MilePost Online ... Transcript of September 8, 2009 Luncheon Presentation

Our Diesel Tomorrow?

“It’s time to change your minds about diesel, folks.”

John Stewart, Editor-in-Chief, Offroad Industry Magazine: Everybody knows that diesel has changed, and changed a lot, in the last five years. There are probably four major trends at work here that you might want to be aware of.

First of all, diesel is a way to meet regulatory standards. That might be one reason why there are so many new diesel cars being introduced. You can meet CAFE and Kyoto by going diesel.

Diesel’s become very politically correct. It’s green technology. The Green Car of the Year is actually a diesel this year.

And diesel fuel, right at the moment, at least as of this morning, is the cheapest fuel out there. And it may even stay that way. There are some trends at work there that you may want to ask about.

And then there’s product appeal. The new diesels are not slow and dirty, like the school bus that you remember.

So there’s a lot of reasons why now consumers are going after diesels. VW’s Jetta is virtually a sell-out for 2009. There’s a 29-day supply of Audi Q7s at the moment, and JD Power says that, while we are at three percent diesel penetration now, we will be at nine percent around 2015.

So the question is, what’s next? We have two very distinguished guests here to clue us in on those kinds of things.

Gale Banks is considered one of the foremost designers and manufacturers of diesel engine upgrade products. He’s personally championed clean diesel power for close to 20 years. Gale is a futurist, and he’s made it his business to set motorsports records and speed records to prove diesel over the years, and he’s still doing it.

Now Gale Banks Engineering and Robert Bosch LLC, which is the North American subsidiary of one of the world’s largest automotive suppliers, they’ve teamed up on numerous projects in the past and probably have some projects going now they don’t want to talk about. But from Robert Bosch LLC we have Lars Ullrich.

Lars is the marketing director of diesel systems for Bosch. He’s responsible for strategic and operational marketing activities, marketing communications, advanced product planning, divisional process and policy development, and aligning external affairs activities for diesel systems in North America.

Ullrich is an engineer with a degree in aeronautical engineering from the University of Applied Science in Aachen, Germany.

So without any further ado, I’d like to call our panelists and let them begin their presentations. I think Lars, you wanted to take the lead.

Lars Ullrich, diesel systems marketing director, Bosch: Thank you, John. Well, we’ll start out with the…

Stewart: I think you have a presentation…

Ullrich: Presentation, yes. We’ll do it very, very relaxed, here. What I will be talking about today is the past, present and future of diesels. As John has mentioned, my background is aeronautical engineering. I’ve held several positions within Bosch through several functions, through several divisions. I’ve worked in gasoline, chassis, as well as now currently diesel.

If we just take a look into where diesel started out… It all started out in 1897, or actually a little bit before that, but 1897 was the first time when Rudolf Diesel introduced his first one-cylinder diesel engine during the world exhibit in Paris.

In 1912, Rudolf mentioned the first usage of biodiesel. He compared this as one of the things which will be as important in the future as fossil fuels were. And this was already a statement in 1912. So we see already some similarities to 2009.

1913, the first trip in the U.S. was taken by a diesel-powered car. It was a Packard sedan with a Cummins engine. Interestingly enough, they covered 800 miles for a dollar-38.

So when 1970 [sic] the oil crisis came and with that the challenge of how to continue in the future. A lot of options were discussed: electrification at that time, hybridization. So very similar to 2008 again.

GM, in the mid-80s, introduced as the first North American OEM the diesel, which at one point in the mid-80s accounted for roughly ten percent of all the vehicles sold at GM.

Then by the mid-1990s there were more than 100 different diesel vehicles in the market. That was the time when the diesel got somehow the bad image of being loud, being smoky. With that Bosch put a lot of emphasis on cleaning up the diesels, and in 2000 we basically looked into, or from 2000 to 2008 we introduced several new technologies, like common rail injection systems, new injectors, which basically helped Europe to grow their diesel share to more than 50 percent in vehicle installation rate.

By 2009, more than 50 million common rail injection systems have been sold by Bosch. So it is quite a significant number.

And then, as John has mentioned, Green Car of the Year, the new diesels arrived here in North America, being 50-state compliant, and diesel all of a sudden is not a dirty word any longer.

