Diesel Progress Report

Predominantly confined to commercial use, diesel-powered zero-turn radius (ZTR) mowers have represented about 5% of the total ZTR market in each of the past five years.  But that could change when the Environmental Protection Agency’s final Tier 4 emissions standard (Tier 4F) for 25 to 74 hp diesel engines takes effect in 2013. The standard requires emissions of particulate matter (PM) and nitrogen oxides (NOx) be reduced by a further 90%.

Whereas previous emissions reduction solutions were focused on the engine alone, the technology required to achieve Tier 4F standards in NOx and PM impacts the entire machine, from air intake to post-exhaust. Recent conversations Power Products Marketing had with four engine suppliers, seven original equipment manufacturers, enlightened retailers and industry observers indicate the already relatively high price of diesel-powered equipment in the 25 to 74 hp category is sure to be exacerbated by the Tier 4F standard and will force manufacturers to redesign and retool their product lines at a cost so severe it will undoubtedly result in even higher end prices for the consumer.

So what are suppliers doing/going to do to prepare their 25 to 74 hp diesel-powered mowers and compact tractors for Tier 4F? Can engine suppliers offer a competitively priced powerplant? Will OEMs continue to carry a selection of diesel products despite skyrocketing costs? How do dealers plan to handle what may be a drastic change in the market? How will consumers respond?

The conversations PPM had with engine suppliers, OEMs, industry observers and retailers at the close of 2011 suggest the forthcoming Tier 4F standard could be a real game-changer for the market, but also revealed confusing testimony regarding the current state of preparation for the standard’s implementation.

A surprising number of OEM representatives charged with working alongside engine suppliers said they still have no concrete knowledge of what their engine supplier plans to offer, and most said they will make a decision on the future of their diesel-powered line-up once they are presented with final options from their suppliers.

Engine suppliers PPM talked with all said they are working on their Tier 4F compliant engine offerings but declined to go into specifics regarding their powerplant(s). Those suppliers that have shown prototypes were equally reticent to discuss the communications they have been having with OEM customers.

But design implementation between OEM and engine supplier is in fact already underway, according to our industry observers, who said they believe OEMs with current diesel models to sell don’t want consumers focused on the future and thus won’t reveal their product plans for Tier 4F.

This may explain the lack of subject knowledge retailers displayed in communications with PPM. Incredibly, more than half of the 115 retailers surveyed had little to no knowledge of Tier 4F requirements as pertaining to the 25 to 74hp turf equipment market.

MANUFACTURERS

As mentioned earlier, PPM’s conversations with OEMs revealed that many of the brands, as of the fourth quarter of fiscal 2011, they were still undecided as to the fate of their diesel-powered 25 to 74 hp offerings in 2013. Most of those PPM talked with said they would make a decision on the future of their diesel-powered line-up once they are presented with options from their engine suppliers. The most important considerations, the OEMs said, concern engine cost, size and output.

A couple of the OEMs surveyed have produced websites to help explain the Tier 4 issue to customers, but much of those marketing materials tend to explain the current Tier 4 interim standards rather than what can be expected for Tier 4F and and what the company is doing to prepare for that standard.

It is important to note that the EPA regulates the transition from one tier to the next at the engine manufacturer level. As previous tier engines (and equipment containing those engines) are depleted from the supply chain, the new tier product will be released. All turf equipment manufacturers will have to transition to Tier 4F compliant product, but each equipment manufacturer’s launch date of the new tier will depend on conversion schedules and the use of a voluntary “Transition Program for Equipment Manufacturers” (TPEM) – aka engine “flex” credits.

ENGINE SUPPLIERS

It comes as no surprise that engine suppliers are staying largely mum about their R&D processes and business strategies in relation to Tier 4F. However, according to what PPM learned in its research, it is somewhat surprising that engine suppliers have also largely declined to keep customer OEMs informed.

A representative example can be found in an answer to the question, ‘What are you doing to meet the upcoming Tier 4F standards for your engines?’

“The exact engineering and design specifications have not yet been finalized at this time,” a representative of one significant diesel engine supplier told PPM in late 2011.

Of the companies PPM talked with, only three have shown at least one prototype engine within the 25 to 74 hp range, giving the industry a miniscule peek at the technology they hope to use in attaining Tier 4F compliance.

