Freightliner CEO James Hebe

Over the last year, OOIDA and Land Line have assailed Freightliner and CEO James Hebe over issues that owner-operators hold high. The so-called "black box" is one issue - used truck values, another. Johnston says the hard jabs have served a higher purpose.

"Our mission is to be a voice for professional truckers and carry that voice to those who need to hear it," says OOIDA's Jim Johnston. "We don't just bash issues for the sake of bashing. Our point with Freightliner was to send a message and to hope it was not falling on deaf, or uninterested ears."

Following the Land Line interview with Hebe on Oct. 6, Johnston says the Freightliner CEO's response leaves no doubt that OOIDA's message has been heard loud and clear.

Here's the interview.

SANDI SOENDKER: You have said that at the end of 2000, on-board recording devices would be standard in Freightliner trucks. Given the uproar from your o-o customers firmly opposed to any type of mandated technology that could lend itself to electronic surveillance, is this still in the plans?

James Hebe: I think first we have to dissect what on-board recorders are and what on-board recorders do. Since 1996, in our Century Class, we have had what is called a Data Logging Unit (DLU). Its purpose is to record extreme incidents or incidents that occur onboard the vehicle that are outside normal operating parameters. It's standard on our Century Class since 1996 and on our Century Class ST. So it's really a recorder of systems operations onboard the truck.

I think where we and some of your reader/members ran afoul is in regard to hours-of-service recording. Our DLU does not record hours of service. It only records by exception, events that occur outside normal operating parameters. It in no way records hours or anyway is it a device that would satisfy the requirements of the DOT with regards to recording hours of service.

Our intent - and this is something that is very important to make clear - our intent is to continue with the DLU in the Century Class ST as standard because it is absolutely crucial to be able to diagnose the systems activity on board the truck. Because you know that today, with so much electronics on a vehicle like that - a fault in one system can surface or can exhibit itself as a misoperation of a totally different operation. For instance, with electronics onboard in the engine, it could affect something as radically different as the braking system or the windshield wipers. So it's crucial to us to have fault recording onboard for maintenance and diagnostic purposes.

But we have no device or do we intend to make standard a device that would be capable of satisfying the DOT's hours-of-service reporting. Let me make an observation about that. We like to think we are the technological leaders in the business. Our responsibility is to use the technology we have to improve the industry as much as we can, to continually push the envelope as far as we can, to improve safety, operational efficiency, economics and to improve the well-being and the safety and comfort of the people that own and drive our trucks. And from time to time, (if we take that position as being our responsibility) we are going to run up against what is accepted practice or the accepted norm by our customer base in the industry.

In some cases, customers may see the technology that we can develop as beneficial - in some cases, as with recording devices, clearly, your constituency has seen that as a technology that they do not consider as in their best interest. Our responsibility then is to look at our position and determine as to whether it makes sense for us to continue to promote something or should we perhaps let common usage either catch up with technology or decide not to use it. And that's certainly the case with our position with regard to the black box, hours-of-service recorders. If it's something that the majority of the industry doesn't want, then it's something that certainly doesn't make sense for us to pursue.

Let me say this. Certainly Jim and I have had discussions and I think in some cases we've agreed to disagree, but certainly in this case, he's done a very effective job of making us aware of the position of his (and your) constituents. We respect that and we have used that in formulating our future position on safety.

"We have no device or do we intend to make standard a device that would be capable of satisfying the DOT's hours-of-service reporting"

- James Hebe

Ruth Jones: What is your future position?

HEBE: First of all, in terms of making trucks safer. Using the technology that we have available, I will assure you we will continue to invest every ounce of resource we have in doing that. You know, it's a shame because all of a sudden this industry has been forced to integrate its thinking with regard to the HOS reform in combination with technology that is out there to improve safety. So I think that our position with regard to typical black box HOS recording device is that certainly we and lots of other manufacturers - not just truck manufacturers but electronic manufacturers - have devices that are capable of recording hours of service, but as far as I'm concerned, that's not our business. It's somebody else's and we certainly are not going to be a proponent of standardizing black boxes to record hours of service.

SOENDKER: Any opinion on the hours-of-service proposal?

HEBE: I certainly do have an opinion on it. I think that first and foremost, I think the trucking industry as a whole has approached HOS reform without a consensus on what the proposed HOS reform would be. So, Pandora's Box has been opened saying "let's have somebody look at hours of service without having agreement among ourselves." The industry that operates vehicles did not have a consensus of where we wanted to go and it opened it up by definition by someone who had an agenda other than the trucking industry and that was the DOT.