Now if we look into the present, what I decided today is just to bring a couple of numbers with me, what we see in the market. The first slide shows the powertrain share of current diesel vehicles, first the passenger car segment and also the SUV segment, and what we see here is that…we see for the passenger car side the Jetta leading basically, with over 30 percent installation rate for diesels. For example, the sportwagon, which is out in the parking lot, has actually more than 80 percent diesel take rate, which is an incredible number and shows that consumers actually are craving for the technology. Starting June 2008, when we reached peak price of $5, consumers were really out for that technology and since then we have not seen that tapering off.

Also, on the SUV side we see the vehicles which have been launched, like the M Class from Mercedes, the G Class, the BMW X5, the Audi Q7, all reaching within a fairly short timeframe, talking about three or four months after launch, a 30-percent share of diesel powertrain.

Which shows that consumers do not want to sacrifice in lifestyle. They want to have the fuel economy and at the same time stay with the use transportation which they have been accommodating with.

Now another driver for the clean diesel is the residual value. We just concluded a study based on Mannheim Auto Auction data where we looked into the comparison, and it just shows the Jetta gasoline vs. the TDI, and Jetta TDI vs. the Toyota Prius hybrid. We have done that also with other vehicles, but I picked these specific ones here. What we see here is that the diesels, and this in the Jetta case, sell between 20 and 25 percent higher residual value than a gasoline vehicle, if you sell it at a certain given time in point with a certain mileage on the odometer.

The same with the TDI vs. the Prius. In general, we see higher residual values for the diesel, somewhere between 15 and up to 25 percent. And that goes across all different vehicles. You can take the number for the Mercedes E Class, numbers even which, uhm, vehicles which have been in the market for a long time. The pickups, for example: the GM Sierra or the Dodge Ram show very similar numbers.

And where this plays an effect is in the future consumer choice. That’s summarized in the next slide, with the total cost of ownership. What we have done here is, we have basically looked into the fuel price, which is on the Y axis; on the X axis we have the mileage. In between the charts you see here are basically graphs of diesel vs. gasoline price points.

The grey chart, when we start out, currently roughly $2.70 is the price for diesel, national average. If you go over to the diesel equals gasoline, in price right now, which is roughly an assumption which across the nation is true, then you just would need to drive 8000 miles per year to actually have a positive total cost of ownership.

What that means for the consumers is, money left in their pocket. What that means for the environment is having less CO2, exactly 20 percent less CO2 emission. And that all contributes toward 2006 scene, where we want to go in respect to the improved miles per gallon and better fuel economy.

So total cost of ownership will become one of the major drivers, as we see this currently also here in North America, as consumers get more sensible to how much money they have to pay for a vehicle. In Europe for example, we see very similar numbers. The diesels, roughly speaking, about 10,000 kilometers a year driven, and you should choose diesel as a powertrain, just to have better total cost of ownership.

And this total cost of ownership is not only considering the residual value, but also considering insurance, also considering maintenance, so a lot of factors. But the residual value is one of the largest factors which plays a role in the total cost of ownership.

So to summarize the first portion, it’s great variety of clean diesel vehicles offered, and strong consumer interest due to maintaining the lifestyle with enhancing fuel economy. Automakers offering a clean diesel option on their passenger car vehicle platforms are seeing today between five to greater [than] 30 percent take rates.

The clean diesels are worth up to 25 percent more than a comparable gasoline vehicle or up to 19 percent than a comparable hybrid vehicle when sold at the same mileage.

And the clean diesels have overall lower total costs of ownership than gasoline vehicles — and we use here currently roughly smaller than 10,000 miles per year.

So overall the clean diesel is a good 30 percent less fuel consumption and clean, 20 percent less CO2 emission, and a FUNctional [BOSCH emphasis] solution. So you have a lot of torque, so you don’t miss the driving pleasure, but at the same time you can haul your tools.

And since I’ve lived the last nine years in the U.S., one thing I have learned here in the U.S. is to accommodate all the tools which we have to haul around with us. Whether it’s when we go camping, whether it’s the boat which you tow around, whether it’s the motorcycles which you have in the back, we need to have solutions which provide us still this freedom and at the same time provide the better fuel economy, which we all are striving for.

