This Could Mean Trouble

[davekc]

Phil,
Greg is correct in that the marine versions could be retrofitted for commercial applications. As far as the RV market, I wouldn't hold my breath on their conversions. I would be tempted to think it will follow the path of non enforced compliance with regards to weight, CDL license, length limits and the like. It may be fazed in during new production, but that is likely it. RV'ers aren't usually running the mileage or use the generator as exclusive use as a commercial truck would.

You would have been served well when I said over the last couple of years to avoid purchasing a truck for the intend of long term usage. 10 years is too long. Why? Technology is moving at too fast of pace for them to be a viable option. Better off buying a used one and running it, or when buying new, keep the service time to 4 or 5 years.
I think those posts got largely ignored by some, but what I said then is now here. One will cease to remain competitive running a truck that gets under 12 or 13 miles per gallon.
Hybrid trucks are coming. Kenworth already has one in production that is reporting a 30-35 percent improvement in fuel economy. In three years, they are saying 50 to 60 percent.
Additionally, the government is giving a $12,000 rebate and is likely to go higher. I don't think they are 100 percent there for a OTR application, but I would say in three, they are there.
If fuel continues to climb, current trucks will essentially be obsolete because of their economy. The incentive coming from truck manufacturers is not retrofits for current trucks. Their profit will come from selling a new one.

 

[layoutshooter]

I don't believe that hybrids are the answer, yet at least. There is a lot of evidence that the batteries do not have the life span that they thought they would have. The replacement cost for those batteries is high enough to offset a very large portion of the fuel savings. Let us not forget the weight penalty as well. A new battery may come along but not yet. Do not forget the heavy polution caused during the manufacturing process for the batteries. There is a big problem with recycling them as well. Nothing is polution free. There is more to the evironment than the temp. Everything will be stop gap till fuel cells become real. Still a long way off from that. Layoutshooter

 

[davekc]

Maybe closer than you think. I believe in three years you will be seeing more of these.
Kenworth Truck Company

Production starts this year. I believe Freightliner is pursuing something similar as well.

 

[ATeam]

You would have been served well when I said over the last couple of years to avoid purchasing a truck for the intend of long term usage. 10 years is too long. Why? Technology is moving at too fast of pace for them to be a viable option. Better off buying a used one and running it, or when buying new, keep the service time to 4 or 5 years.
I think those posts got largely ignored by some, but what I said then is now here.

In our case, Dave, your suggestion was not ignored. It was considered and rejected.

Your priorities are not our priorities. Your way is not our way. As with all suggestions offered in the Open Forum, whether they are good or not depend on each expediter's circumatances, capabilities and goals. Your suggestion was not wrong. It was just not relavant to us. For some others, accepting your suggestion may be the right thing.

Comparing how you make money in the industry with your trucks and how we do with ours is comparing apples and oranges. That does not mean one way is better than the other. Both ways seem to work well enough, do they not?

 

[greg334]

I think Dave is 100% right, a ten year outlook in this business is really not a good idea. Anyone who expects to have something in 2005 to be usable in 2015, is by definition an overoptimistic person at best. I would expect with the shifting markets, the possible future consolidation of transportation methods and so on, the used cheaper truck may be the best solution in the long run would be a wiser decision (thank you my accountant) because of the capital investment one needs to make to get into this business in the first place with specialized new equipment is not what you would call the best path to follow – unless you have some considerations made on your behalf to justify the cost.

 

[jaminjim]

Gregg Says: Phil is an editor and as one should take the criticism 100% without anyone saying a word. If you feel this is out of line, take it up with a higher power and I will listen to them."

Greg he is the editor of the magazine not the forum.

I have thought better of what I was going to say in public, I'll PM you out of courtesy.

 

[davekc]

Phil was wise to re-edit that post. It was a clear exercise in foolishness. If one is going to engage in self promotion to be the only savior for a cause, then they should step up to the plate.
Keep in mind that you started this thread, rather than responding to a previous post.
With regards to different circumstances on truck longevity, our situation is clearly different. Your situation is unusual in that you are in a specialized field that isn't available to operators even within your own carriers system. Selling all of your assets and just living out of the truck is not the usual path most take either.
It is also clear that you "rejected" the advise of many. That decision resulted in two truck builds.
With that being said, I look at things of course from a fleet owners prospective, as well as from an investment standpoint.
While I don't drive any of the trucks I own, I don't purchase any that I wouldn't personally drive.

 

[jaminjim]

Could it be that with the shorter amount of time that some trucks will be able to be used in all forty-eight states, change how much money you were able to make on that investment.(ROI) :-}>

 

[davekc]

Could it be that with the shorter amount of time that some trucks will be able to be used in all forty-eight states, change how much money you were able to make on that investment.(ROI) :-}>

For many, it would have to be a consideration that is not overlooked. The biggest issue is the idea of a truck purchase based on ten years. There was a time that it could have been feasible. Looking at a global market and fuel prices, the 05 truck may not be competitive or realistic to operate at a profit in say 2015. Pretty much the comparison Greg used.
A lot of changes are coming. Some will be good, and some might be more challenging.

