RERMAG

Revved Up

As the Environmental Protection Agency set tiers of emission requirements for all engines, manufacturers have been working hard to not only meet these standards, but to exceed them. RER recently discussed the impact of EPA's requirements on engine technology; research and development spending; engine costs; and the engine manufacturers themselves.

RER: Explain the latest requirements from EPA and how your company is doing in responding to them?

Briggs & Stratton: EPA has implemented a system of progressively tougher “tiers” of emissions standards for small engines. We are currently in the second tier of regulations, which measure hydrocarbon and NOX levels to determine compliance over a specified life of the engine.

Cummins: EPA's first off-highway emission regulation, Tier 1, became effective in 1996 through 1998, so emission certified products already make up a considerable portion of today's rental fleet. The industry is currently transitioning to EPA's more stringent Tier 2 regulation. The Tier 2 regulation further restricts the output of oxides of nitrogen, hydrocarbons, carbon monoxide, and particulate matter. Tier 2 has been in effect since January 2001 for engines over 300 hp, and January 2003 for engines between 100 to 300 hp. Starting January 2004, engines between 25 to 100 hp must meet Tier 2 regulations, which will impact many of the equipment types used in rental applications. Smaller equipment, powered by engines ranging from 10 to 25 hp won't be affected until 2005.

Cummins has a complete line of Tier 2 certified products, 25 hp and up, available to off-highway equipment manufacturers.

Ford Power: Ford Motor Company is currently working to comply with EPA's requirements and plans to meet these requirements for the 2004 model year.

Kohler: The latest phase of EPA's small engine regulation was implemented in 2001. It includes a durability period also known as the “regulatory useful life.” The manufacturer selects the appropriate period from three options. All Kohler certified engines comply with this requirement.

American Honda: One of our philosophies is always to meet or exceed EPA regulations well in advance of their phase-in dates.

Robin America: Currently all Robin Subaru engines that are being sold in the United States meet EPA emission requirements up to 2005.

Caterpillar: Current Tier 2 regulations are in force for a large portion of our products and will be completely phased in by 2006. We are complying with the standards as we roll out our new products. The next wave of regulations, Tier 3, goes into effect beginning in 2006 (2005 for Caterpillar under the consent decree).

Following Tier 3 comes Tier 4, which EPA is developing. EPA is taking a systems-wide approach to this rulemaking, looking at engine after-treatment and fuels. Engine manufacturers, including CAT, have been working with EPA on the technical issues associated with this rulemaking. We expect to have 500ppm fuel available in mid-2007 and 15 ppm fuel in mid-2010 to facilitate compliance with these tough standards.

There have been a number of tiers over the past decade, and different levels of requirements for engine manufacturers. How has engine technology changed as a result?

Briggs & Stratton: The drive to build cleaner running engines has perpetuated a host of changes in Briggs & Stratton engines. Overhead valve (OHV) engine designs for example, have not only helped to reduce emissions, but have also increased performance through increased combustion efficiency. Our new engines are also designed to run on a lean fuel mixture, which further reduces emissions. In addition, limiter caps prevent user changes to the carburetor that could result in increased emissions.

Cummins: Engine technology has changed in many ways that are invisible to the equipment user, but key areas of development include fuel injection systems, electronic control systems, combustion chamber and cylinder head design, and lower temperature after-cooling.

Ford Power: Historically, engine manufacturers have developed technology to meet the regulatory standards. Industrial engines will draw on some of the automotive after-treatment and electronic technology and will use it as appropriate.

Kohler: Most engine manufacturers, including Kohler Co., are utilizing OHV engines with fixed jet carburetors to comply with the regulations.

Perkins: At Perkins we have taken emission legislation as the framework that sets the time scale for new product introduction. However we look to changing customer needs as the main driving force for introducing new or improving existing engine technology.

Before we started any design work we conducted extensive customer research using QFD (Quantitative Functional Deployment) techniques to really understand the key issues for our customer. Only once this work was complete and this data was fully understood did we start work on developing our Tier 2 range of products.

Robin America: We have a new line of EX slant cylinder engines. These engines use the most modern small engine technology, including a hemispherical cylinder head and chain drive overhead cam.