RETAILERS

While retailers are often thought to be the most educated source to help consumers understand current regulations and those that may be on the horizon, PPM’s survey of 115 dealers found an incredible 42% of the dealer representatives could not recall the Tier 4F issue while 38% said they had some knowledge of Tier 4F.

The remaining 20% of dealers surveyed deflected Tier 4-related communications to the OEM.

INDUSTRY OBSERVER

Intrigued by the apparent lack of communication between engine suppliers and OEMs, PPM talked with a longtime diesel industry observer unaffiliated with any one company for his view of the Tier 4F issue as it pertains to the turf market.

“I’m sure all of the engine suppliers know what they are doing for Tier 4 Final,” the diesel industry specialist told PPM. “It’s too late in the game to still be wondering what they’re going to do. They are all global companies and they understand what it takes. However, we’re still in the Tier 4 Interim stage, and so they have engines to sell and don’t want to get people too focused on what’s ahead. Plus, these engines are going to be more expensive and nobody wants to be the first to share that bad news.

“What most of the manufacturers have done is told their customers that the Tier 4 pathway they’ve chosen is basically going to allow it to be a drop-in solution from Tier 4 Interim.

“So I think the engine manufacturers have a pretty good idea and I think the OEMs probably have a pretty good idea (of what they plan to do). I think it’s the people who buy the machines that don’t know what’s coming.

“(Consumers) may have heard machines are going to be more expensive, but I think there is going to be a lot of sticker shock. You can warn people and warn people, but it doesn’t do much until they actually see the price. And, at that point, I think it’s going to cause a lot of jaws to drop. It’s inevitable.”

Guido Ebert has served as a powersports industry press representative, speaker, analyst and consultant for businesses in the U.S., Europe and Asia. A former editor at two trade publications serving the U.S. powersports industry, he now serves as a consultant working with Power Products Marketing, a market research firm that provides detailed market share data and research services to the global power equipment industry. Power Products Marketing is at 7525 Mitchell Road, Suite 203, Minneapolis, MN 55344. Phone: (952) 893-6870.

It starts as a sad story. One of our colleagues was recently robbed! Thieves broke in his summer house in the south of Sweden. No major damage, but they stole all his garden tools, plus his beloved diesel gen-set.

He told me that when he discovered the robbery, he wanted to cry. Not for the house door that had to be replaced, not for the missing (expensive) lawn mower he had just bought last summer. No, he wanted to cry for that diesel gen-set, for the years of faithful service, for the countless starts at the very first try, for its reasssuring diesel purr, that he feared he would hear no more.

But don’t worry. The story gets better.

Never a man to let a challenge down, our colleague started looking for a replacement gen-set, thinking that he would never find the same model. But surprise! The Spanish gen-set manufacturer Gesan said it could supply another unit with exactly the same configuration – Lombardini one-cylinder diesel, Mecc-Alte generator and Gesan control unit.

This happy ending made me think. In today’s market for diesel engines, we are used to hearing about always higher-performing engines, new technologies to keep fuel consumption and emissions down, billions spent worldwide for research & development projects, a frantic run to offer the best technology that matches respect for the environment with commercially viable operation. 

Perhaps we have forgotten that the real market is also ultimately made of cases like this –  the man next door who has a gen-set in his basement to keep his house warm when the next blizzard causes a power outage. The little farmer with a ‘vintage’ vineyard tractor that he loves even more than the few barrels of homemade wine he produces (and drinks) every year. 

Isn’t it true that success is made of small little things, of daily efforts to never let your customers down?

Our colleague will keep enjoying his diesel “purr” and I am happy to be able to end this story in the most classic way: “and they lived happily ever after.”

There is a distinct difference between sound and noise. Sound is something you hear and noise is something that is annoying. To put it into the simplest terms, sound would be your puppy’s first bark and noise is your neighbor’s howling dog in the middle of the night — the latter truly annoying. Sound is your child’s first word and noise is that baby crying next to you on a plane, unless of course that is your baby crying on a plane or you are into crying babies. Hey, I don’t judge. 

Basically, sound and noise is all how you interpret it and a sound turns into noise when it becomes an annoyance to you and you feel the need to complain. After attending the AEM Noise Conference, I am truly questioning if I have ever heard sound. I think I have only heard noise for the last 30 odd years (no need to get specific) and that is why I have been annoyed. Noise conference is like a Freudian wake up call.

