GOTHENBURG, Sweden – As president and CEO of Volvo Trucks North America, Inc. , Peter Karlsten must wrestle with the new manufacturing strategies necessitated by customer demands for increasingly sophisticated products brought to market at increasingly faster speeds and the corporate need to better leverage economies of scale.

Truck News caught up with Karlsten in Gothenburg, Sweden, and this is part two of that interview.

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TN: You will continue using cooled exhaust-gas recirculation on the diesels built as of Jan. 1, 2007. Why will EGR still be right for the North American market in 2007?

PK: EGR has proven very reliable and meets emissions regulations while meeting customer performance expectations. The development of the EPA’07 EGR solution will draw upon Volvo’s significant real-world experience with EGR in our EPA’02 compliant VED12 engine, and Volvo’s technical expertise and volume base as part of the Volvo Group, the world’s largest producer of heavy-duty diesel engines.

TN: So, what WILL be different about the engines in 2007?

PK: As we discussed recently in Sweden with the media, Volvo’s 2007 solution will include advanced, high-pressure fuel injection with multiple injections per stroke, and a single-stage variable geometry turbocharger (VGT). We’ll have stronger base engine components to handle internal loads and a high-capacity cooling system fully integrated into truck design. As mentioned earlier, we’ll use our proven EGR valve technology and a diesel particulate filter (DPF) integrated into truck design. We’ll also have closed crankcase ventilation and onboard diagnostics (OBD) integrated with engine controls.

We are very confident that Volvo’s engine technology, experience and resources will make 2007 a “non-event” for our customers.

TN: Will fuel consumption take another hit?

PK: Our testing so far indicates that, in general, fuel economy is on track to be as good or better than current engines. In addition, we have outstanding engine response for excellent driveability.

TN: It has been reported that the 2002 engines cost about $5,000 more than their predecessors. What price should engine buyers expect for ’07?

PK: It’s too soon to say at this point, but we do expect there will be added cost to the customer.

TN: You feel strongly that EGR is the right technology for NA. Why is SCR, in your view, NOT right for the North American market?

PK: We haven’t abandoned our research into SCR, which is the Volvo Group’s technology path for Europe. There may still be a role for SCR in North America at some point in the future. But as we looked at the total picture – our current experience with EGR and the work that would need to be done on the urea infrastructure for SCR, among other things – we decided that, on balance, EGR is the best solution at this time for our customers.

TN: Are there any applications in North America where you see SCR making sense, and if so, do you have any plans to offer SCR for such applications?

PK: We continue to believe that SCR is a viable option in North America, but it is not in our strategy for 2007.

TN: It must hurt a bit that you can’t employ the same engine technologies here and in Europe. Is there anything that can be done to alleviate that?

PK: The longer-term answer is to encourage the global harmonization of environmental standards, among North America, Europe and Asia.

TN: At a recent TMC meeting 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. If the industry is headed this way again, does it concern you? Are we headed for another pre-buy?

PK: I’m very concerned about a potential pre-buy for 2007.

A pre-buy is not a good situation for anybody; everybody loses with a pre-buy. The cost of the engines will increase, yes, but that is not a very large increase compared to the other costs involved in a pre-buy. Fleets disrupt their own performance when they pre-buy.

They change their trade cycles, which affects their trade-in values and their capital expenditures. From a supplier point of view, a pre-buy can be devastating, as seen by the impact the 2002 pre-buy had – many people were laid off after the pre-buy ended.

But let’s not forget the environmental costs of a pre-buy. The environmental benefits of the new engines, in this case significantly reduced emissions, are delayed for years.

We have an obligation to our children and grandchildren to make sure they have clean air to breathe.

TN: As you pointed out, the engine makers that did meet the 2002 deadline had to run plants around the clock to meet the demand, and then needed to lay off many of the workers once the new standards came into force. I’m sure you wouldn’t want to go through that again if you could avoid it. What needs to be done to avoid it?

PK: This industry needs to avoid repeating its past mistakes. That means we should not add new capacity to meet pre-buy demand. And, we continue to reassure our customers that we think 2007 will be a non-event that will have little impact on their operations.