Now the third part which I will go into is a brief touch on the future. I’ve mentioned 2006, and the Obama administration has set the bar pretty high in respect to what they want to reach. This picture illustrates the passenger car and the light truck segment, of where the different segments are in correlation to the 2016 targets. These are currently still estimates, because the final targets will be released, but we monitored those based on last year’s.

What we see in general, we have a 28-percent gap to close, national fleet average. If we just take a very simple approach of saying, OK, diesel can offer already a 30-percent better fuel economy, then this is one of the solutions which will help us to achieve that. It will not be the solution, but it will be one of the solutions, combined with all of the other technologies, drive-time technologies which we have.

And that’s where also Bosch plays a major role into it. Roughly 60 percent of our business consists on automotive, and we cover the great range from gasoline to diesel to hybrid to electrification, and what we see, there is not one single solution which will bring us to this target. We need to rely on all the different solutions.

Like, for example, a large part of Europe has done. I just looked into this as an example: In England, England had a very similar market as in the U.S. Had a lot of six-cylinder, eight-cylinder engines. And what they did is, they took a very radical approach and focused pretty much on diesel, and by that they basically were able to reduce the CO2 emission significantly, by the same time have consumer acceptance.

Now as we’re talking about the future of the diesel, diesel currently offers a 30-percent advantage and what we see here is just the difference in areas… [explains details of categories shown on chart]. What we see here is that clean diesels offer additional opportunity towards further improvement in the future, and that’s something which we can’t neglect.

Now if it comes down to real-world driving, I just picked this as a kind of example, as a cycle-based calculation. We have to get the consumers to understand they have to choose their powertrain as they currently choose their consumer goods.

It’s very similar to an iPod. If you’re a runner, you go with the Shuffle. If you’re a music enthusiast, you go with a big iPod.

And it’s the same thing with the diesel technology. If you’re a highway driver, pick the diesel, because that’s where you get the biggest implication or biggest bang for your buck. If you’re somebody who’s living in a city, well, hybrid is probably a good solution to choose from.

And that’s where we have to see that in two out of these three drive cycles, actually diesel dominate if you compare them, for example, to a hybrid technology. And that’s what we have to keep in mind when we go and talk about future powertrains.

So just to summarize, average target gap of fleet fuel consumption is about 28 percent towards 2008; clean diesel provides today already a 30-percent fuel consumption advantage compared to conventional gasoline engines; a clean diesel offers additional potential for fuel consumption reduction downsizing, start-stop, some of the features which we actually see already in the Jetta which is parked outside, like the new transmission, double-clutch transmission, which also helps to reduce [sic] fuel economy.

And then also clean diesel out-performs conventional gas engines as well as current hybrid technology in most cases of real-world driving. And again, it’s a good, it’s a clean, and it’s a very functional solution.

With that, I would just like to thank you for the first part and hand over to Gale.

Gale Banks, president, Gale Banks Engineering: Ok, my name is Gale. I’m a torque junky. [Laughter and a cry of “Welcome!”]

Thank you! There is no 12-step program for my affliction — right, Reeves? [Callaway, in audience.] We go in the ground with this one.

I am a futurist. I live in the future, and I think about it constantly. Last month was my 51st anniversary in the engine business. So I’ve been thinking into the future for quite a while.

But I want to put just a little plug in here for the car business and automotive enthusiasm in general. Who’s watching Jay Leno at 10 tonight? [Misstated date, that show’s premier was a week later.] He’s got a track on the set. Just watch it happen. So I suggest this might be worthwhile.

Lars mentioned the GM diesel. That cylinder case, or block, was an outgrowth of a marine racing engine that I did for Oldsmobile in 1970 and we won the championship, APBA. And that thing became the diesel block. I couldn’t keep the main caps from moving around and I had 12.5-to-one compression ratio. The cylinder heads wanted to be in the water, rather than on the engine.

So they may have captured ten percent of the marketplace, but they also captured 90 percent of the warranty work. [Laughter.] And it virtually killed diesel in the United States, so it’s kind of a tragic theme.