While to date U.S. noise regulations are a mishmash of state, county, city, and local laws appearing in some regions and missing in others (are you having idling regulations flashbacks?). Enforcement of these regulations seems to be a case of “We’ll do something when someone complains.” New York, which seems to be one of the leaders in noise regulations has recommended equipment vendor list, which contractors are encouraged to buy off of and operate these machines.

Stricter laws are evident in the EU, and mirrored EU regs are in effect in countries such as Turkey, Croatia, Macedonia and Iceland, Liechtenstein, Norway, Switzerland, Israel and New Caledonia.

Brazil after eight years of discussion is once again threatening to enforce a noise regulation with an effective target date of 2015. The regulation, like China, will use honor system compliance, which questions who will comply and will they comply?

Obviously, the writing is on the wall. Stricter noise and vibration regulations are coming to all parts of America. They are here in some form already, but will it be an EPA mandate as we have seen with emissions regulations or a smattering of city, state and local laws?

Who will absorb the cost? Contractors? OEMs? Component suppliers? Engine Manufacturers? The finger pointing has already begun.

Yes, some level of dB(A) amount of can be reduce through fans, pumps, valves, pneumatics, gears and bearings, sprockets and chains, structures, shafts and even tires can make a difference. But, the engine is the main source of noise. All fingers point here.

The engine cams, lifters, valves, timing gears/chains, pistons slap, tappet knock, block pulsation, and imbalance are possible noise offenders. Does this mean that engine manufacturers will again go through another costly certification process? Didn’t they just dish out the bucks for several very expensive emissions certifications? And what about the CO2 regulations on the horizon? I doubt this will be an inexpensive feat.

How much is too much for an engine OE to absorb? When will the engine cost more than the machine? Make the engine clean. Make it quiet. What next?

I am not opposed to noise regulations. Remember I am annoyed easily. I have probably given you the stink eye on a plane for talking too loud, but I have to admit I like the fast and dirty approach to noise reduction that was taken in the ‘80s. Do whatever it takes to make it quiet now. Be resourceful. Dig a hole and bury it. Hey, whatever it takes. Do it now and do it fast. I know probably not the most environmental approach. No need to send hate mail. I do recycle.

Yes, technology has come a long way and we have come leaps and bounds from how things were done in the 80s. Yes, there are smarter, more logical and more intuitive ways for noise attenuation used today. OEMs can reduce several dB(A) through system design, without damper insulation, which is an amazing accomplishment.

I am just trying to sort through the noise and figure out who will feel the impact the hardest. Who will reach in their pockets the deepest? Who is making the most noise? Whose noise will turn into sound? Really, I would just like to get a good night’s sleep.

It wasn’t that long ago that anything to do with pricing was secret. How and why prices were set, margins, etc., seemed almost bound by an oath of omerta. Anybody who knew anything wasn’t talking.

That started to change for public companies thanks to the ever increasing number of financial reporting regulations. Nowadays, unless it’s privately held, you can comb through quarterly and annual reports and see how much they made before and after taxes, what the average margins were and can even do some rough volumes if you know what you’re looking for. Just about all of the data is there.

One segment of the process remained somewhat shadowy, however – price increases. Price increases have always been something that nobody liked to talk about. They were viewed, not surprisingly, as bad news. It was hard, no matter how justified, not to feel a little bad for your customer who after all, is already buying something from you. Plus there is always the fear that any price increase could give a competitor a foot in the door. “They raised your prices? In this market? Boy, they really don’t care much about you, do they?”

Yet over the last couple of years, that last bastion of confidentially is also going by the boards. Nowadays, companies are putting out press releases (!) announcing that because of this or that, the price for their particular product was about to go up.

Recently, filter giant Donaldson issued a statement that it was implementing “targeted price increases” for some of its industrial air filtration products in April and would do the same for some engine filtration and exhaust products later in the year. The company stated that “the specific price increases will vary and are dependent on the specific types and quantities of raw material content in each product line. These price increases are a direct result of the significant increase in costs of steel and all petrochemical based purchased materials.”

Even more recently, Yokohama Tire, a significant supplier of tires announced it will implement a price increase of up to 10% on all of its off-the-road (OTR) tires in the U.S., effective May 1. There will be in-line adjustments, as well, which will be announced at a later date.  The price hike, the company said, was because of the rising costs of raw materials such as natural rubber, along with higher transportation and manufacturing costs.

