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BIG developments in face of global crisis

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Global Focus

As Navistar and Caterpillar join forces, Daimler AG and Hero call it quits on their proposed joint venture. The global financial crisis has sent vehicle sales plunging into freefall in many parts of the world. Following a 10-year period of uninterrupted growth, the Australian truck market has not escaped the impact of reduced demand,

and it has recently been reported that two of the truck manufacturing operations operating Down Under have taken measures to reduce costs and production capacities in line with slowing sales volumes.

The newly announced global commercial truck joint venture between Navistar International and Caterpillar promises to bring some interesting new products to market, and may eventually provide a successor to the long-serving International 9800 Series

Paccar Australia, whose Kenworth brand has enjoyed an extended run at the top of the heavy-duty segment of the local market, recently shed 125 jobs at its Bayswater manufacturing facility in Victoria, while Volvo Commercial Vehicles Australia, located in Brisbane, which is responsible for the Volvo and Mack truck brands in the region, has retrenched a total of 177 permanent and contract workers since December 2008.

The Australian government, however, has reacted to the situation by announcing a $AUS2.7 billion (R17.7 billion) initiative, named the Small Business and General Business Tax Break package, which is expected to have a stimulatory effect on truck sales. This programme, intended to assist small and medium businesses in upgrading their equipment, is a key component of the wider-ranging $AUS42 billion (R275 billion) Nation Building and Jobs Plan. It provides a 30% investment allowance in respect of legally binding contracts for the acquisition of a new piece of equipment negotiated between December 2008 and June 2009, with final ‘installation’ of the item to be effected by no later than the end of June 2010. Recognising the rather short window of opportunity that this initiative has created, an alternative provision will allow a 10% investment allowance on contracts negotiated between July 2009 and December 2009, with delivery of the subsidised piece of equipment to take place before the end of December 2010. These incentives are supplemental to the normal depreciation allowances for assets provided under Australian tax law, and have no impact on the treatment of asset disposals in terms of that law.

The incentive is available to small businesses, with an annual turnover of $AUS2 million (R13 million) or less, purchasing items valued at more than $AUS1 000 (R6 500), or businesses with an annual turnover exceeding

pic 1 - The newly announced global commercial truck joint venture between Navistar International and Caterpillar promises to bring some interesting new products to market, and may eventually provide a successor to the long-serving International 9800 Series.

(R13 million), purchasing items valued at more than $AUS10 000 (R65 000). This means that smaller operators can access the tax break when purchasing replacement engines, transmissions or even bull bars that cost more than the prescribed minimum value, as well as complete vehicles. The incentive can also be used for the acquisition of ex-demonstrator vehicles, which are deemed as ‘new’ for the purposes of the tax break, and company cars, although the maximum allowed value of the latter is capped in terms of Australian tax law at $AUS57 180 (R374 000), and the incentive cannot, therefore, exceed 30% of this value. This tax concession also does not allow for the apportionment of any non-business use of the asset purchased in terms of the scheme.

NAVISTAR AND CATERPILLAR RATCHET UP THEIR JOINT VENTURE

Last August, Global FOCUS started reporting on emerging co-operation between Navistar International Corporation of Warrenville, and Caterpillar of Peoria, both in the American state of Illinois. Initially, this took the form of a memorandum of understanding covering the technology development for global market engine platforms, and the targeted introduction, in 2010, of a Caterpillar-branded severe-service, heavy-duty truck range for the North American market, aimed at the road construction, civil engineering and oilfield sectors. Subsequently, we learned that Navistar is to integrate Caterpillar’s C-15 diesel engine into its MaxxForce engine lineup, although a late start made in adapting this engine to comply with the EPA 2010 emission standards will preclude its use in Navistar’sUS-market ProStar and LoneStar trucks until some time after the initial implementation of these regulations in 2010.

Early in April, the two companies announced the formal signing of a definitive agreement more clearly describing the future direction that will be taken by their alliance. This agreement now confirms the production of Caterpillar-branded heavy-duty vocational trucks (i.e. for specific applications, rather than general goods haulage) for the North American market, plus the formation of a 50/50 joint venture to pursue global commercial truck opportunities outside of North America. The detail of the announcement clearly defines the latter component of the agreement as covering “world-class, on-highway trucks, through the unequalled sales and service networks of Cat and International dealers around the world”, and goes on to say: “Caterpillar looks forward to becoming a significant player in the global on-highway truck market.” This clearly indicates an entirely new, and almost unprecedented, direction for the Caterpillar brand, which, up until now, has been mainly active in the earthmoving and engine manufacturing fields.

