Engine-Maker Cummins Among Winners in U.S. Trucking Proposal

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U.S. regulators delivered a victory for engine makers such as Cummins Inc. in a battle over emissions regulations for heavy-duty trucks.

The Environmental Protection Agency and the Transportation Department proposed fuel-economy standards Friday that would mandate efficiency gains in engines and transmissions made by companies such as Cummins and Eaton Corp. The rules are intended to encourage the development of new technology, and the replacement of engines.

Cummins rose as much as 0.4 percent to $136.96 during New York trading on Friday, and closed down 32 cents at $136.14. Eaton fell 1.2 percent to $70.20.

Tom Linebarger, Cummins chairman and chief executive officer, said the Columbus, Indiana-based engine maker supports the EPA proposal.

“It will help our industry grow in a more sustainable way, which is a win for our customers and win for the environment,” Linebarger said in an e-mailed statement.

Among freight carriers, publicly traded companies like Con-way Inc., Swift Transportation Co., ArcBest Corp., United Parcel Service Inc. and FedEx Corp. should be able to absorb the added costs or pass them along to consumers, Bloomberg Intelligence analyst Lee Klaskow said.

Owner Operators

Small truckload companies and owner-operators may have trouble affording the more expensive trucks, even with the two-year payback period estimated by the regulators.

“This could push some smaller companies out of business,” Klaskow said.

The American Trucking Associations, whose members include the industry’s largest companies, expressed overall support for the proposal as a way to reduce fuel expenses. The agencies followed 14 of 15 principles the industry was looking for.

Still, some of the trade group’s members are concerned the regulation will push certain technologies into the market before they’re ready.

“Unreliability could slow not only adoption of these technologies, but the environmental benefits they aim to create,” said Glen Kedzie, the Arlington, Virginia-based group’s vice president and energy and environmental counsel.

The Owner-Operator Independent Drivers Association is looking at the regulation “to see if the input from small business truckers was truly taken to heart,” the Grain Valley, Missouri-based group’s executive vice president, Todd Spencer, said in a statement.

Untested Technologies

Based on an initial review, the agencies’ reliance on untested technologies “ may lead to costs such as increased maintenance and down time that will eclipse the potential savings,” Spencer said.

Truckmakers had pushed for the elimination of a standard for engines, and backed just testing the whole vehicle the way automobiles are assessed. That way, fuel consumption targets could be met with less expensive changes, such as improved aerodynamics.

Volvo AB’s North American unit told the agencies that overemphasizing engines in the regulations could result in added costs, weight and vehicle complexity. Daimler Trucks North America LLC warned against engine standards that aren’t aligned with real-world operations.

Volvo fell as much as 2 percent in Stockholm trading on Friday. Daimler AG shares was little changed in Frankfurt.

Flexibility Limits

“The Volvo Group maintains that a separate engine standard is inconsistent with our interest in minimizing the complete, real world environmental impacts of our products,” John Mies, a company spokesman, said in an e-mailed statement. The approach “limits manufacturers’ flexibility to meet the regulated targets for each individual customer in a way that suits their specific needs.”

Volvo is reviewing the proposal and plans to work with both agencies to ensure a final regulation is “good for both the environment and our customers.”

The agencies are expected to accept comments on the regulation over the next few months and publish the final rule sometime next year.

About 350,000 new heavy-duty trucks were sold in 2013 in the U.S., according to Bloomberg Intelligence. Daimler had the largest share, or 37.3 percent, of the 2014 market for the heaviest trucks, followed by PACCAR Inc., Volvo and Navistar International Corp.

Daimler has been an industry leader in fuel economy and was first to certify trucks that met the agencies’ last round of truck efficiency regulations, said Sean Waters, director of product compliance and regulatory affairs at Daimler Trucks North America.

“The rule should reflect realistic vehicle production and operating conditions, and consider the cost-efficient, fuel-saving technologies in fleet operations,” Waters said.

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