Now of course nobody likes paying higher prices for anything. But if there is one truism in the world, it’s the one that says you get what you pay for. Today’s engines, equipment and vehicles are arguably the best ever in terms of quality, efficiency and reliability. There’s a cost to that. And if you want to maintain that level, sometimes the cost goes up.

See the real deal at http://twitter.com/dieselprogress

There are a lot of words that come to mind when you think of global heavy-duty diesel engine manufacturers. Words like technology, durability, horsepower, along with some that can’t be mentioned in a family setting.

One word you normally wouldn’t think to associate with diesel manufacturers would be “coy.” Yet that’s what they’ve pretty much all been when the subject turns to Tier 4 final emissions standards.

Even as they were outlining their Tier 4 interim paths, they talked about how the technology that enabled engines to meet the initial standards would serve as the foundation or building block to meet Tier 4 final. In most cases, they’d talk about cooled EGR and DPFs as the basic Tier 4 interim answers, then talk about how these same technologies would be employed with some additional wrinkles, at final.

And when asked what those additional wrinkles would be, the answer would typically be a smile and a short statement about how they knew what they were, but just weren’t ready to talk publicly about them. Followed by another smile.

But indications are growing that they may at last be ready to identify what those final technologies are and that we’ll see a lot of them at the upcoming ConExpo-ConAgg 2011.

A few companies – Perkins, Cummins and MTU – have already announced that they will unveil the first of their Tier 4 final engine lineups at the show. The smart money is that we’ll see a lot of what we’ve seen before in other markets, namely a combination of cooled EGR, DPFs with SCR added, a configuration that nearly everyone has taken in the heavy-duty truck market. For a couple of manufacturers, who have already adopted SCR, it’ll be slightly reversed. Their final answers will be the addition of cooled EGR. Either way, it’s not too likely we’ll see anything we haven’t seen before – which is not to say it’s any less exciting.

Yet there is an outside chance that someone may throw a curveball and adopt one of the altered forms of SCR (solid or hydrocarbon-based) that Tenneco and a few other companies say will be ready to roll in 2012. Now that would be exciting!

Either way, it’s fair to say the curtain is about to go up on yet another “new era” in off-road diesel technology. And what better place for a show than Las Vegas?

(Editor’s Note: Ian Cameron formerly worked for Rolls-Royce)

Despite its standing as arguably the most famous brand name in the world, Rolls-Royce has traditionally been notoriously shy about wading into the world of mega deals and corporate takeovers.

Rolls just doesn’t do headline-grabbing acquisitions. It usually grows organically and its largest ever purchase – that of Vickers for £576 million – was as long ago as 1999. At the time it was a substantial amount to pay but by today’s going rates it feels somewhat lightweight.

Yet this week Rolls-Royce surprised analysts when it was revealed that, along with Daimler AG, it is in talks with German engine and propulsion systems company Tognum about a possible joint bid for control of the latter that probably values the target at more than US$4 billion.

Tognum’s products go for off-highway applications and distributed energy systems. It has two business units, Engines and Onsite Energy & Components. The former comprises the MTU range of engines for ships, rail, defence, heavy land vehicles and oil and gas with the other business units including the brand MTU Onsite Energy and also fuel injection systems from L’Orange.

Of course, it would be a hefty price to pay by Rolls and Daimler but, then again, both can afford it.

According to the latest financial results, Rolls-Royce has a very healthy order book worth around $96 billion at today’s rates whilst Daimler is currently cashing in on booming Mercedes-Benz car sales.

It seems though that the strategic advantages for Rolls-Royce greatly outweigh those for car and truck maker Daimler which already owns 28% of Tognum.

In particular, Tognum’s marine interests would sit nicely with those of Rolls-Royce. Should a deal go through, and it’s not yet certain, Rolls would probably integrate its Bergen diesel and gas engine portfolio (acquired as part of the Vickers deal) with Tognum.

The Marine arm of Rolls-Royce has developed strongly over recent years earning around $541 million in underlying profits for the group in the last financial year. Tognum’s profitable energy business could also be welded onto Rolls-Royce’s.

So as the accountants from all sides work on the figures, it could be that the headline writers are also making their plans.