Equipment Type

Component Integration in Heavy Trucks

Vertical integration, where the OEM decides what goes into its trucks, is gaining ground as heavy truck builders advance their component manufacturing plans or strike new supplier agreements.

October 01, 2007

International Truck and Engine, one of the more vertically integrated manufacturers, also enables upfitters to easily hook up specialty equipment with its Diamond Logic multiplexed wiring system. 

The PX-6, a rebadged Cummins ISB with grey paint and different accessories, is the only engine in Kenworth and Peterbilt LCF trucks. That and the PX-8, a/k/a Cummins ISC, will also be exclusive to the two Paccar-owned OEMs' conventional-cab trucks. Paccar has dropped the Cat C7.

Cat's C7, displayed in a FordF-650 at an industry meeting, is more tricky to package because its CGI piping emerges from the diesel particulate filter (at right, looking like a muffler) and runs back to the engine.

Business Developments Could Affect Some Truck Content

Several recent developments and situations will affect certain trucks, and perhaps how their various systems are assembled. These include business deals and lawsuits:

  • General Motors, following top executives' previously announced intentions to raise cash and concentrate on automobiles and light trucks, has sold Allison Transmission to an investment group. Announced in June, the $5.6 billion deal closed quickly on Aug. 7. Allison, based in Indianapolis, claims an 80 percent share of sales of commercial-truck automatic transmissions, and makes powershift transmissions and other components for military and off-road vehicles. It grossed $2 billion last year.
    Observers feel Allison's business can grow because it will be free to approach vehicle builders who have avoided buying the transmissions because they don't want to contribute any revenues to GM. Allison's buyers, Onex Corp. of Toronto and Carlyle Group of Washington, D.C., said they would sell part of Allison to public investors through stock offerings. But they will probably keep the operation intact because, says Carlyle's managing director, Greg Ledford, "I think it's the best automotive industrial company that I've ever seen."
  • GM was rumored to be trying to sell off its Class 4 through 7 and light-8 truck business, but an alternate plan — having an outside company build the trucks for GM and its dealers — might also work. Rumors during the summer identified International Truck and Engine as a serious would-be buyer. However, International might instead agree to make the trucks under contract or a joint venture, like it now does for Ford. Neither GM nor International will comment on such speculation, and something may or may not happen.
  • GM and Isuzu Commercial Truck of America dissolved their joint venture, GM-Isuzu Commercial Truck, on August 1st.. The joint venture managed the distribution of medium-duty LCF trucks for both participants, something that is now being handled separately by the two companies.
    The joint venture worked fine, sources at both ends said, but it was an obstacle to Isuzu of Japan's ambitious plans to expand its sales in North America and other markets outside Japan. The dissolution also frees GM to do whatever it wants with its medium-duty line.
    Although GM last year sold its remaining stake in Isuzu, which once was as high as 49 percent, the two remain engaged in alliances that include Class 3 through 8 LCF trucks that are made in Japan and the United States. Coincidently, Isuzu has dropped a GM-built midrange conventional from its lineup.
  • DaimlerChrysler on August 3rd sold 80.1 percent of the Chrysler Group to a subsidiary of Cerburus Capital Management. The much-publicized move splits up the troubled German-American corporation, but Daimler AG (its possible new name) retains the other 19.9 percent. That will ensure continued cooperation in commercial truck ventures involving Chrysler LLC's Dodge Truck operations.
    Thus, Mercedes will still supply Sprinter vans and chassis-cab trucks for sale by Dodge dealers, and Dodge will still supply Ram 4500 and 5500 cab-chassis trucks which Sterling dealers sell as Bullets. The sale otherwise does not involve Freightliner, Sterling, Western Star, Detroit Diesel or any of Daimler's other North American companies.
  • Ford Motor Co. might be thinking about returning to the Class 8 market, which top management quit when it sold its heavy truck business to Freightliner LLC in late '97. The deal was effective a few months later, when Freightliner acquired the products which became the Sterling A and L Lines. Ford agreed not to market any Class 8 trucks for 10 years, and hasn't; its heaviest truck is still the Class 7 F-750.

The prohibition expires early next year, and Ford could conceivably roll over the 33,000-pound limit by adding tandem rear axles and heavier frames to the F-750 and perhaps revive the F-850 model. Ford executives won't say whether they will.

