How did Navistar manage to build its assembly plant in San Antonio for a relatively paltry $250 million? Partly by ignoring a famous baseball movie line. Also this week, Daimler Truck North America preps technicians to work on electric trucks. And every step van on the market could be electrified — today, a North American Council for Freight Efficiency report says.
A world of plants
Mark Hernandez sounds like the no-nonsense manufacturing expert he is. Straight out of central casting.
But the executive vice president of Navistar manufacturing is much more. A U.S. Navy nuclear submarine engineer. A former McKinsey & Co. consultant. Most recently, Hernandez oversaw the superfast two-year construction of Navistar’s 970,000-square-foot assembly plant in San Antonio.
We wrote about the grand opening last month, including some of the details that set it apart as the first new truck plant in the U.S. in nearly 30 years. But the backstory of how Hernandez delivered a brand-new manufacturing facility for the relatively small sum of $250 million that will pay for itself before the end of the decade is worth a more exhaustive telling.
“Not many people get to build two plants in their careers,” Hernandez told me this week as we reconstructed over Microsoft Teams much of a dinner conversation in San Antonio. Technically, he has 2 ½ plants to his credit.
Brownfield and greenfield plants
The first was a brownfield plant at Daimler Trucks North America. Its purpose was to refurbish used sleeper cabs into daycabs, which were worth more in the used market than their residual values indicated. Shortening cabs and chassis is typically a one-off event done start to finish in a work stall. “I set up a process where we were doing 15 or 20 a day off an assembly-type process,” he said.
Hernandez then built DTNA’s $300 million greenfield plant in Saltillo, Mexico, which opened in February 2009. He benchmarked other plants and processes in the U.S. and Europe while learning the lean manufacturing metric called hours per unit (HPU), which measures the efficiency of plant functions from the body and paint shops to the final assembly line.
Watch now: Understanding how tracking hours per unit cuts waste and saves money
Reducing HPU practically became a competitive sport in the 1990s when the Harbour Report on auto plant efficiency became an obsession among manufacturing leaders. Hernandez worked with consultant Ron Harbour to apply HPU principles to the Saltillo plant.
Low wages at plants not enough
Making trucks in a low-wage country like Mexico wasn’t enough.
“Just because it’s a low-cost labor country doesn’t mean that your hours should not be in line,” Hernandez said. “It’s not as much of a penalty if you have extra labor in Mexico. However, philosophically, if you’re truly a lean person, it shouldn’t matter how much the labor costs.”
After a few years working as a manufacturing consultant himself at McKinsey, Hernandez joined Navistar, which in 2018 began planning a new plant in south Texas, about 290 miles from its plant in Escobedo, Mexico. The talk was of a $500 million investment. But there was little confidence the Navistar board would go for it.
Watch now: Efficiency still counts, even when labor is cheap
“If you’re trying to be pragmatic, you have to be careful how you spend your money. You have to treat it like it’s your own money. I said, ‘Look, if I build this plant, I know I can do it for this much HPU compared to our network and save this much money. And get the payback down to less than six years, which is huge.”
The typical cost recovery for a capital investment like the San Antonio plant is 15 to 20 years.
If you build it, will they come?
With 428 acres south of the city, Navistar could have built a plant twice as large. Someday, it might, which would require finding new pastures for cows that graze on the outskirts.
Hernandez thought the opposite of “If you build it, he will come,” the mantra from the 1989 movie “Field of Dreams.” Coincidentally, owners of the Field of Dreams Movie Site in Dyersville, Iowa, this week announced an $80 million expansion. They plan to add more baseball fields, team dormitories, a hotel and an outdoor concert amphitheater.
“Don’t bet on the market for 10 years.Bet on the market for the next three or four years with the ability to expand if need be,” Hernandez said.
San Antonio is starting with a single shift targeting 52 trucks a day by July. The optimum setup is for two shifts making 100 to 120 trucks a day for a total of about 25,000 units a year. Adding overtime or a third shift could push that to 40,000 trucks in market peaks.
Regardless of production volumes, Hernandez said the HPU savings is 30% to 35% compared to Escobedo and a Navistar plant in Springfield, Ohio. Additional benefits accrue from sharing inbound logistics and a supply base with Escobedo.
If demand accelerates and market share grows — especially for medium-duty electric trucks that Navistar will integrate with diesel-powered models — and Navistar’s new corporate parent Traton Group decides to build some of its products there, it’s OK.
“The space is there,” Hernandez said. “The way the plant is laid out on the site, it can be doubled.”
Charging technicians
Daimler Truck North America (DTNA) is expanding its Detroit Service Training Center to train technicians how to service electric trucks. The shortage of technicians mirrors certain shortages in drivers. And that extends to the coming growth in battery-powered trucks. DTNA opened the service center in 2018 focused on conventional diesel-powered trucks.
The enlarged center is adding eight new courses, including classes on the Detroit ePowertrain launching in the Freightliner eCascadia and eM2. Courses in both diesel and electric vehicles are available for the nearly 10,000 technicians who support 770 Detroit distribution and service locations.
DTNA also has corporate service training centers in Portland, Oregon, and Cleveland, North Carolina, adjacent to DTNA manufacturing plants.
Charging step vans
Vans and step vans are great candidates for electrification, according to a new report from the North American Council for Freight Efficiency (NACFE) and RMI, formerly the Rocky Mountain Institute.
Research shows that 100% of package delivery vehicles in the U.S. and Canada could be electrified today. It would be the equivalent of removing nearly 5 billion gallons of gasoline from the economy every year while avoiding about 43.5 million tons of carbon dioxide equivalent. They account for about half of all registered commercial vehicles in North America.
The report used findings from the real-world truck demonstration, Run on Less–Electric conducted in September. It shares the methods used to select the participating fleets, routes, and equipment, metrics, and details of the Run’s findings and lessons learned.
Briefly …
As much as Traton Group pledges allegiance to battery-electric trucks, its operating units keep showing up in hydrogen trucking projects. Swedish truck maker Scania is working with Cummins Inc. to develop 20 fuel-cell-electric trucks that will run on green hydrogen for the HyTrucks project. The fuel cell electric trucks will be built on Scania’s battery electric vehicle platform and leverage Cummins’ proton exchange membrane fuel cell systems and hydrogen fueling and storage. HyTrucks is a consortium of businesses that has pledged to put 1,000 hydrogen trucks and 25 hydrogen refueling stations on European roads by 2025.
Kenworth is growing its manufacturing footprint in Ohio. The manufacturer this week broke ground for the start of construction on a state-of-the-art $45 million, 105,000-square-foot test building addition to its Class 8 truck assembly plant in Chillicothe. The expansion represents a nearly 17% increase to the 622,000-square-foot plant.
That’s it for this week. Thanks for reading. Click here to get Truck Tech delivered via email on Fridays.
Alan