Frequent readers may remember a time when Caterpillar’s South African distributors sold Oshkosh trucks into this market. Initially, they were closely identified with the Caterpillar brand, and many were used to haul low-loading semi-trailers for the on-road conveyance of earthmoving equipment. The early models exclusively used Cat power units, but later, when the range was expanded from the original conventional cab R-Series line-up to include the stub-nosed S-Series and full-forward E-Series, the local preference for Cummins engines in long-haul vehicles was recognised. However, Oshkosh, together with several other prominent American truck brands, disappeared from the local scene around 1983, when Atlantis diesel engine fitment became mandatory. However, it now appears that the newly announced International/Cat alliance may well re-establish the connection between the iconic Cat name and trucking at the southernmost tip of Africa. It is particularly significant that the text of the announcement also specifically mentions that the product range will include both aero nose (i.e. aerodynamic conventional) and cab-over designs.

United States truck manufacturers have traditionally encountered serious difficulty when attempting to sell their premium bonneted trucks into foreign markets, where dimensional and mass distribution legislation have been written to favour the forward-control products that typically emanate from Europe and Japan. Navistar International has persevered with its Cabover 9800 Series products in several export markets, despite negligible demand at home, in order to compete with Freightliner’s Argosy, which, despite having its design roots set firmly in the latter part of the 20th Century, is still the most modern-styled, forward-control (cabover), premium truck-tractor available from a North American manufacturer.

The Caterpillar-branded heavy-duty vocational trucks, destined for the North American market, are due to be unveiled in late 2010, and will be manufactured at Navistar’s Garland, Texas, facility from 2011 onwards. They are to be distributed and serviced through Caterpillar’s dealer network, and will incorporate some shared componentry with Caterpillar equipment used in the earthmoving, quarry, waste, mining, construction, logging and road building vocations, thereby facilitating their ready acceptance by the market.

global focusAs commented in previous reports, it has recently become clear that Navistar International has a strategy to increase its global truck sales footprint. Gaining access to Caterpillar’s distribution network – particularly in markets where Navistar has not historically been active, or the International brand has been ineffectively represented – could greatly facilitate the achievement of this objective. This will add to the momentum gained from other cooperative arrangements, including the well-publicised engine manufacturing relationship with MAN Nutzfahrzeuge AG, the truck-building joint venture with Mahindra & Mahindra, which promises to roll out well beyond the shores of its native India, and the Blue Diamond medium truck joint venture with Ford, in which both companies sell similar medium-truck products for the North American market, manufactured by Navistar, with their own unique branding.

INDIAN NEWS UPDATE

In July 2008, Global FOCUS reported on the formation of a 60/40 joint venture (JV) between Daimler AG of Germany and the Hero Group of New Delhi, India, which was to have been known as Daimler Hero Motor Corporation (DHMC). The intention was that the DHMC operation would produce, from 2010, light-, medium- and heavy-duty commercial vehicles at an initial rate of 70 000 units per annum, at a manufacturing site in Chennai. The JV was envisaged to cover the local production of commercial vehicles for the Indian market, with exports to selected foreign countries expected to follow later.

However, on 16 April 2009, a subsequent announcement indicated that this JV was to be abandoned, because of the economic situation leading to weakness in the Indian market. Consequently, Daimler AG has decided to proceed with the Indian truck-making project as the sole shareholder, while the Hero Group reverted to concentrating on its core business as the world’s largest motorcycle manufacturer. Daimler’s decision to go it alone and develop a new product generation in India will necessitate a new name for the erstwhile DHMC operation, and the investment of more than €700 million (R8.1 billion) over the next four years.

Statements issued by Daimler at the time of the announcement enunciate a clear commitment to participate more fully in the market for commercial vehicles in India, based on the local production of a dedicated product range.

