GRAPEVINE, TX – At the 2020 Heavy Duty Aftermarket Dialogue opening panel “The Real World View – A Global Perspective,” Rick Dauch, CEO of Delphi Technologies, and Jim Kamsickas, CEO and president of Dana Incorporated, described the current road trucking is on to zero-emissions and overall electrification as a treacherous one, rife with potential potholes.
“For the next five to 10 years, it's going to be tough,” Dauch said. "The next three to four years are really going to be game changers. There will be some survivors and some losers.”
Kamsickas, whose company provides electrified drivetrain systems and components for OEMs and the aftermarket, went even further.
“This is going to be the most difficult time to lead a company in history,” he said, speaking specifically about companies embroiled in electrification.
Few if any know that better than Dauch.
Delphi, which operates in 24 countries and has 21,000 employees, had enjoyed boom times until Q3 of 2019, when "every one of our commercial vehicle plants were running flat out seven days a week” with $12-15 million worth of backlogs, Dauch said. Then revenue dropped 14% from 2018 to 2019. Dauch assumed leadership in 2019.
That’s arguably because of several economic factors, but a primary culprit Dauch fingered was Europe’s “Dieselgate” emissions cheating scandal, with Europe’s growing distaste for fossil fuels as an accomplice.
“If you look at the laws, the big cities are going to ban diesel cars, and maybe full combustion engines, by 2050, based on the Paris accord,” said Dauch, a Flint, Mich. native living in London.
According to Dauch, China fanned the bonfire of burning profits by altering its electric vehicle subsidies. Delphi opened a new plant in China last July that had not made any parts “because the Chinese government changed the incentive plans for electric vehicles,” he said. In March 2019, the Ministry of Finance announced it would bifurcate EV subsidies to 25,00 yuan from 50,000 yuan, a difference of $3,700 U.S. dollars.
“Our light duty diesel businesses are dropping almost 70%, from $1.2 billion to $200 million, in less than five years,” Dauch said, “so that's forcing our company go through a massive restructuring.”
Facilities and plants closed in England, France and Spain (decisions made prior to Dauch’s tenure), while new ones have sprung up in Poland, Romania and Turkey. Growing pains have included a truck losing 23 pallets of fuel injection systems parts while the driver allegedly slept.
“Come on, you have to have a fork truck to get those things off the truck,” Dauch said incredulously, comparing the mishap to a scene from “The Irishman.”
Another repercussion is plans to lay off about 40% of its approximate pool of 5,000 engineers.
As Delphi’s diesel business struggled, its electric market flourished, and is worth about $1 billion now.
“We think we're going to double our electrification business over the next five years,” Dauch added. “We're not going to make the motors, but we're going to make the systems that are in between: the inverters, chargers, battery management systems.
He said four new electrification plants opened in China, Poland, Mexico and Singapore where they do “some really cool technology.” An American plant was also modified to produce electric parts.
He then mentioned a major challenge companies such as his will face is finding enough software and electrical engineers.
Another is getting enough infrastructure to handle an influx of electric vehicles. In London, he observed electric taxis must wait four deep to power up, reducing their uptime. The other question is how the electricity is generated? If the emissions aren’t coming from the tailpipe, are they streaming from a smokestack?
Dauch said a recent meeting with BP revealed the energy company spends only $500 million of its total capital budget of $15 billion on renewables. Those same number were also reported by The Guardian in 2018.
Dauch said the infrastructure burden would fall on governments, as electrification programs are often too unwieldy for large manufacturers to take on alone.
“When you're seeing these big collaborations and joint ventures between the OEMs, even they don't have some of the resources to make it happen,” Dauch said.
Less than 24 hours later, that proved to be a Delphi-fulfilling prophesy as BorgWarner acquired the fuel injection system maker in a $3.3 billion, all-stock deal.
Electric’s positive side
Panel moderator Chris Patterson, former Daimler Trucks North America CEO, painted a complicated landscape for trucking in the 2020s. Backlogs and the driver shortage are less of an issue as the trucking industry nurses a hangover from its record-setting highs of 2018 and 2019. The trade war with China also appears to have been deescalated, and the United States has reached an agreement with its north and south neighbors for a new trade deal, the United States-Mexico-Canada Agreement.
Trouble still casts a foreboding shadow, as carriers big (Celadon) and small (too many to name) have gone out of business as cost pressures such as insurance increase. The squeeze was also felt from regulatory bodies worldwide demanding cleaner-running trucks in response to climate concerns. Then there’s the Wuhan Corona virus emanating from China, which could require an all-out quarantine of exports that would cripple the global supply chain.
“It's not a rosy outlook, but it's far from a doomsday scenario,” Patterson said
Good or bad, it’s time of change. Patterson noted that in about a year’s time, the commercial vehicle market went from no battery electric models available to 50 now, and the cost keeps dropping.
That’s led to uncertainty in many corners of trucking, despite diesel accounting for upwards of 95% of the powertrains. That 5% has planted the seeds of doubt, though, which is fine by Kamsickas.
“A crisis is a terrible thing to waste,” he said. “This is great. This is making all of us think a little bit differently.”
Dana has thought differently for at least 20 years, the amount of time it has ventured into the sustainable fuel frontier.
Kamsickas isn’t concerned at all with emissions standards; Dana’s strategy— which includes pure battery, hybrid, and CNG powertrains, as well as hydrogen fuel cell plates—is moving full steam ahead regardless. “If you really think about millennials, and you think about the end customer, the consumer, that's what they're going to be asking for,” he said.
He doesn’t see infrastructure as a major limiting factor, offering China’s 1 million charging stations as an example of problem-solving occurring when the willpower presents itself.
Because of voltage requirements he believed medium duty and last mile applications will be most viable, though Class 8 would require more power. And hydrogen fuel cells for long range freight is still “the endgame.”
What might keep Kamsickas concerned, though, is how people will interact with this new electric landscape, from the plants to the repair shops.
Dana is working on 800V inverters and testing 1,200V ones.
“800 volts pretty much kills you,” he said.
So beyond economics and engineering, the critical component to any business’s electrification success will be building the right safety culture: “If you have not thought about that, relative to ratcheting up, training, safety precautions, culture, if you are not embedding that right now, I recommend that you do because you know if it was mentioned, you're going to have some real bad casualties real fast,” Kamsickas concluded.
