Production at Paccar‘s newly-built engine plant in Columbus, Mississippi, began this month. The start-up, originally scheduled for mid-2009, was put back because of the drastic fall in demand for heavy-duty trucks in North America. The first product rolling off the assembly lines is the 12.9-litre MX diesel, a power-unit developed by Paccar’s DAF Trucks subsidiary in the Netherlands, that has been in production in Eindhoven for over four years.
Before its acquisition of DAF in 1996, Paccar had never countenanced manufacturing its own engines. In the tradition of the US heavy truck industry, the group’s Kenworth and Peterbilt chassis had been wholly reliant on proprietary, ie out-sourced, engines, mainly from Cummins and Caterpillar. And immediately following the DAF take-over, it was widely expected that Paccar would apply the same strategy to its new European truck business, by terminating engine production.
The added-value potential for a truck or bus manufacturer in producing its own heavy-duty engines had long ago been recognised by all the main market contenders in mainland Europe.
But Paccar’s top management was gradually persuaded by DAF executives that vertical integration had decisive merits. The added-value potential for a truck or bus manufacturer in producing its own heavy-duty engines had long ago been recognised by all the main market contenders in mainland Europe. To which could be added the sales revenue benefits of what amounted to a captive aftermarket for engine parts and related service business for the dealer network.
DAF’s success in Europe, as shown by market share, has grown progressively through the last decade, with its engines – the MX and the mid-range 9.2-litre PR – contributing in no small measure, with their sound reputation for reliability and fuel efficiency. Over the last two or three years, pilot installations of the up-to-530hp MX engine in class 8 Kenworth and Peterbilt long-haul tractors have demonstrated its performance acceptability in North American fleets.
DAF’s success in Europe, as shown by market share, has grown progressively through the last decade, with its engines – the MX and the mid-range 9.2-litre PR – contributing in no small measure
Paccar’s challenge now is get customers to specify an in-house engine in preference to the established Cummins 15-litre ISX, which will remain effectively the only option, Caterpillar having bowed out of the on-highway engine market last year. The company says around 20% of class 8 Kenworths and Peterbilts are now being ordered with the MX engine. It seems clear that prospective buyers are likely to be regaled with introductory incentives, by way of straight discounts or low-interest finance packages, as a means of ‘converting’ hitherto loyal fans of Cummins power to give the MX a try. It should prove easier to get those Kenworth and Peterbilt buyers whose previously allegiance was to Caterpillar and who, by definition, remain to a lesser or greater extent ‘anti-Cummins’, to take the new engine.
Any ideas Paccar might have had of following the DAF precedent, by making the MX the no-option standard, would have been quickly scotched by the realisation that such a ploy could well drive its established Cummins powertrain customers elsewhere, notably to Freightliner or Volvo where, for identical marketing reasons, the ISX has been retained as an alternative to their respective in-house engines. Cummins holds an intriguing and unprecedented balance of power in the market, knowing that none of its three North American heavy-duty OEMs – Paccar, Volvo or Daimler – will risk losing sales by deleting the ISX option.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