Caterpillar: As emissions reduction requirements have become more stringent, engine manufacturers have relied to a greater degree on electronics and advanced combustion technologies to maximize engine performance and fuel efficiency. Cleaner fuels and improved lubricating oils have also been a part of the formula.

What have been the positive aspects of these changes, i.e., how have engines improved as a result?

Briggs & Stratton: Cleaner combustion is the most positive aspect of the resulting engine changes. In fact, new Briggs & Stratton engines are on average 70 percent cleaner running than engines built in 1990.

In addition, our new engines have made healthy gains in the areas of fuel efficiency and power consistency. All of our commercial engines use the OHV design, which promotes increased fuel economy while maximizing the available power from a given engine displacement.

Cummins: This is an excellent question, as engine capability and productivity really has advanced greatly. For example, prior to the Tier 1 emission regulation, Cummins' popular 6-liter B5.9 engine produced a maximum output of 174 hp. Today, the same 6-liter engine, redesigned with an electronic fuel system and 24-valve cylinder head, and now named the QSB, is capable of 275 hp.

Ford Power: Industrial engines have reduced emissions by approximately 90 percent while improving fuel economy by 20 percent.

Kohler: OHV engines tend to have better cooling and less bore distortion, making them more durable with less oil consumption and more fuel-efficient.

Robin America: Our new engines have improved fuel economy and increased power compared to other similar displacement engines. These new engines also are easier to start and have less vibration than other older design engines in their class.

Caterpillar: As emissions regulations have become more stringent, engine manufacturers have been challenged to meet or exceed the performance requirements of our customers for durability, reliability, fuel efficiency and operational ease of handling.

Obviously environmental requirements have placed significant costs on engine manufacturers. How have these costs affected your company? Have you passed these costs along to OEMs, consumers, distributors and rental companies?

Briggs & Stratton: Inevitably some of those costs are passed along, but the value level remains high with our customers due to the enhanced efficiency and durability our new engines provide.

Cummins: The goal is to ensure the value of the engine increases greater than the cost of meeting new emission standards. In general, by improving the productivity of our engines, we've been able to provide more value, dollar-for-dollar, as we introduce our Tier 2 engine lines.

Ford Power: Regulations have increased the costs of design, development and manufacturing of LSI engines, while adding the expense of testing and warranty to the industry. Anyone that purchases these products will experience cost increases as predicted by the regulators.

Kohler: Purchasing new emission equipment, additional engineering efforts to make sure engines meet the new EPA standards, and additional reporting requirements to the government agencies have all impacted our costs. However, we are proud of our efficiencies, which have helped avoid passing most of these costs on to our customers.

Perkins: Yes our Tier 2 engines do cost our OEM more than a Tier 1 engine, as they cost more to produce and the R&D investments need to be covered. However, for both the OEM and the operator these up front costs pale into insignificance when compared to the full life cost savings that open up.

The introduction of complementary aftermarket support systems offers a big leap forward, minimizing costly downtime. We now have IT systems in place that guarantee fast and cost effective diagnosis and repair should an engine suffer problems in the field, and with electronically controlled engines a record of how the engine has been operated. This is a real benefit to the rental market where owners are not around to see how or when their equipment is being used.

American Honda: EPA standards have had no affect on us as far as cost and technology. We're there and we have been there.

Robin America: We have modernized our engine assembly lines to improve production efficiency. This has required significant capital investment but has resulted in our ability to supply modern engines at costs very close to our older engines. Actually our newest EX overhead cam chain drive engines cost our customers less than the previous pushrod overhead valve engines.

Caterpillar: Caterpillar has invested heavily in emissions reduction technology. All engine manufacturers have raised the prices of their on-highway engines to help defray research and development costs. Tier 3 off-highway engines will also carry a price increase.

What percentage of your budget is spent on R&D? Has that gone up substantially since EPA regulations have gone into effect?

Briggs & Stratton: Briggs & Stratton has progressively increased its R&D activities for a number of reasons, one of which is to comply with emissions standards.

Ford Power: R&D costs have increased substantially in preparation for certification.

Kohler: Our R&D budget is confidential, but we can say that it has increased since regulations have been implemented.

