Manufacturers of off-highway equipment love to dream about big things. Their cyclical assembly lines depend heavily on airports, bridges, dams, mass transit systems, skyscrapers, stadiums, highways, tunnels, water treatment facilities and other major construction projects.
Fortunately, there's a slew of big projects and a flurry of new construction activity around the world that should spur demand for backhoes, bulldozers, cranes, diggers, excavators, graders, haulers, pavers, rollers, scrapers and telescopic handlers. Demand for farm tractors, forestry machines and mining equipment is also starting to pick up after several years of sluggish growth.
"We are certainly more optimistic than we have been in the past few years," says Ron DeFeo, CEO of Terex Corp. (Westport, CT), the third largest construction equipment maker in the world. "Our customers have taken a wait-and-see attitude during the past few years as our economy has slowed, delaying new equipment purchases." Traditionally, the off-road equipment industry grows only as fast as the economy.
"We look for a general improvement in business conditions to positively impact the construction equipment manufacturing industry," adds DeFeo. "For our business segment in particular, our customers' fleets are aging and need replacement. Also, the federal government needs to pass highway spending legislation, and this should boost equipment sales."
Since this is an election year, the urgent need to repair America's aging infrastructure is in the spotlight. According to some estimates, the huge task of rebuilding the country's 4-million-mile network of streets, highways and interstates will require $1.2 trillion over a 10-year period.
In most urban locations, heavily congested highways have outdated layouts. Ramps lack adequate acceleration and deceleration lengths, interchanges and ramps are too close together, and bridges have limited vertical and horizontal clearance. The American Highway Users Alliance (Washington, DC) claims there has been a 40 percent increase in the number of traffic bottlenecks over the past 5 years.
"Congestion is nearly unbearable in many metro areas," says Federal Highway Administrator Mary Peters. And, she warns that two key statistics-vehicle miles traveled and freight tonnage-are expected to double over the next 20 years.
Peters and her colleagues recently unveiled the Safe, Accountable, Flexible and Efficient Transportation Equity Act (SAFETEA). It contains a historically high level of federal investment for the nation's highways and transit systems. For instance, it provides $256 billion over a 6-year period.
Major road building projects currently underway in the United States range from the T-REX I-25 freeway reconstruction in Denver to the new Bay Bridge in San Francisco. And, the State of Illinois recently unveiled a $5.3 billion plan to rebuild its 272-mile tollway system over a 10-year period.
Overseas, several large construction projects are currently underway or scheduled to ramp up in the next few years, including:
- A 1,768-kilometer oil pipeline in Azerbaijan, Georgia and Turkey. The $2.9 billion Baku-Tbilisi-Ceyhan (BTC) Pipeline Project is being funded by 11 large oil companies.
- A 36-kilometer bridge across the Hangzhou Bay in China.
- A 10-kilometer railway tunnel under the Bosphorous. The intercontinental project will link Asia and Europe.
- A deepwater container port located 31 kilometers off the coast of Shanghai, China. The massive project is not scheduled to be completed until 2020, when a causeway will connect the man-made island terminal to the mainland.
- A 3.3-kilometer suspension bridge linking mainland Italy and the island of Sicily. Construction on the Strait of Messina Bridge is expected to begin next year and continue until 2011.
- A $250 million container terminal in Callau, Peru, that will meet growing demand for asparagus, coffee, minerals and textiles.
- A $12 billion project in China to build five high-speed rail lines stretching over 2,000 kilometers.
- Numerous mega-skyscraper projects in Dubai, Hong Kong, London, New York City, Seoul and Shanghai.
Off-road equipment manufacturers are smiling about all that good news, which is expected to fuel demand for their machines. In fact, two of the largest players in the off-highway market, Caterpillar Inc. (Peoria, IL) and Deere & Co. (Moline, IL), recently raised their sales forecasts.
Second-quarter revenue at Caterpillar rose 28 percent to $7.56 billion. As a result, Caterpillar raised its 2004 sales growth projection to 30 percent from 20 percent. "We achieved record results as demand continued to surge and volume remained high across major industries and geographic markets worldwide," says CEO Jim Owens. "[These are] the best set of economic conditions we have seen in many years."