Meanwhile, there's both cooperation and conflict between Ford and International Truck and Engine. The two continue their Blue Diamond joint venture under which International assembles Ford's F-650 and F-750 at a plant in Mexico, using International frames, Ford cabs and wiring harnesses, and vendor engines. That plant also makes the Class 3–4 Ford LCF and International CF low-cab-forward trucks that are clones.

The two builders also continue their legal battles over warranty costs for the International-built 6-liter '04–06 Power Stroke V-8 diesel, which suffered mechanical problems. Ford claims International should pay more for warranty repairs, and when it wouldn't, Ford began withholding partial payments for newer series Power Strokes. International stopped delivering those engines, but a judge ordered it to resume, pending outcome of the suit.

International meanwhile sued Ford, claiming Ford is developing its own smaller V-8 diesel in violation of their supplier agreement (outside sources say Cummins is developing the engine for use in the F-150). Will the hard feelings ruin the long-time relationship between the companies? We'll see.

 

"For Sale"? GM is rumored to be seeking a buyer for its Class 4 through 7 medium-duty truck line. An alternate plan might be to farm out their assembly, like International now does for Ford's F-650/750 and LCF trucks.

 


A modern truck has hundreds of feet of wiring and thousands of electrical circuits, which can be complex and confusing for technicians. An alternative is multiplexed wiring, now used on certain Internationals and Freightliners.

Not many years ago, makers of heavy trucks bragged that they were "custom builders." They had to be, as the business grew up in North America with outside companies supplying components and subsystems to the original equipment manufacturers that assembled them. That's changed, and OEMs are not nearly as willing to customize their vehicles to suit customers' demands or whims. Vertical integration, where the OEM decides what goes into its trucks, is gaining ground as heavy truck builders advance their component manufacturing plans or strike new supplier agreements.

Vertical integration is how it's done overseas. In Europe and Asia, most OEMs decide what's best for their customers. OEMs themselves build some components — most notably, engines and transmissions — and obtain other items from select suppliers. Some very good and technologically advanced trucks are built this way, and they reliably move cargo down the road.

In North America, light- and medium-duty trucks have been built this way for many years, and though midrange customers sometimes have choices of engines and transmissions, the choices now aren't nearly as great. The heavy-duty market is edging closer to that practice as OEMs — many with ties to Europe — assume the role of component spec'ing that used to be played by fleet managers.

Out with the oddballs

For the past 10 to 15 years, the OEMs have been paring down their options lists to the most popular items and eliminating the oddball stuff. OEMs argued that it simply costs too much to offer things that few customers want and that don't do a job better, only differently.

Fleet managers complain that they've learned over the years what works and doesn't work in their operations and what suppliers satisfactorily back their products, and they order accordingly. This tends to make managers conservative — reluctant to accept new products and new technology until they're proven absolutely reliable by large fleets with the resources to experiment. Fleet managers resent having their choices taken away by OEM executives who think they know better, but OEM execs are winning.

Engines comprise the primary example of how choices have shrunk, but the trend toward vertical integration is also evident in transmissions, drivelines, axles and suspensions. They are among the still spec'able heavy-duty drive train components, but most OEMs analyzed their options lists and identified the most popular parts, then eliminated the rest. This greatly simplified their ordering and engineering costs and increased their potential profits; OEMs have also argued that it helped them to hold the line on vehicle prices.

Marketing agreements between component makers and OEMs are another major factor. In medium- and heavy-duty trucks, all OEMs offer certain Eaton transmissions, Spicer drivelines, Spicer or Meritor axles, and Hendrickson, Chalmers, Watson-Chalin and certain other suspensions. Some OEMs developed their own tandem-axle suspensions that compete with those of outside suppliers. But they also emphasize private-branded components built for them by those same suppliers, often with features exclusive to that builder but sometimes all but identical to those still carrying vendor names.

An example is Hendrickson, which says it is now the preferred suspension supplier to International Truck. Hendrickson executives explain that for years they have done "pull-through" marketing — trying to convince truck users to spec Hendrickson products based on superior design, performance and durability. They still do this, but have found that a supplier agreement with a volume truck builder yields more business.