American Honda: Honda is highly R&D focused. Our goal is low emissions and high fuel economy.

Caterpillar: Cat is investing $4 million each working day in technology. Our continued investments in technology have produced breakthroughs in emissions reduction, increased product and component life and improved safety and fuel economy.

Have any particular challenges, from a technical standpoint, been particularly hard to overcome?

Briggs & Stratton: Engines are a series of complex, interrelated systems that operate in a balance with each other. Whenever a change is made to one of the systems, other systems will be affected. For example, a lean-running engine is great for low emissions but typically won't start-up as quickly, or provide the performance consistency, of an equivalent richer-running engine, all other factors being equal. Finding the right balance that allows a robust, hard working engine that meets the current and future emissions standards requires a great depth of experience and understanding.

Robin America: Avoiding the use of catalytic converters because of the increased cost and safety concerns due to increased exhaust temperatures.

Caterpillar: In the late 1990s, Caterpillar pursued several technology paths in order to meet current and future EPA emissions standards. However, after enormous research and testing, we abandoned cooled-EGR in favor of ACERT technology. We found that ACERT represents a long-term solution in both on- and off-highway markets.

What kinds of equipment are your engines most suited for?

Briggs & Stratton: Briggs & Stratton manufactures engines for virtually any commercial equipment application that utilizes an engine in the 2.4 hp to 34 hp range.

Cummins: Cummins' current product line starts at 30 hp and continues on up to 3,500 hp. In between, Cummins has a complete line of engines suitable for any type of rental equipment.

Ford Power: Any industrial equipment requiring an LSI engine operating at 200 hp or less.

Kohler: We produce engines for a variety of markets, including turf, welding, rental and construction.

Caterpillar: Caterpillar engines and engine systems provide power from 20 to over 20,000 hp. Our engines are applied in a wide variety of mobile and stationary applications including construction equipment, industrial applications, trucks, electric power, marine and much more.

What challenges are rental companies most likely to face in the coming years and how do you expect them to react to those challenges?

Briggs & Stratton: Recruiting and retaining high quality employees whose values are consistent with those of the company, and whose skills meet the needs of the company's customers is one challenge I see for every rental company.

Cummins: As rental equipment ages, it will need more complex repairs that are beyond warranty that the rental companies normally didn't have to face because they rotated their fleet every three to three-and-a-half years. Now they will have to face this new cost and manage the logistics of equipment that remains off-line longer for more complex repairs. The shortage of trained technicians will compound the problem of keeping older equipment running reliably and generating revenue.

Ford Power: Audit issues will be the most difficult to overcome. If an engine manufacturer is selected for an audit, the rental company may have to locate a particular piece of equipment with the selected engine and provide it to the manufacturer for auditing purposes. The rental company will be without the equipment while the engine is being tested.

Kohler: The biggest challenge I see is to continue offering superior customer service. Those companies who are able to offer up-to-date product knowledge, longer store hours, and pick up and delivery will likely achieve repeat business.

Caterpillar: Low rental rates have been a big problem for the industry, mostly caused by excess fleet and declining demand. This problem will work itself out somewhat as construction activity and demand increases. Profitability will continue to be a challenge and we will have to continually monitor our cost structure and both wring out excess costs as well as implement more efficient processes wherever possible.

For a complete transcript of this roundtable, please visit www.rermag.com.

PARTICIPANTS

Briggs & Stratton Commercial Power

Philip Cappitelli, vice president & general manager, Vanguard Commercial Business Unit

Cummins

Roe East, director market strategy & product strategy

Larry Thomas, director, industrial national accounts rental market

Ford Power Products

John Andreas, director, programs and engineering

Kohler

Cameron Litt, product manager, twin cylinder engines

Perkins

Richard Webb, product marketing manager

American Honda

Sage Marie, Honda spokesman

Robin America

Casey Ishii, vice president of engineering; Dale Maradei, engineering manager; and Barry Miller, distribution and territory manager

Caterpillar Inc.

Chuck Wills, industrial marketing manager, Power Systems Division

Robert Wahrenburg, marketing services consultant, NACD — Rental & Used Equipment Services

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