OUTLOOK 08: Shifting Specs

For Paul Will, deciding whether or not to change his fleet's tractor specs hinges on how much overall value they bring to the bottom line. If the specs save more money over the long term than their upfront cost, then he makes the change with little hesitation. But if value is in doubt in any area driver acceptance or reduced residuals, for example the change will be put on ice. Globally speaking,

For Paul Will, deciding whether or not to change his fleet's tractor specs hinges on how much overall value they bring to the bottom line. If the specs save more money over the long term than their upfront cost, then he makes the change with little hesitation. But if value is in doubt in any area — driver acceptance or reduced residuals, for example — the change will be put on ice.

“Globally speaking, fuel costs are driving big changes to equipment specifications today,” says Will, vice chairman and CFO of truckload carrier Celadon Group. “While specs improving fuel economy may cost more, that cost is outweighed by long-term fuel savings,” he adds. “That's why we're going with aluminum vs. steel wheels and fuel tank skirts on our trucks, for example. We're adding aerodynamic improvements where we can.”

That's also why Celadon is moving to International ProStar and Freightliner Cascadia tractors. “Both offer much more fuel-efficient, aerodynamic designs compared to the models we used to use, the 9400 and Columbia, respectively,” he explains.

HITS & MISSES

However, the value proposition is far less clear, at least to Celadon, when it comes to options such as automated transmissions, wide-base tires and auxiliary power units (APUs), notes Will.

“Some fleets are moving to automated transmissions; we're not,” he says. “We're sticking with 10-speed manuals because we've found using automated transmissions may limit the number of drivers we can recruit. If there's no shifting, it's ‘not a man's truck,’” he says. “There's also the cost. The automated [transmissions] we've looked at can cost $3,000 to $5,000 more compared to a manual on the front end, but they also lose us $1,000 to $2,000 on the back end in terms of the truck's residual value as there isn't that much demand for them.”

Wide-base tires aren't getting the nod either, for although they're considered more fuel efficient, nationwide availability isn't there yet. “If a truck goes down with a wide-base flat, it's down. It's stuck on the side of the road and can't limp in for repair,” says Will. “We also have to remove them and go back to duals when we sell the truck; there's no traction yet in the market.”

Celadon is also hesitant to invest in diesel-powered APUs, since many states are planning to regulate APU emissions to the same standard as truck engines. “They also cost $5,000 to $8,000 and right now there's no residual value to them,” Will adds. “The best solution we see is a battery-powered APU, but none so far have really proved themselves.”

In the end, all of these spec'ing decisions can be grouped under one umbrella, says Jeff Sass, marketing director for Kenworth Truck Co.: life cycle costs. “This ranges from fuel economy to insurance liability to resale value to driver retention,” he explains. “Any specs that provide a competitive advantage to lower life cycle costs improve the competitiveness and profitability of the fleet. At this point, large for-hire fleets have been most active in making changes to their equipment specs, but all fleet managers are scrutinizing their specs on a daily basis now.”

FUEL LEADS THE WAY

Fuel economy is by far the most dominant spec'ing criteria in trucking at the moment. And it's no wonder: The industry's fuel bill climbed from $65.9 billion in 2004 to an estimated $110.1 billion this year, according to the American Trucking Assns. (ATA). “For many motor carriers, fuel represents the second-highest operating expense after driver wages, accounting for up to 25% of total operating expenses,” says Bill Graves, ATA's president and CEO.

Consequently, demand for aerodynamically shaped tractor exteriors is rising quickly, notes Kevin Gustainis, director of sales for Peterbilt Motor Co. “In 2004, 20% of our highway tractor orders were for aerodynamic cabs. In 2006, that rose to 30%. We're projecting nearly 50% by 2012,” he says.

“There's been a gradual change from traditional models to aerodynamic models over the past five years,” adds Kenworth's Sass. “We expect that with the intensified focus on fuel economy and with diesel prices exceeding $3 per gallon, we will see the migration from traditional to aerodynamic intensify as fleets minimize the overall life cycle cost of their trucks.”

Bob Weber, chief engineer-heavy vehicles at International Truck & Engine Corp., says that specs are changing quickly, precisely because of the rise in fuel and operating costs.

Ed Saxman, product manager-powertrain for Volvo Trucks North America, points out that many fleets are experimenting with other technologies specifically to combat the rapid rise in fuel prices. “Fuel economy is at the forefront of everyone's mind. All of a sudden, fleets are spending more on fuel than drivers, and the boss is asking, what do we do about this? As a result, more fleets are trying out wide-base tires and automated transmissions, simply because of the potential fuel savings,” he says.

