The New Year and a New Era Begin

For those of you that have read my column in the past, you know I have certain views of what and how things should be done in our industry and by our government. I am an avowed free-marketer and have always felt that the great minds and resources in the private sector can, and will, solve most problems faced - if the government can find a way to step aside once in a while. Many of our greatest achievements in this industry have been driven by the innovative minds in the industry. For the purpose of this discussion, “industry” means the entire value-chain; truck operators, maintenance and repair professionals, parts distributors, truck dealers, parts suppliers, truck OEMs and others.

Stopping a truck quickly is something that makes great sense. Stopping a truck effectively and efficiently makes good business sense. There is a difference.

If it were mandated by federal law, our truck makers and brake systems suppliers could develop a heavy commercial vehicle that could stop as fast as a small car going 60 mph, in let’s say, 100 feet. It would be very expensive, but it could be done. That would make good sense.

If that same truck was pulling a trailer with 40,000 pounds of freight in it, the truck-tractor part might stop in 100 feet, but the trailer and freight would probably have its own ideas about complying with that law. Newton’s law would win over whatever government laws were written and the trailer and freight would make up its own mind about how fast it would stop. It would probably roll right over and smash the quick-stopping truck. That would be bad for business.

There was recently a political story about a young congressional staffer who, when confronted with a story similar to the above, stated, “Well; now that we have a huge majority in Congress, we can change that Newton’s Law thing.”

True or not true, that is a broad generalization of how an empowered majority government views things. Regardless of private sector concerns for the economics of some of the more bizarre things we see written into legislation, much of it makes its way into law, making all industry and employment suffer as a result.

We have been through the EPA mandated emissions regulations of 2002 to 2010, where diesel exhaust particulates and NOx have been reduced by 98 percent, to a point where a 2010 diesel engine exhaust is cleaner than the ambient air in many cities. This was extremely costly and difficult for the industry to comply with, but it is now complete and working, at a cost of about $25,000+ per truck.

Now we are coping with a new law where medium and heavy commercial vehicles will be required to improve fuel economy. This was mandated in legislation a couple of years back, when Congress passed light vehicle fuel economy standards and ordered a study by the National Academy of Sciences to conduct a two-year study and come back with a recommendation on what it should look like for heavy duty vehicles.

During that period, the EPA was given legal authority to regulate CO2 as a hazardous material. We all exhale CO2, plants live on CO2 and everything that burns emits CO2, including diesel engines.

As a result of the study and some serious pressure from the administration, EPA and NHTSA are currently working on a combined regulation for CO2 and fuel economy standards for heavy commercial vehicles.

If I know anything about the truck industry, I know that you can ask any truck owner, with one or 15,000 trucks, how much diesel fuel did you buy last year, month, week, yesterday? They would all ask you: “Gallons or dollars?” They would know both, probably off the top of their heads.

Diesel fuel is the biggest single expense item that most truck operators have in their businesses. All of them work diligently to squeeze every mile out of every tank of fuel with such tools as new fuel-efficient trucks, driver incentives and rewards, amazing new technology for idle limiting and fuel economy, light-weighting, aerodynamics, etc.

The idea that a government mandate will create greater progress than the cost-of-fuel incentive seems a little odd. But that is the way they see things in Washington, including the “odd” part.

Throwing carbon dioxide output reduction into that mix seems a little excessive, but the two are closely related. The more fuel you consume in today’s truck, the greater the carbon output. So it seems to make sense that they should be tied together, sort of.

What makes little sense is that the latest mandate is to implement a significant fuel economy and carbon emissions improvement standard within the next two years. The problem is the unintended consequences that always seem to accompany mandates.   First, it will cost significantly more to field a new truck with the ability to meet the fuel economy and CO2 standards.

Second, truck owners and major fleets will make a value judgment on their cost of operation for new vehicles vs. keeping their old ones. Most will hang on to the old ones. That will cause another huge drop in new truck sales, like the 2007 EPA mandate did by more than 70 percent.

That scenario will most certainly reoccur when the new regulations come into effect. The downside is that very few of the new vehicles will be purchased so very little new technologies will hit the field. Trucks will be kept for longer periods of time, causing the degradation of low-emission solutions due to age and wear. Service and maintenance will be booming, for those in that business.

Trucking is a business, and a business runs efficiently or ceases to exist.

Fuel economy and emissions have greatly improved over the past few years as the newer engines enter the field. We were already on a path for improved fuel economy over the past 20 years, from 2½ to 3 mpg to 7 mpg in most operations. This was driven by cost effectiveness requirements of the truck owners.

With that improved fuel economy comes a significant reduction in carbon emissions; with or without the regulation.

Infrastructure improvements could greatly reduce fuel consumption and emissions of cars and trucks. This is a nation that grew and currently thrives because of our incredible mobility.

Drive down the Kennedy Expressway in Chicago sometime and try to envision it with an average speed of 55 mph for all vehicles. If there were sufficient roads and infrastructure to accommodate today’s vehicle population, trucks and cars would spend little time in gridlocked traffic.

Excessive idling is another target of the law makers. Most idling is done sitting in traffic and consumes massive amounts of fuel and generates tons of CO2.

Perhaps the government could try to use the hundreds of billions collected in fuel taxes to build the roads and bridges that they always told us they were collecting it for - but now I am dreaming.

However, building roads and bridges is a legitimate function for the government. Government should not be telling a fleet owner that he needs to get better fuel economy. 

That is the equivalent of telling a 16-year-old boy that he is mandated by law to look at pretty girls. 

As all three of my boys would have told me at that age: “Duh!”     

 

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Regardless of private sector concerns for the economics of some of the more bizarre things written into legislation, much of it makes its way into law, and all industry and employment suffers as a result.

 

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Tim Kraus is president and chief operations officer of the Heavy Duty Manufacturers Association (HDMA). HDMA is the heavy duty market segment association of the Motor & Equipment Manufacturers Associations (MEMA). HDMA exclusively represents the interests and serves heavy duty product manufacturers. Prior to joining HDMA, Kraus served as director of sales and marketing at Triseal Corp.

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