How to Recover Tier 4 Costs

How to Recover Tier 4 Costs

November 5, 2012

Asset managers have 13 months until Tier 4-Final hits the bulk of construction equipment, those with diesel engines between 174 and 751 horsepower, in January 2014. (Diesels between 75 and 173 horsepower have to comply by January 2015.) That gives them 13 months to determine how to manage new engine technology, how to budget for the increases in machine cost, and how to deliver the best equipment rates to their organizations in light of those costs.

As this year ends, we know, finally, that urea is indeed going to be the new fluid in every fleet’s maintenance management operations. Last month, Caterpillar revealed its SCR solution, and earlier Navistar abandoned Advanced EGR for SCR.  Managers need to learn about and then determine procedures for the storage, delivery and use of this fluid, more commonly known as diesel exhaust fluid, or DEF.

Equipment manufacturers and dealers assure users that the fluid will not cause problems, either in use or in maintenance management. They also assure users that Tier 4 engine technology will not cause changes in maintenance strategies. Dealer technicians either have had or will have substantial training in the new engine hardware. That training will certainly trickle down to fleet technicians, but those who ask will probably receive it more quickly than those who wait.

Machine costs will continue to reflect the investment engine builders have made in order to comply with the EPA’s mandates on emissions. Billions of dollars have been spent on these technologies, and billions more on the machine engineering to accept the additional hardware under the hood. That investment will have to be recovered.

Fleet owners will be stuck with the bulk of those costs, passed on in machine prices. Acquisition costs will influence owning costs. Operating costs will be affected by the introduction of DEF, maintenance of diesel particulate filters (DPFs), new lubricants, and recalculation of preventive maintance intervals.

The pressure will be upon fleet asset managers to justify the expense, determine an accurate return on the investment, and generate an accurate and competitive rate that can be built into project estimates.

The magic bullet, according to many equipment manufacturers, is telematics. Telematics providers, OEMs and third-party, have been touting the costs savings that telematics can deliver. Now, they are suggesting those savings might just offset the costs of Tier 4. Telematics enable managers to track fuel usage, more accurately plan logistics, and keep a keener eye on machine health.

Before the year ends, fleet-asset managers would be wise to evaluate how well their fleets are prepared for new engine techology. The increased costs are on the horizon, and those costs will have to be recovered.