 

[TeamCaffee]

While reading this thread it is beginning to sound as if a Class 7 truck might be the way to go. The initial cost is cheaper and you need to replace that truck sooner than you would a class 8. With all of the country going "Green" there are sure to be many states and the federal government watching how California gets along with their new laws. There are some laws we can say no to such as the new Canada speed governors by just not crossing the border but it is not feasible to just say no to loads that go to large areas in the United States. Sooner are later as a business owner you are either going to go out of business or just take local jobs. For us as business owners and owner operators we will continue to watch and try to plan on being as compliant as we can with the new regulations. We do plan on being out here in ten years and we will be as profitable as we can.

It sounds as if you will have a choice by 2012 get your older truck compliant or get a new truck. Either way we need to start now planning for the future.

 

[davekc]

Hey Linder,
A class 8 could still be a viable option depending on what you are paying for it. We bought a class 8 last year for a few thousand over a class 7 similarly equipped except for the drive train.
Class 7's are a viable option as the cost is lower, and can be turned at a faster rate. Even more so with the smaller cummins engines. We also bought several KW's with cummins in them just for the fact they are pretty durable, and can be rebuilt very inexpensively compared to other engines.
Also, when looking at resale, the difference of value on a 5 year class seven and a five year class 8 isn't too much.
You are right about operators that get in a position to restricting areas of operation. When you start saying no west cost, followed by no east coast, and so forth, you are really starting to work a narrow band. If one goes down that path, one better have the ability to acquire some of their own freight.

 

[ATeam]

It is also clear that you "rejected" the advise of many. That decision resulted in two truck builds.

That is incorrect.

With the first truck build, we RELIED on the advice of people we believed to be expert vendors, but in the end, the truck they put together was unacceptable for a number of reasons, including that it was illegal to drive. The problem was not that we rejected expert and experienced advice, it was that we accepted it and trusted the vendors who gave it.

Learning from that experience, we rejected the first truck, trusted vendors less, dismissed those that failed us, took a more hands-on approach, and built a second truck that worked. The end rusult is we are now in a truck we love, and one we would build again if we had it to do over again.

Talking about setbacks, the truck reject setback had a much greater impact (the whole truck instantly gone) than a CARB rules change (the possible need to modify some components or the markets we serve). While it was not fun, we got through the truck setback in fine shape and will get through anything CARB throws at us the same way. Setbacks of any kind are undesirable, but they are part of the game.

On another topic, I fail to see how buying an older truck will help you avoid undesirable changes in CARB rules. These rule changes usually come with a lead time. The older the truck, the sooner its lead time will expire. In the resale market, I would expect the value of the truck to decline by the cost of any upgrade forced by a rules change.

Regarding the time horizon of a new truck, Diane and I saw people buying two or three trucks in ten years. We asked ourselves, what is cheaper, buying one expensive truck in ten years or two or three lower cost trucks in the same time period?

One truck was the answer that made the most sense to us. At the time, a new but less expensive DR-unit (lower quality, less sleeper space, less features, class 7 with shorter lifespan, avoid FET with single axle) would have cost about $50,000 less than we paid. Knock about $20,000 more off for FET savings.

What is better? Buy one truck for $250,000 in ten years, or buy two trucks for $180,000 each in the same time period? To put it another way, what is cheaper, spend $250,000 on new truck purchases in ten years or $360,000?

We could go on and on and on about things like trade in value, insurance costs, deprecation benefits, finance costs, maintenance costs, the actual need for a large sleeper and other creature comforts an expensive truck can provide, lost revenue for the lift axle wait to avoid FET, etc. I don't think we have to because I am not saying one way is better than the other.

I am saying the way we chose is the best way for us (and we have the numbers to prove it). Just two years into our ten-year truck plan, the truck is paid for and we can get out intact if it came to that. The good news is we do not have to.

Nevertheless, we have the option of reverting to a five year plan if it comes to that. It would take nothing more than a change of mind to sell or trade the truck after five years (or four, or seven, or whatever) and build a more modern one. No plans for that now, but plans can change. One never knows.

 

[davekc]

Not sure where you are shopping, but I can't imagine a class 7 reefer truck being 190K
At that five year mark, the five year year truck will have some trade value (not much) and two trucks through a five year period will have more warranty coverage and newer components through that 10 year period.
Why, because we are only really talking a drive train difference.
Everything else from batteries, tires, wiring and the like will age.
That comes at a significant cost. Not just in parts replacement on the older truck, but lost revenue from downtime ect.
As I mentioned, a used class 8 is certainly a option to offset some of those differences.
But, you did what worked for you because your situation is different than most. For someone new, I would weigh all the options very carefully.

