[Editor's note: earlier this week, Marc Gunther profiled Eaton's hybrid trucks; here, Cutler goes into more depth on how the hybrid big-rig business is booming.]
Marc Gunther: I'm joined by Sandy Cutler. Sandy is the CEO of Eaton Corporation. It's a $15 billion, Fortune 100 company and we're talking today about the hybrid electric truck market. You all know about hybrid cars, the Toyota Prius and the like, these are hybrid trucks. So Sandy thanks for joining me. Please begin by just describing what a hybrid truck is, briefly how it works and what the advantages are to your end customers.
Sandy Cutler: Sure, I'll be glad to. A hybrid commercial vehicle combines a traditional electric – an electric motor with a traditional diesel engine to form the power train, or it combines a hydraulic system with diesel engine. Both systems are meant to try to reduce variations in the speed of the engine which then allows you to have very, very significant fuel economy advantages and also significant reduction in emissions, both obviously very important to users today.
MG: And so who are some of your customers today for these both hybrid trucks and the HLA hydraulic trucks and what's the scale of the business?
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SC: Many, many household names are the lead customers today, whether it be UPS or whether it be Federal Express. Customers like a waste management for their large refuse trucks. We're seeing people who run large fleets of trucks who are interested in reducing their energy costs and reducing their emissions and finding a way to run these trucks more economically are fairly quickly now adopting one of the three basic different types of technologies that we bring to the hybrid power trains in commercial vehicles today.
MG: Well obviously we're in very tough economic times. How has that affected the business? These trucks I know are more expensive than conventional trucks.
SC: You're exactly right, and part of our concern coming into 2009 is that we might see people pull back on what has been the front-end of what we think will be a very exciting ramp up in this industry. The industries probably in the U.S. on the order of a couple thousand vehicles today. We feel we need to get up to roughly 10,000 vehicles as an industry to get these technologies to be fully cost competitive with a traditional diesel based power trains.
But we are encouraged here in 2009 is that I think as people look at the prospect of higher fuel costs and continued emissions reductions requirements. Whether those come in the form of carbon caps or Cap A type regulations, we are seeing many, many fleets now move past the point of simply sampling and introducing real quantities into their fleet for these hybrid power trains.
MG: So is this segment of your business growing even despite the recession that it appears we're still in?
SC: Yes it is and we're really pleased, as you say, in spite of this sort of economic conditions that surround all of us today in the U.S. and really around the world. This particular segment is growing and I think it's a testament to the effectiveness of this technology and the fact that it's really hitting a sweet spot in the midst of a period of time of real concern about carbon imprint and a real concern about future energy costs.
MG: Last question Sandy, when you think about hybrid cars, we think the Toyota Prius, Honda has the Incite, it's really a Japanese led business at this point although Ford is obviously involved as is GM. What's the picture in terms of hybrid trucks?
SC: There is an enormous opportunity for the U.S. to continue its present real leadership on a worldwide basis in this regard and we're pleased that we Eaton are the largest provider of commercial hybrid power trains so in the world today with great success here in the U.S., Europe, and in Asia. The criticality of our getting up to this 10,000 units per year is that that'll allow the industry to be competitive and stay out in the lead and now have us forfeit the lead that we at one time had in electric passenger cars. It's a real opportunity for the U.S. to maintain worldwide leadership, create really good jobs and grow in what is really a strong driver all around carbon emissions and fuel economy.
MG: Well that was Sandy Cutler. Sandy's the CEO of Eaton Corporation. Thank you very much for joining me.
SC: Thanks very much.
GreenBiz.com Senior Writer Marc Gunther blogs at www.marcgunther.com.