By Boris Ladwig, The Republic
bladwig@therepublic.com
A large transportation company that mostly uses Cummins Inc. engines expects to purchase as many trucks this year as every year despite new emissions standards and resulting higher truck prices.
New heavy-duty diesel engine emissions standards took effect Jan. 1, and many industry analysts and truck a decline of North American heavy-duty truck purchases of about 50 percent this year.
Some trucking companies will delay purchases of the new trucks partially because they cost anywhere from $7,000 to $14,000 more.
However, FedEx Freight, which owns more than 9,000 heavy-duty trucks, mostly powered by Cummins engines, expects to buy between 1,000 and 1,500 new trucks this year - about the same as every year, said Dennis Beal, vice president of physical assets for FedEx Freight.
"We believe that's good business ... (and environmentally) the responsible thing to do," he said.
Beal said companies incur a cost when they buy vehicles before a deadline, because essentially they are retiring vehicles before they need to be replaced. "Some people don't calculate that cost," he said. FedEx Freight will replace vehicles this year, as every year, depending on when the old ones need to be replaced. Beal said he expects the big orders to be placed starting at the end of this month.
The company has bought about a dozen trucks with 2007-compliant engines, and Beal said drivers have been happy with the performance - from all engines and engine makers.
"From a performance standpoint, there's been no issue at all," Beal said.
Some trucking fleets also worry about the new engines' fuel economy. A Schneider National Inc. spokesman told The Republic last week that the transportation company expects the new trucks to use about 1.5 percent more fuel than the old ones.
FedEx Freight, too, expects a fuel economy penalty, Beal said, though it is too early to determine the size of that penalty. Fuel economy is affected by wind, temperature and many other factors, Beal said, and therefore has to be calculated over a longer period.
Cummins is FedEx Freight's primary engine supplier, Cummins spokesman Mark Land said. He said the transportation company provides "important business for us."
Cat earnings better
Cummins rival Caterpillar Inc. posted better-than-expected results Friday because of growth outside of North America, on which Cummins, too, is banking this year.
Sales, of roughly $10 billion, rose 7 percent from a year earlier. Sales outside North America rose nearly $900 million, but sales in North America fell by nearly $1 billion.
Profit fell 3 percent to $816 million.
"Despite major headwinds in North America related to housing and the sharp drop in demand for on-highway truck engines, Team Caterpillar stepped up to deliver a solid first quarter," said Chairman and Chief Executive Officer Jim Owens.
"While we expected a sales decline in on-highway truck engines and U.S. housingrelated markets, the continued strength in most of the other industries we serve and exceptional growth outside North America helped us deliver good results in a tough quarter," he said.
Cummins executives also have said that strength in foreign markets and other divisions will help the company overcome lower North American heavy-duty truck sales. The Columbus-based engine maker is projecting this year's financial results to be the second-best in company history.
Caterpillar's shares rose nearly 4.7 percent Friday, closing at $71.82. Cummins' shares fared even better, closing at $77.42, up nearly 5 percent.