: Cummins always considers all the technologies, we have to, and we are absolutely convinced that the SCR system we introduced in 2010 will continue to be our cornerstone for the next decade.

There’s no better way to control NOx emissions at the levels we need to control them at than with SCR and I think that as much as it is an emissions control system, I like to talk about it as a fuel economy improvement system.

The other thing I’d say about the fuel economy of an SCR engine is that whatever the improvement is in fuel economy, the 5-6% or wherever it goes moving forward, the other thing that’s likely in that mathematical equation is the price of fuel is going to go up and the cost of DEF is going to go down.

The math is a lot different if fuel is $4 per gallon and DEF is $1.50, so the value of SCR is not really static, it depends on the cost of DEF versus the cost of fuel and we believe that over time, supply and demand and the cost of producing DEF will cause those two fluids to separate even more than today.

TW: Finally, the rising cost of new trucks and engines has been difficult for fleets and owner/operators to absorb. When is it going to end? We can’t keep adding thousands of dollars to the cost of new trucks, can we?

Jones: When there are relatively modest technical advances, as will probably be the case in 2013 and 2014 -there’s probably not going to be any new major emissions systems like EGR, DPFs or SCR -I would say that increases should be modest with a good ROI for the customer.

I think as you get out into advanced technologies, the challenge we’re going to face is to make sure the truck and engine technologies that deliver the significant improvements in fuel economy that we all want to achieve, really do have a good ROI for the trucker. We think the technologies are there to do that, but we’ve got a ways to go.

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