Resurgent farm and construction equipment sales pushed Deere's third-quarter profits up 62 percent from a year earlier. Deere reported gains of 34 percent in agricultural equipment sales and 40 percent in construction and forestry equipment sales.
Deere predicts that sales of its farm machinery will rise 32 percent worldwide this year, up from a previous prediction of 24 percent to 26 percent. Sales of construction and forestry equipment are forecast to increase 50 percent, instead of the previously estimated 35 percent to 37 percent.
Solid farm conditions and increasing farmland values indicate that stable agricultural demand will continue into 2005. The Association of Equipment Manufacturers (AEM, Milwaukee) predicts that total U.S. sales of agricultural tractors will increase 6.2 percent by year-end, followed by 2005 sales growth of 3.4 percent. Continued credit availability and government payments are the major economic factors that will drive future U.S. farm equipment sales, followed by interest rates and net farm income.
New Diesel Emissions Rule
Today, there are more than 1 million diesel-powered off-road machines operating in the United States. According to the Diesel Technology Forum (Frederick, MD), diesel is the predominant source of power for many industries, including:
- Agriculture. Farms and ranches use diesel to power two-thirds of all agricultural equipment-almost $19 billion worth of tractors, combines and other equipment.
- Airport operations. Approximately one-third of all airport ground support equipment, such as tuggers, is diesel-powered.
- Construction. Nearly 100 percent of all off-road construction equipment, worth $17 billion, is diesel-powered.
- Mining. Diesel power drives 72 percent of all haulers, loaders, shovels and other mining equipment.
Strict new emission regulations will force all of those off-road equipment users to invest in new products, such as diesels equipped with electronic control modules and onboard computers. Some observers claim that the U.S. Environmental Protection Agency (EPA, Washington, DC) regulations represent the biggest technological leap and engineering challenge to confront the off-highway industry in decades.
In May, the EPA issued stringent regulations for nonroad engine emissions. The Clean Air Nonroad Diesel Rule will cut emission levels from construction, agricultural and industrial diesel-powered equipment by more than 90 percent. The new rule will also remove 99 percent of the sulfur in diesel fuel by 2010, resulting in dramatic reductions in soot from all diesel engines.
"We are going to make that burst of black smoke that erupts from diesels a thing of the past," claims EPA Administrator Mike Leavitt. "We're able to accomplish this in large part because of a masterful collaboration with engine and equipment manufacturers, the oil industry, state officials, and the public health and environmental communities."
The so-called Tier 4 EPA standards will significantly decrease both nitrogen oxides (NOx) and particulate matter (PM). A phase-in period will ensure that current products are brought up to the new level, and all manufacturing systems achieve full compliance.
The EPA has regulated off-road engine emissions since 1996. A series of steps, called "tiers," were established in North America-with a defined set of standards for allowable emissions per tier, per horsepower range. Each progressive tier has an objective of reducing levels from the previous one.
In 1996, Tier 1 for off-road applications became effective for the United States. Current Tier 2 regulations are in force for a large portion of off-highway equipment and will be phased in completely by 2006. The next wave of regulations, Tier 3, will go into effect beginning in January 2005.
"Under Tier 4, standards for new engines will be phased in starting with the smallest engines in 2008 until all but the very largest diesel engines meet both NOx and PM standards in 2014," says Leavitt. "Some large engines over 750-hp will have one additional year to meet the emissions standards."
Tier 1 regulations reduced NOx emissions from new engines by 35 percent. Tier 2 regulations are expected to reduce NOx by another 30 percent, and particulates by 60 percent. According to Leavitt, the concentration of sulfur in diesel fuel is about 3,000 parts per million (ppm) sulfur. The new rule will cut that to 500 ppm in 2007 and 15 ppm by 2010.
Implementation of the Tier 4 rules will focus on three key elements: Sophisticated engine controls for emissions; comprehensive use of exhaust treatment technology; and the introduction of ultra-low-sulfur fuel for nonroad use.
"The EPA rule is very significant to equipment manufacturers," says Darrin Drollinger, AEM vice president of technical and safety programs. "To meet the more stringent emissions levels, equipment manufacturers will need to work closely with their engine suppliers and emission control system manufacturers."
In addition, consumers will need to be assured of adequate levels of low-sulfur diesel fuel. The EPA estimates that the new low-sulfur fuel will cost about 5 cents more per gallon.