LITMUS TEST

But International's Weber emphasizes that such spec changes must still meet a rigorous economic litmus test before getting the green light. “Wide-base tires can give you up to 4% better fuel economy, yet their miles-to-replacement are still much lower than traditional duals,” he points out. “Also, regional P&D fleets that require a lot of shifting may move far more strongly to automated transmissions than longhaul highway fleets, where a 10-speed manual still satisfies most applications,” he adds.

“You need to really think about how spec'ing changes impact your overall business, not just fuel economy,” adds Keith Harrington, heavy-duty marketing manager for Daimler Trucks North America, formerly Freightliner LLC. “That means bringing all the critical issues to the forefront — fuel savings, driver retention and comfort, vehicle cost, residual value, etc.”

COMPLETE PACKAGE

Bruce Stockton, vp-maintenance and asset management for Contract Freighters Inc. (CFI), now a subsidiary of Con-way Truckload, says his fleet's truck specs are being altered by a combination of factors: driver needs, fuel economy and cost of operation. Creating the right truck spec package for the future means balancing those factors and revisiting a fleet's spec'ing choices annually.

“We literally build a new truck every year, changing those specs that make sense in terms of fuel savings, driver comfort and acceptance, and operating costs,” Stockton explains. “Drivers are in many cases our best source of feedback and ideas because they are out there in the trucks every day, while we're behind a desk.”

Prior to its acquisition by Con-way, CFI's 2,100 company-owned fleet of trucks were a mix of Kenworth T-600, T-800 and T-2000 tractors that averaged between 6.5 to 7 mpg, with some drivers able to log 8 mpg. The carrier spec'd Michelin X-One wide base tires on its tractors, gaining a fuel economy improvement of 2/10th of a mile per gallon.

Reducing tractor weight is another factor Stockton believes is key to improving CFI's fuel economy profile. “Over the last two years, we've cut 675 lb. out,” he says. “We did it by switching to the wide-base tires, but also by changing little things. We deleted the corner fenders in front of the drive-axle tires, saving 75 lb. We're going to a horizontal instead of vertical exhaust, which will save 80 to 100 lb. And our drivers suggested we remove the deck plate step because they never used it.”

NEVER SAY NEVER

Economics are never far from CFI's spec'ing calculations. The carrier tried automated transmissions in 2000 and 2001, yet found no appreciable fuel savings or accident reduction statistics to offset the 5% increase those components added to the base price of its trucks.

However, Stockton also is a firm believer in never saying “never.” “Today the software controlling those transmissions is very different; it controls the truck just like a really good driver would,” he explains. “That's what really improves fuel economy, and that's why I think you'll see them come back into our fleet in the future.”

Cutting engine idling time is what will really boost fuel savings in a major way in the near term, so CFI is looking hard at an APU-style system, specifically Kenworth's battery-based Clean Power System. “Reducing idle time is a huge piece of our spec'ing challenge long term,” he says. We don't have impressive idle time numbers right now. We're about 40% idle time without an APU. But we want a system that doesn't produce emissions — which is why we're looking at battery power — and is installed at the factory.”

Having a factory-built no-idle system should positively impact the residual value of the truck, Stockton thinks.

But other issues that need to be addressed are the additional weight and maintenance needs such a component adds to CFI's tractors, both of which affect vehicle life cycle cost. “It will affect our cost matrix, but it's still something that can pay off for us down the road,” he says. “That's why we re-examine our spec'ing options every year.”

Changing the mix

A number of fleets have begun to change the mix of tractor types they spec, due largely to the revised hours-of-service (HOS) regulations that went into effect in 2004. “We're definitely seeing more daycab orders due to HOS as fleets break up many longhaul routes,” says Keith Harrington, heavy-duty marketing manager for Daimler Trucks North America. “In the past, daycabs made up 15% of our volume. Now they are 30%.”

However, Frank Bio, product manager-trucks for Volvo Trucks North America, points out that this trend may or may not accelerate in 2008 because of the controversy surrounding the HOS rules. With the rules still under legal attack on several fronts, fleets remain leery of committing themselves to a particular vehicle type.

“The HOS discussion centers around whether you use relays or team drivers to move your freight,” says Bio. “If the final HOS rules favor teams, then we'll see orders pick up for bigger sleepers, ones that comfortably fit two people. If they end up favoring a relay system, we'll see fleets go to more daycabs as they change their distribution methods to more regional runs.”

This equipment re-analysis is also being extended to trailers, Bio reports. “A funny thing is occurring: Many private fleets we talk to are looking to go to tandem trailers so they can increase the productivity of their drivers by hauling more. Conversely, many LTLs we hear from are looking to use more single trailers. In both cases, with payloads going up, fleets will be looking to spec higher horsepower engines.”

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