At the awards, Ten Best, this year I had the pleasure of doing the keynote speech, and I’m driving the car that’s out front. It’s my car. It’s a Jetta Sport Wagon. Norbert Krause, when he accepted the award, because not only is that the Green Car of the Year, that engine also has won awards, Ten Best. Norbert headed up development of that at Volkswagen, and he told me from the lectern, me sitting at the table, “Now Gale, don’t you go too far with that Jetta.”

Well, I intend to go too far. How do you know when it breaks? You gotta find the envelope. It’s like those guys that tested all those airplanes out there. They had to find the envelope.

So it’s a sport wagon. Picked it up in Huntingdon Beach, drove it around L.A. for about three days, drove it to Yosemite. Buildin’ a house up there, in the Park. So I drove it to Yosemite National Park. Mountains and everything. And the first thing I noticed is, that thing grooves.

Being a torque junky, this thing comes off the turns. And that six-speed DSG that shifts in less than a hundred milliseconds, that’s a cool transmission.

People were actually pulling into those turnoffs to let me go, and I’m in a two-liter diesel station wagon.

There’s somethin’ right with the world!

Because I drove it around Yosemite for three days, drove it back to Bakersfield, which is where I chickened-out. I thought, where are the gas stations beyond Bakersfield? I’m comin’ south. I fueled it on the north side of Bakersfield: 14.3 gallons.

Now from my house over in Monrovia to Yosemite is 299 miles. I mean, this thing shows you the instantaneous mileage, and you soon are driving for that.

And after I demonstrated that little S-10 pickup out front for Jay Leno, it’s in one of his videos on his website, after we were all done he said, “You know what, Banks? I think mileage might be the horsepower of tomorrow.”

Well, I’m not buying that. Horsepower is the horsepower of tomorrow. We just want good mileage with it, and low emissions. We want to be socially responsible.

I want to talk with you just for a minute about where we’re goin’, but I’ve got a little sizzle-reel here that John is jonesing to show you. So we’ll show you some of our high specific-output experimental engines.

[Shows two-minute video of diesel racing vehicles.]

Banks: Good job, John! We’re real proud. The first association with Bosch was the common rail, introduction of common rail. So the engine in the little Dakota pickup [in video], which is a kind of John De Lorean special, a lot of engine in very little vehicle, we towed our trailer with the race parts in it to Bonneville. Unlike the Cyclone that we ran ten years before. Chuck’s [Koch] nodding his head over here, and Eric [Dahlquist]. The Cyclone went there in a trailer. And the Sidewinder Dakota broke that record 11 years later and it pulled its trailer to the Salt flats. 222 mph, 24.3 mpg.

Now we did streamline the trailer a little bit. Kinda pointy-nosed.

But we got all of the race gear out of the trailer, put the wheels and tires on, changed the gears in the quick-change, made nine passes and finally killed the quick-change.

We weren’t out of diesel by any means, and we weren’t out of speed. But it’s the FIA record.

And then we took it on the hot rod power tour. It was the fastest and most efficient vehicle on the power tour that year.

We’re proud of that stuff. The whole deal is, how do we maintain performance in the United States? Well, there are some tools, but they have to be socially acceptable. Supercharging, turbocharging, those are tools.

Diesel is also a tool, oddly enough. It’s time to change your minds about diesel, folks. It is clean. On the particulate side, the particulate output of the diesels that are coming from Germany today, and can be matched with technology here, is one tenth, one order of magnitude, lower than current gasoline. So the American Lung Assoc. ought to be very happy with that little factoid.

Where are we going with diesel? I’ll give you some broad-brush stuff as quickly as I can.

First of all, low-mass, high-speed diesel has been my thing. Certainly not that Cummins [in video], which was designed about 40 years ago, but the Duramax. And General Motors in their infinite wisdom gave me a three-year development exclusive on the Duramax to bring it to market in the marine industry. There are some fliers over here about that.

And since they went bankrupt and came back again, they now gave me every other usage of the engine. In other words, we’re kind of the Duramax guys for GM.

Luckily, that is the candidate for a high-speed, low-mass — by low-mass I mean specific output, pounds per horsepower. It has such built-in durability and capability that it has become a wonderful test bed.

We did a software development with Bosch Engineering Group over a year and a half period and developed a 6000-rpm marine and on-road and off-road diesel engine controller.

