Aggregates Manager Digital Magazine
Issue link: https://read.dmtmag.com/i/91809
SPECIAL REPORT get new, complicated engines, but move into Latin America where serviceability may not be available, that will impact the saleability of the engines." This concern about resale could just be like the frenzy about Y2K. "Everyone was freaking out about it, but it didn't turn out to be a huge issue," Blake said. "But who knows?" Clean air has been a concern of the U.S. government since 1955, Manfredi added. The Clean Air Act of 1970 included mo- tor vehicles and the Clean Air Act of 1990 established air-quality standards for all on- highway vehicles and off-road equipment. Tier 4 Interim became effective Jan. 1, 2012, and regulations have continually become more stringent. "Initial updates have chal- lenged engine manufacturers as the EPA [Environmental Protection Agency] regula- tions have become stronger and stricter in tiers over time," Manfredi said. He also noted that these regulations have progressed from what was once a simple en- gine tune-up to an elaborate engine system that is both much more costly and complex. Blake says it's hard to determine yet the effect of Tier 4 on the used equipment market. "Most of what is coming to auction today is below Tier 4," he said. "We've sold some Tier 4 in Australia, and it has been well received." However, Tier 3 construction equip- ment has seen an increase in value from the past couple of years. Blake credits it to the increased demand for used equipment dur- ing the last 18 months rather than the Tier 4 issues. A big part of Tier 4 is also education and compliance. Neal R. Winberg, director of equipment purchasing and sales at Kiewit Corp., said his company relies heavily on dealers and manufacturers "to guide us through things." He is concerned about the price increases on Tier 4 equipment and compliance. Winberg called the additional costs associated with Tier 4 equipment a "right jab," and "the left hook is what it will be on the back end" — a potential decrease in resale value. He said Kiewit also recognizes that it has to take some risks to make sure the com- pany is in compliance with regulations, but says it has a whole staff dedicated to this. "We are a target…as a large consumer of construction on- and off-highway equip- ment," he said during the panel discussion. "We really depend on dealers and manu- facturers to keep us abreast of the current requirements." The panel also discussed emissions de- vice adoption and which will become the standard. Manfredi posed the question of whether it will become a VHS vs. Betamax issue, likening it to the short-lived format war between the two video viewing devices. "Everyone will eventually have to have the same [technology]," added panelist Tom Rhein, president of Rhein Associates, which publishes The Rhein Report: Powertrain Products. "Navistar is an interesting situation as it is the only engine manufacturer cur- rently using exhaust gas recirculation (EGR) technology only for its trucks, but will be changing over to selective catalytic reduc- tion (SCR) technology in 2013 to comply with EPA requirements." "If you look at off-highway equipment, there are so many engines, so many duty cy- cles," Rhein said. "NOx (nitrogen oxide) and particulates oppose each other. If you have the most efficient engine in the world and it produces no particulates, your NOx sky- rockets. They knew at the beginning of the emissions changes how to get NOx down… by producing an inefficient engine." Blake said the reality is that the tech- nology is going to have to "morph" into something standard. He said he expects the industry to go through "a bumpy period where no one really knows what the right answer is," and Tier 4 will "kind of marry" EGR and SCR together. "The billions of dollars in research have to be recovered somehow," Blake said. Each manufacturer will look at which is the most inexpensive technology and what produces the best fuel economy, Rhein said. "Based on this, they will come up with their final resolutions. Cooled EGR is a very in- efficient engine. SCR has brought it back to be more efficient." Future planning scenarios With so much up in the air, it's hard to determine what will happen in the future. Manfredi came up with these three scenar- ios and asked the audience to weigh in via another real-time poll as to which statement each person agreed with most: a. 10 years from now everyone will won- der why we are all concerned. c. Let the buyer beware — there will be a flow of used machines between emis- sion regulation regions that will require buyers to be extremely knowledgeable. The audience was pretty much split into thirds, with 33 percent agreeing with choice a, 31 percent agreeing with choice b, and 35 percent agreeing with choice c. It appears that only time will tell, but with the EPA's continued regulations, the used construction equipment market faces challenges that it will have to figure out how to hurdle — but it's just par for the course. AM For a video from the panel discussion, go to http://tinyurl.com/Tier-4-future-resale-market b. The world will be divided into emission regulations regions. AGGREGATES MANAGER DIGITAL EXCLUSIVE November 2012 37B