Tata Motors is reported to be working on a new global range of medium- and heavy-duty trucks, which is expected to make its initial public debut around the time that these words appear in print. It is expected that the introduction of this new series will be utilised to consolidate the future efforts of Tata’s Indian and South Korean truck-building operations into a rationalised product line-up. Power outputs ranging from 185 to 565 hp (138 to 420 kW) have been mentioned, with the higher outputs clearly signifying interest in export sales potential. The new range is expected to be some 5 to 10% more costly than Tata’s present Indian product line-up, so it is highly likely that the current models will remain in production, as a parallel ‘value’ series, until global economic conditions improve.

It has also recently been announced that Hino Motors plans to enter the Indian market in its own right. This follows the reported termination of an earlier technology-sharing arrangement with second-ranked Indian truck and bus manufacturer, Ashok Leyland. The Hino products will initially be sourced from Thailand, but there are plans to initiate local production once this step can be justified by sales volume achievement. Hino’s Indian network will be set up in conjunction with Japanese trading house Marubeni, and will, presumably, be independent of any existing Toyota Group operation on the subcontinent.

It now appears that the newly announced International/Cat alliance may well re-establish the connection between the iconic Cat name and trucking at the southernmost tip of Africa

PUSHING THE ENVELOPE

From time to time, Global FOCUS encounters media reports covering efforts by pressure groups and individuals to increase the legal dimensions and payloads of vehicles in various countries around the world. One of the most uniformly regulated areas is Europe, where most countries enforce an overall length limit of 18.75 m, a height restriction of 4 m, and a maximum gross combination mass of 44 t for vehicles operating across national borders. Some European nations, such as Finland and Sweden, allow 60-t, all-up masses with lengths of 24 and 25.25 m, respectively, for combinations running domestically, while various others have sanctioned short-term experiments with oversize and overweight combinations. The motivation for these trials is generally to test the potential for reducing the absolute number of rigs occupying space on heavily congested roads, improve the collective CO2 footprint and achieve higher levels of vehicle productivity.

In less densely populated countries, particularly those with a British colonial past, multi-trailer combination sets have become standard practice. In particular, one design concept, originally credited to Dan Keeney of southern California, was to gain traction in Canada, New Zealand and, eventually, Australia and South Africa. In 1947, Keeney coupled two semi-trailers together using a fifth wheel mounted on the rear chassis of the foremost A-Trailer, and so created the configuration that became known as the B-Train, although, for mainly political reasons (road trains can be a sensitive issue), the Australian version was rechristened the B-Double, while South Africa adopted the name, interlink.

European operators have looked with envious eyes at these rigs, and one in particular, Dick Denby of Lincoln in the United Kingdom, has actively lobbied for the local adoption of a similar concept for some time. In 2004, his company, Denby Transport Limited, commissioned the prototype build of what can be best described as a B-Train, specially adapted to meet British manoeuvrability legislative requirements. These rules require that a heavy truck must be able to negotiate a turning corridor with an inner radius of 5.3 m, and an outside radius of 12.5 m. Clearly, this 25.25-m, 60-t GCM, tandem-tridem test rig was well oversize in terms of European Union dimensional limits. In order to meet the turning circle requirements, the widespread tandem axle bogie mounted on the first- or A-Trailer-element, has been adapted to steer each axle independently on command from sensors mounted above the truck-tractor’s rear bogie. The test unit, dubbed Eco-Link, was configured for an A-Trailer internal loading length of 7.82 m, plus 13.6 m on the tridem axle B-Trailer.

Features of the combination include wide, super-single tyres on the trailers, hydraulic ‘command steer’ of the rearmost ‘central’ axle, mechanical slaving of its forward neighbour, and electronic control of action delay, speed cut-out, skid correction and reverse cancellation of the trailer steering. Working with a standard three-axled, 6x2, twin-steer, 480 bhp (360 kW) Scania trucktractor, the rig achieves just over 37-t payload, and is claimed to use only 23% more fuel than the same tractor working at the legal limit of 44 t gross, and carrying a 28-t payload.

As yet, Dick Denby has not made any tangible progress with getting this design legalised, but, now retired from his family’s business, he is fighting on. The test unit has undergone extensive testing at the United Kingdom’s Motor Industry Research Association’s test facility, and reportedly returned excellent braking and stability results. Denby is now said to be planning a second, more refined version of the Eco-Link, with computer control of both steering trailer axles.

 


Global FOCUS is a monthly update of international news relating to the commercial vehicle industry. It is compiled exclusively for FOCUS by Frank Beeton of Econometrix.

 

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