When I look at the HOS proposal by the DOT in the latest, frankly, it makes no sense to me at all. It is counterproductive, in my opinion, to what we need to accomplish in this business to improve safety and increase productivity and reduce the impact of our industry on the environment. It fails in all three of those areas. Fourth, and even more importantly, it does not make a truckdriver's life any more appealing than it is today. In fact it makes it less appealing.

SOENDKER: As a truckmaker, how do you plan to make their lives better?

HEBE: Our responsibility as a manufacturer is to make the trucks as comfortable, as safe, as efficient and as productive as we possibly can. And I think the manufacturing side of the industry, if you look at the last ten years, has made monumental leaps in every one of those areas. There's the areas we can impact. And I think they are the areas where we have the greatest responsibility. And whether people agree with me or our position from time to time, we also have a responsibility to communicate our position on other situations that impact the business where we see reform needs to be made.

For instance, in driver pay, treatment by shippers and receivers. There I think we need to weigh in with whatever leverage we have and try to effect change that otherwise is outside the normal realm of our business operation.

SOENDKER: Two years ago you were confident that overcapacity as far as new trucks, was not a problem. How do you feel about that now?

HEBE: If you look at the utilization of the current fleet, utilization, even with the growth in the truck population, is still running at or above historic levels. In fact, if you look at utilization among the biggest carriers and across the carrier base, it has not faltered at any extent at all. So I think that there's always going to be the external force that changes everybody's best expectations. But I guess we've been watching fuel prices for the last year and a half and have recognized that they would have an overall impact on the entire economy. The fact is, they have. As have monetary exchange rates.

You know one of the big issues we have now is the strength of the dollar opposed to the eurodollar or the yen. I don't want to give an economy lesson here, but it's a heck of a lot easier for business in North America - more attractive - to import rather than build.

The problem is when we import, we move it once by truck. And we build it here, we move it on average of five or seven times. So with fuel prices going up and the exchange, the value of the dollar being so strong, freight growth in the year 2000 hasn't kept pace with growth rates in the last three to five years because our economy is shifting. From a producing to a consuming economy.

Now given all of that, the population of trucks out there, we still have record productivity, efficiency, utililization rates. So I'm still comfortable that we don't have a major capacity problem in the truckload sector. We certainly don't in LTL and in private fleet sector we don't either. So what we are experiencing is not a capacity problem. What we are experiencing right now is a slowness of the economy driven by interest rates and fuel prices.

"...with regard to the black box, hours-of-service recorders. If it's something that the majority of the industry doesn't want, then it's something that certainly doesn't make sense for us to pursue."

- James Hebe

SOENDKER: In May of 1998, you said, "Unless something dramatic changes, a used truck crisis lies just around the corner."

HEBE: Was I right or was I wrong?

SOENDKER: You said "manufacturers who are not equipped to handle used trucks, and their customers are in for a tough ride." What is Freightliner's role in the big picture in doing something to turn this around?

HEBE: First and foremost, and this is extremely important to everybody in this business. The first thing we are doing is we are not panicking and we are not pulling out of the used truck business. The last thing in the world this business needs right now is more uncertainly about the value and future of used trucks. The easiest thing for us to do, believe me, would be just to get out of the used truck business. But I will tell you, if we decided today to exit our used truck business, it would send a shock across this industry that would take years to recover from - so we are sticking with our commitment to the used truck business and I think that is number one.

Number two is, we are absolutely not going to panic.

Three, we are looking for every possible way we can to add value to what is a very, very high quality truck that is coming in - the three- and four-year-old truck that we are seeing getting traded in today, is the best truck the industry has ever had on the used truck market. We are doing everything we possibly can to add value to that truck, including opening a plant in Utah to completely refurbish three- and four-year-old trucks and bring them back in virtually undistinguishable-from-new condition and in that way, try to keep the residual and resale value of the product up.

We are also doing interesting things like developing our Route-to-Success program, targeted specifically at first time owner-operators. To get them into the business in a truck they can depend on, rely on, that has a solid warranty on it, backed by us. And a great finance program that accepts the fact that they don't have a tremendous amount of experience or a basket full of money, and a business management program that helps them understand how to be good business operators in the truck business. And we are continuing to develop more programs like that...

For instance, one of the things we are doing now is going out to the fleets that use owner-operators in their business and setting up with them, programs to bring in company drivers to help them become owner-operators. Bring first time owner-operators into a fleet where we not only have a good truck, but a good job that matches up with a reputable company on the fleet side and us that's going to stay with that owner-operator and make a success out of him and give him a foundation to become even more successful an o-o in the future.