With increasingly stringent emissions standards, developing engines for off-highway equipment is becoming more challenging than those designed to power on-highway vehicles, such as trucks. For instance, off-road engines are constantly changing speed. An engine's duty cycle varies dramatically by the kind of job it's employed at, as well as other things that affect engine performance, such as intake and exhaust temperatures, and the amount of dust in the air.
A wheel loader, for example, drives into a pile of dirt, rock or other material, lifts, backs, turns and travels to a dump site, then deposits its load. The whole duty cycle repeats every 40 seconds or so. No on-highway application experiences that kind of use.
"In complying with Tier 4 standards, the nonroad industry faces significantly greater challenges than the on-highway industry," says Luciano Paiola, executive vice president of agricultural product development and industrial governance at CNH Global N.V. (Amsterdam). "Nonroad applications are often more complex than on-highway and typically operate under far more adverse conditions. Moreover, most nonroad applications are designed for specific tasks, and are typically produced in relatively low volumes."
Paiola claims that CNH installs "more diesel engines than anyone in our industry." He says the company currently markets more than 300 different engine models across its agricultural and construction equipment businesses, which include brands such as Case, Case IH, FiatAllis, Kobelco, New Holland, O&K and Steyr. For many of these applications, the annual production is less than 200 units. "This combination of low production volumes and a higher number of models may impact the feasibility and costs of implementation of the Tier 4 standards across the total product mix," Paiola points out.
"Reducing emissions under fluctuating load and throttle positions, plus meeting performance requirements, is no easy task," adds Gary Stroup, vice president of Caterpillar's large power systems division. "Add in factors such as hotter working conditions; small engine envelopes that limit radiator, fan and exhaust after-treatment size; and fuel with a higher sulfur content, and you get a definite challenge-but it' one that [our] engineers have met.
"We've invested heavily in... emission reduction technology," adds Stroup. Caterpillar has spent more than $500 million to develop a new type of diesel engine that boasts more than 250 patents. Its ACERT technology-first introduced to the on-highway market in 2002, where emissions standards are tighter-reduces emissions at the point of combustion. Stroup claims that it provides a long-term solution to emissions reduction with none of the drawbacks associated with other technologies, such as cooled exhaust gas recirculation.
"The technology capitalizes on Caterpillar's expertise in four core engine systems: Fuel, air, electronics and after-treatment," explains Stroup. "It is a unique and revolutionary systems solution that enables Caterpillar engines to meet today's clean air regulations and establishes the building blocks for attaining tomorrow's more stringent standards."
Caterpillar engineers worked with 125 variables to find the optimum balance. According to Stroup, there are more than 10 million possible combustion combinations. "Engineers were challenged by the highly intertwined relationship of reduced emissions, engine performance, fuel efficiency and engine durability," he points out. "Those are not necessarily complimentary objectives. Improving emissions, for example, can have an adverse effect on fuel efficiency."
Caterpillar claims that its new engines will fully comply with the EPA's Tier 3 regulations, which take effect Jan. 1, 2005, for engines of 300 hp to 750 hp, and Jan. 1, 2006, for engines of 175 hp to 300 hp. The first machines equipped with ACERT technology, such as the D8 track-type tractor, entered the marketplace last month.
Other large diesel manufacturers, such as Cummins Inc. (Columbus, IN) and Deere, are also developing new products for off-road applications. However, "a number of technical issues remain to be resolved [with the new EPA regulations], such as the measurement and certification procedures," notes James White, senior vice president of John Deere Power Systems Group. But, he says the phase-in provision "helps promote better air quality while reducing compliance costs for manufacturers and enabling consumers to replace their older engines with newer, more affordable, cleaner-emitting ones."
Today's generation of off-road equipment is smarter than ever, thanks to state-of-the-art technology, such as global positioning systems (GPS), that enhances operator performance and boosts productivity. Automatic steering, grade control and other high-tech tools are providing unprecedented levels of accuracy.
Technologically advanced products enable off-highway equipment manufacturers to offer more productive and innovative machines to their customers. State-of-the-art electronics and telematic systems, such as on-board computers, are routinely installed in cabs and engines as factory-fitted options.
