Rating the Cleanup

Trucking companies waiting until next year to upgrade their fleets with cleaner- burning diesel engines may have a tough time passing the extra cost on to shipper customers if the long economic winter continues into 2010.

The federal mandate for truckers to reach the next level in a steady progression toward emissions improvements is spreading headaches among carriers.

The 2010 deadline for the new generation of engines is approaching, and truckers are struggling through their third year with rate leverage squarely in the shipper camp. Shippers negotiating new contracts this year are reporting base rates down 5 to 10 percent from last year.

It’s a different situation from 2006, when truckers rushed to purchase vehicles ahead of tighter 2007 emissions standards. Heavy truck maker Freightliner helped parent DaimlerChrysler hit record sales in 2006 as carriers rushed to add capacity before cleaner but more expensive 2007 trucks rolled off the assembly line.

Carriers typically add trucks to their fleets in advance of the tougher emissions mandates because the requirements cover newly built engines, and recent models are allowed to continue operating.

It’s a tough cost equation made worse, truckers say, because the emissions-improvement measures cut into fuel efficiency. G. Tommy Hodges, chairman of the American Trucking Associations’ Sustainability Task Force, told Congress in January the 2002 emissions standards drove up engine costs between $3,000 to $5,000 while cutting fuel economy 6 to 8 percent. The Environmental Protection Agency’s emission standards in 2007 drove up the cost of engines again between $8,000 and $10,000, and the new diesels were 2 to 4 percent worse on fuel economy, Hodges said.

The tighter standards to take effect in 2010 “will substantially increase engine costs yet again, while fuel economy impact remains unknown at this time,” said Hodges said, who claimed it would cost truckers $4 billion to purchase the newest engines and the ultra-low sulfur fuel they use.

Independent truckers asked the EPA last November to push back deadlines for the new standards, but the agency declined.

Truckers facing diminishing cash reserves have little money for “pre-buying” vehicles. ACT Research said preliminary orders for Class 8 trucks were down 61 percent in the first two months of 2009 compared to the same period last year, and fell 19 percent from January to February.

Truckers with the cash or credit to buy this year, however, see an opportunity.