Summary
Many large and smaller size truck buyers are leaving options open regarding buying Navistars’ Advanced Exhaust Gas Recirculation (EGR) and everyone else’s Selective Catalyst Reduction (SCR) for 2010 emission rules. The move by Navistar is probably due to a mix of issues noted, but the 13 v. 15 Liter issue with truck buyers must be thrown into the mix. Our colleague Mr. Moser knows the SCR-EGR issues better than most, so I’ll comment on the buyers’ side.
Analysis
In a recent conference call with John Larkin of Stifel Nicolaus, Max Fuller, co-chairman / CEO of U.S. Xpress Enterprises, Randy Marten, chairman / CEO of Marten Transport, and Harry Muhlschlegel, chairman and CEO of New Century said they were comfortable with SCR and EGR. Over the last number of years, US Xpress has favored Volvo and Freightliner trucks, Marten has mixed it up with Paccar, Volvo and Freightliner and New Century has favored Paccar.
The Navistar Prostar has proven to be a good truck, which can be seen in improving sales numbers. One of our affiliates runs them, and they do very well. An important issue not often discussed comes from a comment by old friend Randy Marten that is so true - that his dad Roger started with International’s and is an option for them for the future. In other words, dealer relationships are key.
What also is at play in the real world is the 13 v. 15 Liter question. The market still heavily favors 15-Liter engines in the Class 8 sector - and the MaxxForce 15 (Caterpillar platform) is not to be available until early calendar year 2011. While they can use Cummins ’07 EGR 15-Liter engines built before 1/1/10 from inventory and can bridge (much-most) of the time until the Navistar 15-Liter is available, there is a “pucker” time therein for several reasons.
Key to the Navistar strategy has to be ramping up the number of customers with their new 13-Liter product. Part of Paccar’s strategy is the same with their new 13-Liter engine, but they have the 15-Liter Cummins in their lineup to allow time for market acceptance of smaller-bore engines (again).
In reality, we don’t think the move to 13-Liter engines is going to happen as quickly as most hope. Additionally, we don’t expect to see the deadline extended - as the greenies are in control.