Caterpillar now considers itself to be "a world-class electronics company." Indeed, Cat claims that it ships more than 14 million electronic components and 20 billion lines of software code annually. "The way heavy-duty construction equipment is guided and controlled is going through an evolutionary period," notes David Pinaire, marketing manager at Cat Electronics. He says early adopters of machine control and guidance systems report productivity improvements of up to 30 percent.
For instance, Caterpillar wheel loaders equipped with advanced sensor technology can now automate much of their loading process. A tool called Aggregate Autodig optimizes loading efficiency by taking over many of the loader control functions traditionally performed by an operator. Once the system is engaged, it manages the entire bucket loading cycle by controlling the implement circuits so that the bucket is always loaded as completely as possible. To minimize tire slippage, the device automatically downshifts the transmission to the appropriate gear if it detects that the wrong gear has been selected. The operator only has to control the machine's throttle and steering while the bucket is being loaded.
Operators don't even have to worry about steering when using off-road equipment that contains automatic steering systems. For instance, the new Case IH AFS AccuGuide System eliminates the need for farmers to steer their tractors in open fields, except at row ends or around field obstacles, such as trees. Global positioning systems continually interact with the tractor to keep it on course. A navigation controller in the tractor manages a valve in the power steering system to automatically perform the steering.
"It offers farmers a wide range of productivity and cost saving advantages, ranging from reduced operator stress to more precise planting, fertilizing and tilling," explains Al Viney, marketing manager for Case IH guidance systems (Racine, WI). He says steering accuracy is maintained even on hillsides that cause the tractor to tilt and the roof-mounted GPS antenna to move off the centerline of the tractor. Three gyroscopes and three accelerometers in the navigation controller compensate for the offset and adjust the steering to assure that the crop row stays directly beneath the drawbar pin, and row-to-row and pass-to-pass accuracy is maintained.
John Deere offers a similar technology, called GreenStar AutoTrac, on its tractors, combines and self-propelled sprayers. The company has also been experimenting with autonomous equipment, such as an orchard tractor that can be programmed for tillage, mowing and spraying applications day and night.
"Guidance systems enable farmers to map and navigate their fields very accurately, for maximum efficiency," says Stephen Verhoeff, president of CSI Wireless Inc. (Calgary, AL), a leading provider of advanced wireless and GPS products to the off-road equipment industry. "The mapping enables a farmer to identify the areas of his field that, for example, require extra fertilizer. Using GPS, his fertilizer sprayer will apply the extra fertilizer exactly where it is needed."
In the fall, farmers can automatically steer along a precise path set earlier in the year during planting with accuracy and repeatability. That allows a combine operator to guide his machine along the same exact path during the harvesting season.
Satellite navigation systems are also being used in the construction industry to automate grading applications with greater accuracy, higher productivity and lower costs. Caterpillar is equipping its track-type tractors and motor graders with a tool called AccuGrade.
Operators use advanced laser technology to bring an area to grade faster and with fewer passes. The resulting increases in productivity and accuracy-as much as 50 percent-are accomplished without the use of traditional stakes or grade checkers. "It typically minimizes both the amount of material that needs to be moved and the distance it is moved," says Thomas Bucklar, regional manager for North America productivity solutions at Caterpillar. "The increased accuracy improves material yield, thus reducing the overage costs of expensive imported materials, such as concrete."
The system features laser receivers mounted on the blade that automatically control the machine's hydraulic system. A thin beam of light from an off-board laser transmitter provides precise elevation information that is picked up by the receivers. The blade's lift and tilt are automatically adjusted as the machine moves over the area.
Electric masts allow the machine operator to adjust the height of the receivers from the cab, allowing the operator to finish building pads of varying elevations without getting off of the machine to reset the receivers or laser transmitter. According to Bucklar, this provides significant productivity gains in applications such as finishing multiple residential pads. Because the transmitter emits a 360-degree beam, it creates a grade reference over the entire work area and allows multiple machines to use it.
An in-cab display features an easy-to-read LED grade indicator and a backlit graphical LCD numeric elevation display. As the blade moves above or below the required finished grade, information is sent to the in-cab display, which shows the blade's position relative to grade and indicates cut or fill requirements at that point.
A beeper and colored lights indicate the blade's position relative to desired grade. Based on that information, a dual hydraulic control valve automatically adjusts the machine's cutting edge height to maintain precise grade control.