Usually OEMs have the upper hand in such deals, and can force price concessions in return for steady, guaranteed business. But sometimes a vendor has considerable clout. Eaton Fuller manual transmissions have become so popular that its only competitor, ArvinMeritor, has quit the manual transmission business. ArvinMeritor says it was forced out by predatory practices. A former fleet manager told us that Eaton required at least one OEM to place hefty price premiums on Meritor transmissions, forcing him to accept Eaton gearboxes. ArvinMeritor is suing Eaton, but still markets the ZF-made FreedomLine automated mechanical transmission.

OEM engines

Many engines — the most expensive component in a truck — are still obtained from outside suppliers, primarily Caterpillar and Cummins. But an increasing number are built by OEMs themselves, and two have plans to build more of their own. The trend is for an OEM to be standard with its own engines, if it has them, and offer one vendor's series, often through preferred-supplier agreements. Here's the current situation:

  • Freightliner's ownership of Detroit Diesel causes it and its sister companies, Sterling and Western Star, to be standard with Detroit or, because they're all owned by DaimlerChrysler, Mercedes-Benz diesels. These OEMs offer Cat and Cummins engines in heavy trucks, with some restrictions, as we'll see. Cat is gone from the Freightliner family's medium-duty models, though Cummins ISB and ISC engines are still available.
    M-B's German-built medium-duty 900 engines gained enough sales volume that the 900 series has been assembled by Detroit Diesel in Michigan since last January. A new heavy-duty series, with models eventually replacing the Detroit Series 60 and M-B 4000, are being announced this month.
  • Volvo Powertrain in Hagerstown, Md., is building D series diesels for Volvo and a similar MP series for sister company Mack. Volvo still offers the Cummins ISX in two truck series, but Mack has dropped the ISX and lightweight ISL altogether because it sold very few of them. Mack's Granite vocational truck can be ordered with a 10.8-liter MP7 and a 12.8-liter MP8.
    Volvo's VHD vocational truck comes only with the 12.8-liter D13, while highway trucks can also be had with that and the 10.8-liter D11, along with the 15-liter Cummins ISX. The heavy VT series comes with Volvo's 16.1-liter D16 or the ISX.
  • International Truck and Engine, which has long built its own midrange engines, is close to offering its own heavy-duty diesels. Based on designs from MAN of Germany, these will have advanced features along with simplicity that will lower manufacturing costs and allow them to sell for less than the Cat and Cummins big-bore diesels International now offers.
    For instance, the upcoming MaxxForce 11 and 13 big-bore diesels will have high-tech fuel injection, but each will mount a pair of simple turbochargers instead of a complex and costly variable-geometry turbo. And by building the engines itself, International will better control each unit's profit potential. The engines will be assembled in a new plant at Tuscaloosa, Ala., with blocks cast in Brazil. The move suggests that vendor engines might eventually be removed from International's heavy trucks, but marketers insist that Cat and Cummins power will remain optional.
    International's medium- and medium-heavy-duty engines, like those of competitors, have all been upgraded to meet EPA '07 emissions limits. And they've been renamed MaxxForce, with numerical suffixes that approximate their displacements in liters. The lineup includes V-6, V-8 and in-line-6 models called MaxxForce 5, 6, 7, 9 and 10; what would be the "8" model is called MaxxForce DT, based on the DT 466, whose excellent reputation over the years caused marketers to retain the DT moniker. Horsepower ratings in the various models range from 200 to 350.
  • Paccar has begun equipping its midrange trucks with private branded engines made by Cummins, a long-standing partner, while dropping Caterpillar's C7. And Paccar has begun building a plant in the South which will assemble big-bore diesels for its heavy-duty trucks. For now, Paccar's domestic OEMs, Kenworth and Peterbilt, offer Cummins' ISM and ISX and Cat's C13 and C15.

The PX-6 and PX-8 engines will be used exclusively by Kenworth and Peterbilt in their conventional- and low-cab-forward medium-duty trucks. The PX-6 is Cummins' 6.7-liter ISB while the PX-8 is the 8.3-liter ISC. PXs will not differ technically from their Cummins counterparts, but are painted dark grey instead of Cummins red and use Paccar-branded accessories.

The prices paid by Paccar for PXs might be less than what it would pay for Cummins-branded engines, allowing higher profit potential for Paccar and perhaps lower selling prices for customers. And the Paccar-chosen accessories, including alternators and starters, will guarantee more parts business for KW and Pete dealers, who will also be the primary servicing centers for the PXs.

