International expects minimal impact from dropping DDC

"We're going to lose some customers, that's a given, but we expect to win back more than we lose from this decision," explained Steve Keate, president of International's truck group in a conference call with reporters today. "We're not the only ones making this kind of decision either; the other truck manufacturers are doing it, too."

He said that means all customers will have to take a fresh look at the truck engine and truck OEM combinations they've used to this point.

Keate added that currently 15% of its new Class 8 trucks are equipped with DDC engines, with Cummins providing 55% and Caterpillar about 30%. International has signed long-term deals with both Cummins and Caterpillar to be its engine suppliers through late 2006 and early 2007.

According to Keate, part of the reason for dropping DDC as one of its suppliers is due to its ownership by DaimlerChrysler, which also owns major truck competitor Freightliner LLC. Another issue is that having just two engine suppliers reduces the costs associated with engineering their products into International's trucks, he said.

For example, Keate noted that for its 9000 Series tractors, having just two engine suppliers to deal with has allowed International to develop just one radiator-cooling package for those models.

Keate noted that International expects new 2002 emission-compliant engines, due out in October, will cost an extra $3,000 to $5,000 and will negatively impact fuel economy anywhere from 1% to 5%. He added that the fuel economy impact might be negated depending on what engines customers currently use.

For example, he said upgrading from a Cummins N-14 to a 2002 Cummins ISX will result in no fuel economy loss, simply because of the improved technology in the 2002 engine model.

International also plans to cap its build rate at 150 trucks a day by August of this year and will not go above that level, largely to head off any pre-buy initiatives from fleets seeking to avoid buying 2002 emission-compliant engines, according to Keate.