So the bottom line is, in the used truck business, we are investing in the product, we are investing in a distribution system, we are investing in finance and added value program to bundle around the truck and basically doing everything we can possibly think of to keep resale value up, residual value up and at the same time, bring to the market a level of used truck like it's never seen before.

"Jim and OOIDA were pretty tough on me and pretty tough on Freightliner...I respect the fact that he represents a constituency that said 'wait a minute, Freightliner, this is not in our best interest." We'll listen to that. We really will."

- James Hebe

JONES: It's no secret that the shortage of diesel and the cost of it is a problem that's not going to fix itself. The development of alternate fuels is not progressing like it probably should. It's absolutely vital that truckmakers forge ahead with systems that will reduce our dependency on fossil fuel. How much effort is Freightliner putting into the fuel cell concept and what's the time table on an auxiliary unit to decrease idling time?

HEBE: You know we have shown that device to the DOT, the DOE and we will be displaying it again at GATS (Great American Trucking Show) in the next few weeks. What that does is provide power to the truck while it's sitting so you don't have to provide power to the engine. Power for heat, AC, electrical devices in the truck. We are probably 18-24 months away from having a cost-effective fuel cell powered auxiliary unit that is economical and size and weight right for a heavy truck.

You can think of as far away, but when you think of the technology and rapidity of the development, that is very close given the complexity of that issue. So we are forging ahead. We believe that fuel cells are absolutely the way to go in that particular area. Looking at other alternate fuel powered vehicles, I will tell you that from our perspective, alternate fuel is probably going to find its way into the trucking business in small trucks, where we have them close to home where the fueling isn't a problem and where power is able to be generated not the disparity of cost we see on the heavy end side. You'll see us work more on alternate fueled vehicles but it will be on the low end of the GVW end first.

JONES: On the fuel cell, you are talking 18-24 months out. Is it too soon to talk about the cost to the owner-operator?

HEBE: No, absolutely not. Our belief here is that we have got to get an auxiliary power unit on the truck for less than $1,000. Now we are a long ways away from that today but you know, we can all remember when a calculator used to cost us $295.

RICK CRAIG: Back to working with motor carriers, bringing drivers in as first-time owner operators, one of the problems we have, a big complaint is, a lot of carriers with these purchase programs get these guys hooked, so to speak, to the company store. The motor carrier controls their whole lives, the amount of freight they are allowed to haul, they hook them into insurance programs and all types of things like that. The question would be, what kind of role would you take to try and provide protection to these people so they don't get involved in bad situations.

"Our belief here is that we have got to get an auxiliary power unit on the truck for less than $1,000."

- James Hebe

HEBE: I was in KC in the mid 1970s, in southern Kansas, where some of these o-o programs started, so I remember 25 years of good and bad fleet-sponsored owner-operator programs. Our intent is not to be involved in those that are really, substitutes for having fleet drivers. We want to finance the truck. We want to have it on a kind of straight finance program where either Associates or Mercedes Benz Credit is the principal financing entity. We have a very clear, discernible path of ownership and certainly, it's advantageous to us if the fleet can help us collect (or deduct) the payment. It's really better for the o-o and it's better for us if he can do that, but we understand very well what has happened and what the practice in some places has been over the course of two and one-half decades. So we are going to work real hard for a way to get this guy owning this vehicle on his own. I understand what you are telling me. We've seen a lot of that. I shouldn't say a lot, but we've seen instances where it's happened and we are going to try real hard to make this a clear path to ownership for the individual.

Back on the safety issue, I would like to make clear one thing. We see technology here, a lot of it comes out of the Mercedes Benz car business. They are the company that for 100 and some years has tried to build safer vehicles and we see this technology that comes out, pops up and when it does, you watch what can happen with technology.

Making trucks safer in the future, I think, is the biggest responsibility I have. And trying to weigh that against what is a very traditional business and a very traditional industry, is - as I said to Jim the other day - we are going to bump up against that. Unfortunately in this case, we are right on the edge of a big explosion in technology. It's amazing what is going to happen in the next few years. We get real excited about it, when you go out and put all this stuff on a truck and you think, God, if we can just put our resources behind it, look at the lives we can save and the injuries we can avoid. We are going to run up against things that in a conservative industry, from time to time is going to get us in trouble. And although Jim and OOIDA were pretty tough on me and pretty tough on Freightliner, I respect the fact that he represents a constituency that said "wait a minute, Freightliner, this is not in our best interest." We'll listen to that. We really will. And we have and we will continue to work closer with Jim and with OOIDA than we have in the past.