Kenworth and Peterbilt executives are enthusiastic about the PXs' ratings (from 200 to 330 horsepower) and high performance, and say that they are overcoming dealers' and customers' unhappiness over the loss of Cat power. Executives even claim that a few Cat distributors are considering the buying of Kenworth and Peterbilt midrange trucks because they like their premium features and might overlook the Cummins-built power.

Paccar's upcoming big-bore diesels will be built at Columbus, Miss., based on MX diesels designed by Paccar's European subsidiary, DAF. One is a 12.9-liter model with 410 to 510 horsepower in Euro-emissions versions. Paccar says the plant will be completed in 2009, in time to equip 2010-model trucks with the engines. Paccar is not saying if it will cut out Caterpillar or Cummins big-bore engines at that time, but it's possible that one might go.

Caterpillar sliding?

Cat's fortunes in the medium-duty truck market seem to be sliding, as Freightliner and Sterling have also dropped the C7. They offer Cummins ISB and ISC as options in their midrange models, along with the standard M-B 900 series. The two remaining customers for the C7 are Ford, in its F-650/750, and General Motors, in its Chevrolet Kodiak and GMC TopKick C6500/7500/8500 trucks. In all cases, the C7 will be the premium engine, as a Cummins ISB will be standard in the Fords and the Isuzu 6H will be standard in the Chevys and GMCs.

The Cat's popularity has slipped among Chevy and GMC customers, GM managers say. As recently as three years ago, 80 percent of buyers chose the C7, and now about 33 percent spec it. Price is one reason: The C7 currently costs $1,500 to $2,000 more than the 6H, and dealers point that out to customers.

And, GM says, the 6H (formerly called Duramax 7800) has also proven itself through performance and reliability, with a claimed B10 life of 481,000 miles (which means 90 percent of all 6Hs will still be running at that point). Dealers are proud to sell it, and they also like the idea that they'll get parts and service business while C7 users can choose instead to go to Cat distributors.

Caterpillar will still supply heavy-duty diesels to several high-volume OEMs. The C13 and C15 will be optional in certain Freightliner, Sterling, Western Star, Kenworth, Peterbilt, and International trucks. Cat lost market share earlier this year with a relatively slow start in production of EPA '07-spec engines (though not many '07 diesels of any make have actually been built or sold). But Cat's insistence that its products are premium in quality and deserving of their premium prices is costing it some sales.

Among the premium features of current Cat diesels, in the view of the builder's marketers, is its Clean Gas Induction system. Other builders send cooled but raw exhaust gas into combustion chambers to reduce formation of NOx. But Cat's version of exhaust-gas recirculation takes filtered gas from the rear of the particulate filter and sends it to the engine's air-induction system in a separate pipe that parallels the exhaust system. Thus only clean air goes into its engines, and Cat marketers have torn down competitors' diesels to show that their innards are indeed dirtier. That, marketers say, will probably make them wear out faster.

Competitors wonder why it's harmful to put raw exhaust gases into the cylinders that produced them in the first place. And they counter-argue that Cat CGI's filtered exhaust gas still contains acids that can attack turbos and charge-air coolers, causing worse problems. Fitting the CGI piping into a chassis can be troublesome, and Sterling gave that as a reason to exclude Cats from a recently introduced L Line model. Is this a valid reason, or another way to push customers toward Detroit and M-B "family" engines? What will happen to the big yellow engines come 2010 when engines become even more complex?

SCR coming

Another round of EPA emissions tightening is scheduled for January 2010. This will require further reduction of oxides of nitrogen (NOx), and engine builders are preparing to do it with technology that'll be new to North America. Detroit Diesel-Mercedes-Benz and Volvo Powertrain have announced that they'll employ Selective Catalytic Reduction, along with cooled exhaust-gas recirculation already used. SCR injects a urea solution whose active ingredient, ammonia, causes chemical reactions in exhaust that breaks down NOx into non-harmful gases, including water vapor.

SCR is now successfully used by most builders in Europe and Japan. Japanese builders have not said they'll use SCR in trucks destined for the United States in 2010, but they almost certainly will. Caterpillar, Cummins and International say they are close to deciding how they'll meet the '10 regs, and will announce their approaches by year's end. Greater complexity adds expense, especially if OEMs have to deal with different aftertreatment types. This could push them toward greater simplification in their engine offerings and even more vertical integration.

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