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Jul 1, 2009 12:00 PM

Truck builders battling worst recession in their history

Regulations will have a bigger impact on the trucking industry under the Obama Administration. “We are back in a regulated industry today,” Hebe said. “Worse, this industry has little ability to control its political destiny at this point.”

The industry will see significant regulatory activity on alternative fuels. “Going green isn't a fad anymore,” he said. “We will be forced to use alternative fuels — such as LNG and CNG (liquefied natural gas and compressed natural gas) — because politicians like Harry Reid (Senate Majority Leader) are committed to those fuels. Cost doesn't matter to them. They don't care how it will affect the trucking industry.”

Many states are writing new environmental rules that will impact trucking. For instance, Oregon mandates call for truck fleets to use various alternative fuels, comply with carbon standards, and run various aerodynamic devices to boost fuel economy.

Federal legislative initiatives, such as the labor union card check and the cap-and-trade programs, would have a broad impact on the entire trucking industry, including truck manufacturing. The Waxman-Markey “cap and trade” global warming bill narrowly passed by Congress would impose new taxes and what are essentially government price controls on energy.

Card check (more formally known as the Employee Free Choice Act) would eliminate the secret ballot in unionizing elections. “Advocates in Congress don't care how many jobs will be lost to card check,” Hebe said

He predicted that the surge in regulatory action and new taxes will drive more trucking related manufacturing out of the United States. “Most of the US heavy-duty truck manufacturers now have plants in Mexico,” he said. “Navistar has a plant there. Freightliner just opened a new plant in Saltillo (Coahuila). Component makers are following the truck builders, and jobs are going with the manufacturing. We're also going to see further reduction of medium-duty truck production in the United States. All of this means there will be no big ramp-up in US commercial truck production when the economy recovers.”

Hebe also addressed factors related to the rollout of new diesel engines that comply with the 2010 emission requirements. He said that selective catalytic reduction and advanced exhaust gas recirculation (EGR) are both viable technologies that can meet the emission targets.

“Both technologies work, and that gives fleets a choice,” he said. “At Navistar, we are ready for 2010 with our advanced EGR technology, and we will roll it out in August.”

Regardless of the emission-reduction technology used, the new engines will increase new truck prices by $5,000 to $10,000. “I doubt that fleets will be able to recover any of the additional cost for these engines,” Hebe said. “Smaller production volumes have been predicted for 2010, and that will contribute to the higher cost. Used truck values will be a factor, in part because the used truck export markets are drying up.”

He went on to say that the Environmental Protection Agency rules that mandated development of the 2010 engines were unnecessary. “We didn't need these regulations,” he said. “We've lost sight of our environmental objectives and goals in this country. The cleanest diesel engines in the world are right here in the United States. European diesels are dirtier. They need to clean up their systems and stop criticizing us. We've had cleaner diesel engines since 1998.”