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Newsroom : International Customer Pulse Poll : Uncertainty Overseas
Unpredictable geopolitical conditions overseas can create some significant challenges for the domestic economy, and in particular the trucking and transportation industry. From security restrictions and supply chain slowdowns to increased insurance and freight costs, truck owners and fleet managers face a unique set of concerns. To understand what some of our customers' challenges have been in this climate of uncertainty, we asked a few questions about the "Impact of War" overseas.
Overall, just over 60% of respondents to our recent poll said their businesses were affected "very much" or "somewhat" by the war, while only 10% said they weren't affected at all.
How were our customers affected? The number one issue was the price of diesel fuel - nearly three-quarters felt an immediate impact from high fuel prices.
It's been well documented that there exists a strong correlation between diesel fuel prices and trucking company failures. In most cases, our larger customers can raise freight rates or include a fuel surcharge to compensate for higher fuel costs. However, our smaller customers, who do not have the scale or leverage to negotiate higher rates with their customers, often face greater risks in times of high fuel prices.
When you consider that we operate in a very fragmented industry - 80% of the country's more than 600,000 carriers operate 6 or fewer trucks - it becomes clear that this risk could be very widespread. And even though diesel fuel prices have come down significantly since the end of the war, we should no longer assume the luxury of long-term confidence in either diesel fuel supply or pricing.
In fact, recent International research tracked a certain lag effect taking place, in which the impact of higher fuel prices was seen to reveal itself about five months down the road. Bottom line - the impact of higher prices in March and April will not fully reveal itself until the end of the summer.
In this environment, fuel economy is critical. To identify the true economic impact of fuel economy, a team of researchers at International honed in on the five most important factors affecting our customers' fuel economy performance. Here are the findings:
1. Vehicle Aerodynamics. On a typical Class 8 tractor, 42% of fuel consumption is attributed to aerodynamic drag. It's well understood that a well-designed truck moves through the air with minimal turbulence, achieving air that is "laminated" to all sides of the truck. Recent improvements to our entire line of heavy-duty have achieved fuel economy improvements of up to 14% over trucks without the same aerodynamic features. Translated into economic terms, the difference between a truck with these features and a truck without them is more than $7,000 per year in operating costs, or more than $28,000 over a four-year life cycle.
2. Drivetrain components. Proper axle and wheel alignment can improve fuel economy by more than 2%, and optimizing axle ratio and transmission performance also has a direct impact on fuel economy. We've measured an impact of about $2,000 per year, or nearly $8,000 over a four-year life cycle. To capitalize on this, we've developed a custom transmission shift pattern in partnership with Allison Transmission, specifically designed to optimize shift points for maximum engine output and fuel efficiency.
3. Tires. Tire rolling resistance can account for up to 34% of a truck's fuel consumption. Likewise, under-inflation by 10psi can reduce fuel economy by as much as 10%. The right tires, front wheel alignment and tire inflation levels can have an additional impact of $2,000 per year in fuel costs, or $8,000 over a four-year life. Our tire partner, Goodyear, has improved fuel economy by 12% in the past 10 years through improvements to their highway tires.
4. Diesel engine design and efficiency. Especially with the 2002 emissions requirements and upcoming 2007 requirements, it's crucial that trucks and engines are engineered as an integrated package. When we integrated the 2002 emission engines into our Class 8 products, we worked closely with our partners Cummins and Caterpillar to reduce any adverse impact on fuel economy by focusing on improvements in other areas, such as cooling systems and aerodynamics. And the newest International engine, the VT 365, incorporates several new technologies that make it up to 10% more fuel efficient than the engine it replaces.
5. Driver Performance. Unchecked engine activity, fluctuations in engine temperature and excessive engine idling can eat into fuel pretty quickly. Some of our larger orders recently have addressed that concern by integrating electronic engine controls, such as the Cummins ICON fuel management system. Reducing truck idling can increase a fleet's fuel efficiency by as much as 10%, which translates into a savings of at least $2,500 per truck per year, or $10,000 per truck over a four-year life cycle.
International is doing its part to help our customers succeed by focusing on lowering the operating costs of our vehicles - most notably through fuel economy. In fact, the combined effect of each of the fuel economy savings outlined above can have a very significant and positive effect on our customers' businesses. Customers taking advantage of each of these steps can save up to $15,000 per truck per year, or more than $60,000 per truck over a four-year life cycle.
Using history as our guide, we see that the next few months are very important to the success and survival of many trucking companies. International customers - benefiting from the progress outlined above - are uniquely prepared to make it through successfully and profitably.