 

[nightcreacher]

im not sure of your up keep on a class 8 C or D unit,but ive found over the years,the 1st 400000 miles is usually trouble free.after that the nickle and dime effect comes into play.Fixing isnt always expensive,but the down time might cost you revenue.I usually trade every three years,and in that time no down time and no9t much fixing to go on,plus dealer gives me top trade in value.Now with that said,my last truck,a 1999 freightliner classic,i kept for 5 years till it was paid off,and if it werent for the break down factor,I would probably still have it,but my downtime was starting to hurt more than the payment,so I traded it,having 850000 miles,already rebuilt the transmission,it needing tires,and engine work,couldnt see keeping the truck,so now i'm in the Coronado,special built,higher priced than needed to be,and with just 12 payments left,hope to keep this for a few more years as semi-retirement is soon to come.If i were planning to stay trucking,I would have treaded the truck at 3 years,it was depreciated in those three years,now I have Uncle Sam as my partner in business,and he takes his share every month

 

[TeamCaffee]

Nightcreather which is more what you pay the government on a paid for truck or making those huge payments?
With our truck paid off huge chunks of money go to the bank with only a small percentage going to the government. We earn the interest not Daimler/Chrysler which makes us happy.
For a new person starting out it makes sense to do lots of research and listen to Kevin Rutherford on XM to spec a good used truck. For us used is not an option we are to specific on what we want in a truck and yes we plan on our next truck lasting at least ten years. The truck will be paid off as quickly as possible so if the laws change or our situation changes our long term plan can also change to fit the need.

 

[davekc]

I would agree with Steve on this one. Most trucks that go past the five year mark are pretty much junk. Look at the classifieds for trucks in that 7 to 10 year range and you will see what I mean.
Even if you plan to drive say 150,000 miles a year, that truck would have a million and a half on it. Don't see many with that kind of miles and still running. A few.......but not many.

 

[Streakn1]

I have to wonder how FDCC is going to deal with owners that can no longer go into California once their 2006 model year truck (or older) no longer complies with the Ca emissions rules? Could it be that their 10 year rule for class 8 trucks will be exactly that? Will they tell the owner "replace it, upgrade it, or loose your contract?

In the past FDCC would allow trucks older than 10 years to continue running with a yearly inspection at Corporate. Can one assume that would no longer apply, regardless of how well kept or mechanically dependable a truck such as Ateam's would still be in 2012?

 

[ATeam]

I have to wonder how FDCC is going to deal with owners that can no longer go into California once their 2006 model year truck (or older) no longer complies with the Ca emissions rules? Could it be that their 10 year rule for class 8 trucks will be exactly that? Will they tell the owner "replace it, upgrade it, or loose your contact?

That is possible, yes, and it would not be just FedEx Custom Critical doing so. All owner-operators that lease trucks to a carrier are affected, as are all carriers that operate their own trucks. The California Trucking Association is supportive of CARB in this instance. Being made up of mostly large and new fleets, their membership is not affected as much as owners of one or a small number of older trucks are.

If the rules don't change (and they yet may), there is no question that a number of owner-operators with older equipment will be driven out of the business, or at least out of operating in California.

 

[Streakn1]

You are correct Phil in that it will affect everyone including us with our current carrier. I'm not sure how much our carrier will hold an owner to being able to service the Ca customers such as LAX. In fact, we are in Ontario,Ca now waiting to pick up at LAX. Time will tell if this does go into effect.

There are many in the aviation industry such as us with large sleeper tractors. Although we have a 2007, many have (by choice) older (paid for) trucks that have been totally rebuilt from the ground up. These trucks normally would have many years of service life left in them. Just look at the Southern Pride and Aviation Express rigs out there.

 

[ATeam]

While I remain wary of CARB, recent developments in their proposed rules provide some relief for Diane and me, and people in a similar situation (one-truck owner-operators with plans to run their trucks for a number of years).

This is from a recent Land Line magazine report:

"According to CARB’s statistics, about two-thirds of company fleets are 10 trucks or less, and about one-third are one-truck operations.


"So, CARB proposed an alternate set of rules for companies with three or fewer trucks to allow them more time to meet emissions standards. CARB officials said they understood that most heavy-duty diesel engines have long lifetimes and that the regulation’s previous draft was difficult especially for smaller trucking businesses that have less truck turnover.
The proposal would mandate that one truck from those small companies must meet 2004 emissions standards by Dec. 31, 2012, and would be exempt from additional particulate matter changes until 2017."

We bought our truck in 2006 with the idea of running it ten years or more. If the new proposed rules go through, we will be able to get ten good years out of it without unplanned modifications.