Looking Up

Production of the new 2007 buses is keeping the large
school bus OEMs very busy

Ryan Gray | Senior Editor

As New Year’s Eve circles back onto the radar screen later this year on its annual final approach there will be much more to the anticipation within the school bus industry than the parties.

With school bus OEMs scurrying like army ants at a barbecue picnic to meet the market demand for new vehicles equipped with the 2007 compliant engines it’s shaping up to be a year for record production.

And headaches.

“Everybody’s seeing that supply chain stretched pretty tight,” said Jeffrey Bust, president and CEO of Blue Bird, maker of the Type D All American and the new Vision.

The industry’s three large bus manufacturers — Blue Bird, IC Corp and Thomas Built Buses — were contacted to discuss how the EPA Clean Air Act requirements to lower the amounts of potentially health affecting sulfur figure to affect manufacturing operations.

While it remained unclear exactly how much of the initial production increase was so far based upon the new 2007 buses with ULSD engines and how much was tied to pre-buys, the manufacturers were in general agreement that forthcoming price increases were a contributing factor.

School Transportation News heard figures ranging from an additional $5,000 to $12,000 for new 2007 buses, which of course reflects the new lower emission engines. But related peripheral costs include markups for component parts rushed to all the factories to some how keep up with demand spikes.

The Bird Focuses its Vision
It’s already been a big year for the Fort Valley, Ga., manufacturer, as it flew through a 32-hour bankruptcy, which is being called the quickest financial reorganization in U.S. history. That was more than six months ago, and, with employees back on the job full time in February, things at the company couldn’t be looking more up than a kindergartner at the bus stop on the first day of school.

For example, Bust said normal factory operations during this end-of-season delivery period would entail a slow down in production, with a plant closure around the Christmas and New Year holiday. But this year the company was planning to run normal production staffs straight through until the end of the calendar year. He said it was too early to tell if this anomaly was due to the 2007 pre-buy or a continued success of the company’s new Vision Type C school bus.

In a March 2006 article, Bust said Blue Bird unit deliveries had been flat to slightly down since 2003, but the Vision alone raised sales dollars 27 percent because it essentially replaced all other conventional products previously mounted on an other manufacturer’s chassis.

And because the Vision quickly exceeded its initial sales goals by such a wide margin, company investors grew so confident they extended Blue Bird’s credit line just months after the bankruptcy proceedings concluded. Factor in a deal to offer the GlobalGuard GPS monitoring system in all large school buses, plans to bring propane buses back to the market and, as Bust called it, an “Earth shattering” Type D and Type A supplier agreement with Laidlaw, the nation’s largest contractor with a fleet size of approximately 40,000 vehicles.

“Laidlaw hasn’t bought buses from Blue Bird except for contractor-owned buses for the past 10 years or so. That’s a huge positive endorsement because they’re so big and it’s a big change for them,” he explained. “Beyond the sales value of having this relationship is, Laidlaw being a contractor, they’re a little more flexible on deliveries, which smooths out seasonal affects. They operate so many buses in all the states; we are using them to help us get better data on how our buses are performing and where we need to take our buses in the future.”

But like the other large bus OEMs, Blue Bird was experiencing growing pains from the increased production demand placed on its supply line. In a proactive move made last year, Bust said the company trimmed it’s supplier lines from 2,200 to 750 to streamline operations and better focus on meeting market demand.

“In general we have good visibility and communication with suppliers, and that helps us be relatively flexible with the way we plan things,” he added.

IC Big Things Ahead
Amid release of its much-anticipated hybrid-electric school bus prototype last month, IC Corporation is also looking ahead to a record year.

The nation’s largest school bus manufacturer, which also came to market last year with its AWARE™ Vehicle Intelligence system, now also finds itself in the thick of the 2007 production madness, which it also attributes to pre-buys.

“Many customers do not have an opportunity to pre-buy due to the limited funds available to them during their fiscal years,” said Michael Cancelliere, vice president and general manager of parent company International Truck and Engine’s Bus Vehicle Center. “Some states are looking into bond proposals or other special funds earmarked for school bus purchases that may coincide with buying ahead of the 2007 emissions changes. However, we’ve heard that some fleets are even holding off on purchasing new buses until the 2007 compliant engines are in production. With the prospect of newer, cleaner diesel engines in their fleet, many school bus customers are looking forward to the change.”

He added dealers are reporting an increased activity greater than originally anticipated.
Longhorn Bus Sales in Houston recently completed research that showed a 30 to 35 percent increase in pre-buys by its Texas school district customers.

“There is so much pre-buying we are real concerned about 2007,” said Jack Connell, general manager at Longhorn Bus, adding the company recently purchased an additional 450 stock buses to fill the high order volume before prices go up this month. “The pricing is so high it’s going to impact things considerably.”

As of July 3, he said Longhorn had sold more than 1,200 stock buses in all.
“Between now and the factory orders we don’t know where it’s going to go,” he said. “As soon as the October pricing kicks in sales will drop.”

But he agreed with Cancelliere that price tag increases up to $8,000 per bus won’t detract many fleets from ordering 2007s.

“It depends on how vulnerable these school districts are to emissions,” he said. “So many are being looked at pretty heavily.”

Thomas Built for the New Year
“Test units have performed beyond expectations, and we are ready to go,” said Allan Haggai, manager of marketing and support services at Thomas Built Bus, a Freightliner company. “School bus operators are very interested in reducing diesel emissions and we’re ready to serve that need.”

But at a cost. Like its competitors, Thomas is forecasting increased prices for its 2007 Mercedes-Benz engine units, figures they say are hovering in the $7,000 ballpark. And clearly manufacturers like Thomas have no choice per the federal mandates that will only tighten in 2010 and beyond. Haggai said a trend the High Point, N.C., company sees is school bus customers stocking up on the pre-2007 buses that still have stringent emissions controls in place but cost a fraction of the price.

“Demand is high right now as buyers are trying to avoid the 2007 engine up-charge,” he said, adding that a limited number of pre-2007 engines will be available early next year, “but demand will likely result in premium pricing for such.”

While Thomas and Mercedes heavily invested in the 2007 engine program, sights are also set on the alternative market, though at this time Haggai declined to go into specifics as the systems are still in developmental phases. But Advanced Energy of Raleigh, N.C., partnered with Thomas on past hybrid electric school bus projects, and the industrial engineering company along with the Hybrid School Bus Consortium issued in June an RFP to manufacture and deliver hybrid school buses.

Tom Schaaf, Thomas’ national sales manager, did disclose that Freightliner is in the process of moving Thomas’ Mercedes 906 engine production to the United States, which will eventually enhance the company’s production flow of 2007 engines.

“We are nearing completion of this multi-million dollar engine facility in Detroit, where we already have other sister company facilities and operations,” he said.

MBE’s are currently built in Germany and account for approximately 60 percent of Thomas’ total engine consumption. Having the engine produced in the states could enhance its competitive position in the market place.

“Although we have used the Mercedes’ Germany-located facilities extensively for plant tours, we are very excited because logistically it will now be much closer,” Shaaf added. “The MBE is extremely reliable and known country wide for its fuel efficiency and durability. When potential customers see our facilities and processes, they understand why.”

In the meantime, rush hour continues, as Thomas’ supply chain wrinkles are being addressed by investing extra time with its suppliers and developing better vendor relationships to avoid supply interruptions.

“It has been very tough this year to say the least,” Haggai added.