EXCLUSIVE: Hebe’s T.O. take on economy, engine regs, and truckers on the ropes

TORONTO — The North American owner-operator as we know him is nearing extinction. 

Keep reading because that’s just one of many candid industry insights offered by the outspoken former Freightliner honcho-turned-Navistar International senior VP, North American sales operations, while in Toronto last week.

Unless he’s married to a strong, dedicated carrier to help him structure payments, get cheaper insurance and have steady access to profitable freight, "the day of the owner-operator as an independent stand-alone is coming to and end," the always provocative Jim Hebe told a group of loyal Canadian customers at a private dinner. "And he’s not coming back."

Hebe says that a combination of demographics, bad economics and stringent regulations, has taken a severe toll on the pool of owner-ops in Canada and the U.S., adding that new hours-of-service rules alone have chased many independent haulers out of the industry already.

"Running legal doesn’t work for a lot of (owner ops’) business models," Hebe said.

As for fleets, the largest truckload carriers are realizing that "big is big enough." Many are downsizing and drastically cutting capacity with no intention of ramping up just for marketshare’s sake in the foreseeable future.

"Fuel is down now, but the days of $4.50-a-gallon diesel has not been forgotten and has changed operations for good."

Addressing his Canadian customers, Navistar’s Jim Hebe
didn’t hold back in explaining the challenges trucking
in North America faces over the next few years

Having spent nearly 40 years around trucks, after growing up in a trucking family, Hebe says the current environment "is the most interesting in my lifetime." Trucking certainly is accustomed to sharp turns in the business cycle, but now "the cycles are coming quicker and the impacts are more severe than ever before."

"Historically cycles are driven mainly by three things — the economy, fuel prices, and legislation. But this is a perfect storm where we’re dealing with all three things nearly at once," says Hebe, who notes that for perhaps the first time, truckers will have to manage a major environmental standard, directly following one of the deepest recessions in history.

"There are no rules, no history, and no looking back to lessons of the past because there aren’t any for what’s happening."

Looking towards 2010, Hebe says there is virtually no appetite for a significant pre-buy — in fact, he forecasts that 2009 and the first part of 2010, at least, will be a "no buy" period. Consequently, truck OEMs, suppliers — and by extension, their service providers — will continue to scale down production capacity, including in southern Ontario.

Unlike the Sterling plant in St. Thomas, Navistar’s Chatham heavy-duty plant hasn’t shut down—although it’s now down to 200 full-time workers and Hebe hinted that new negotiations with the CAW are required to keep the facility competitively viable for the long-term. 

ENGINE, ENGINE No. ’10’: 

The marketing war between Navistar and its competitors over 2010 emissions technology is in full swing, and Hebe certainly wasn’t shy about diving into the debate.

Hebe — who helped make Freightliner one of the largest truckmakers in North America before buying a Navistar dealership in Vancouver and eventually coming full circle as an executive in the company he started his career with — didn’t pull punches when discussing his rivals’ decision to go with selective catalytic reduction (SCR) to meet EPA emission rules.

Navistar is on the ‘right side’ of the engine debate, Hebe insists

It’s of little surprise Navistar is aggressive in its campaign to convince customers, considering the company is somewhat on an island as the only major truckmaker to continue using cooled exhaust gas recirculation (EGR) alone, rather than scaled-back EGR plus SCR.

Hebe poked at the argument that SCR (as it’s intended in North America) has already been successfully proven in Europe, since treatment of SCR across the pond has not included diesel particulate filters.

"(SCR) could be the biggest false-start in trucking history," said Hebe, who predicts emerging technologies will soon come online without the need to use a urea-based aftertreatment catalyst like diesel exhaust fluid (DEF).

Although EGR in 2010 is expected to carry a fuel economy penalty, Hebe claims the 3 to 4 percent fuel-savings offered by SCR are overstated when factoring in the $8,000 premium per engine, the added cost of DEF, payload lost to an additional fitted tank, and drivers’ responsibility to ensure the truck is compliant.

"For the first time ever, buyers will have a choice of (engine) technology," he says. "And for the first time ever (with SCR), the transfer of compliance falls from OEM to the fleet."

Naturally, Navistar’s competitors disagree, explaining that the requirement for drivers is no more burdensome than "filling up with windshield washer fluid." Representatives of Volvo and Daimler Trucks North America, in particular, have in the past described Navistar’s campaign as "fear mongering."

Hoping to further clear up industry scuttlebutt, Hebe brought up Navistar’s petition to the EPA, which asked the agency to relax the Jan. 1, 2010 deadline. He stressed that Navistar has no problem meeting the deadline, but simply proposed some breathing room to continue selling current engines into 2010 so as to give fleets more time to test the new technology in real-world applications.

2007 engines may not have the NOx-reduction prowess that next year’s engines promise, but any new, clean engine hitting the highways in this soft market is a good thing for the environment and the industry, he explained.

"About 69 percent of all trucks in North America do not comply with any emissions standard at all (pre-2002)," he said. "Those are the trucks we need to get rid of."

 

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