The rpm limit was 6000 rpm and I thought, my God, I’ve got all kinds of headroom. That’s when we started, like say two years ago. Now I’m bouncing my head off of it. The dragster and the Pro Stock truck are both turnin’ 5800 rpm. So we just don’t want to go any more because there’s only 200 rpm headroom left.

High-speed diesel. Low-torque diesel. Torque is the heritage of diesel. It makes a lot of torque, which makes a lot of low-end horsepower, which moves the vehicle. And from a standstill or makes it go fast. But most diesels make torque two to one. If you look at the current crop of diesels in the U.S., they make twice as much torque as they do horsepower.

So what I’m advocating is, don’t give it all away but maybe back it down 50 percent, to where you’re making 150 percent of the horsepower. So your, say, 600 hp diesel makes 900 pound-feet of torque. I gotta get up to the supercar level.

So what does that do? It paints a horsepower curve like you’ve never seen in your life. Direct-injection gasoline starts to get you there. A little more torque downstairs ‘cause it won’t rattle. Well, you can’t rattle diesel. It’s all about cylinder pressure will the cylinder case, crank, heads, how much will it endure?

We’re at 175 hp per liter right now. The engine in the little truck out front is making 1340 hp. Now it’s a short-duration thing. But what about long-duration?

In an automobile, if you can reduce the torque output of the engine, because all the powertrain is torque-sensitive, and the engine reacts against the chassis, so the chassis has to be of adequate strength to take that torque reaction and not deflect, you can make a lower-mass vehicle with a lightweight, high-speed, medium-torque diesel and you’ve got a fuel that will take you to the future.

Somebody said, “You know, gee, we don’t want to be burning this mineral oil.” You don’t have to. Second-generation bio, you want to make it out of algae? Ok.

You don’t want to make it out of soybeans, that’s for sure. We eat soybeans. But you can make it out of algae. The return per acre is stunningly higher than soybeans, or rapeseed. Or you can make diesel cellulosic. You can make it out of wood chips, lawn clippings, everything you can think of.

And guess what: the cetane rating on those fuels is higher, which makes high-speed diesel a lot easier to achieve.

And lastly, fuel types. Of course there’s all kinds of guys running grease. There’s guys on MTV driving an old Ford ambulance painted out to be a van or something now across the country on French fry oil.

I gotta tell you, French fry oil won’t scale to the usage. [Laughter.] There’s not enough. But algae will. Wood chips will. So there are a number of second-generation diesel fuels.

Now what about emissions? What about efficiency? Well, one of the things we’re going to drive into very strongly, and we’ve been doing the basic groundwork for three or four months, is what we call super-critical diesel injection. We’re heating the fuel to within 100 degrees of its kindling temperature.

Bosch doesn’t know about this yet. [Laughter at Ulrich’s expression.]

Ullrich: I learn a lot today!

Banks: This is gonna be a little hard on the Bosch components, and where we do the heating, hopefully after the pump but before the injectors, might be critical, but the point here is, through calculation we find that the viscosity of the fuel will drop by one order of magnitude. So we’ll be able to inject the fuel mass quicker, if we so desire.

Shape [of] the combustion pressure curve, the energy release of the fuel, will be different.

What I’m talking about here is a sea-change for diesel combustion. We predict lower CO2, and lower NOX. And better efficiency.

You heard it here.

         Q&A

Stewart: Thanks, Gale. [Applause.] What we’d like to do is open it up for questioning. I want to ask the first question myself, if I may. After that I’ll try and get around the room as much as possible.

If JD Power’s right and by 2015 we have about a million units sold a year, are the diesels that we’re going to be able to buy and road test and live with, are they gonna be much different than they are now? Or have we really reached a plateau in terms of the technology? Have all the easy benefits already been gained?

Banks: Ok, Lars, I’ll answer it, since you’re looking at me!

Ullrich: I can add to it.

Banks: The engine of the future is 115 years old, folks. In the last five to seven years there’s been a tremendous change in the technology. Probably, well, we have to thank the environmentalists for this, and I know I’ve got a roomful of guys who might not think that way, but — and ladies — but at the end of the day the environmentalists pushed diesel to clean up its act and in so doing, guaranteed its future.

So we’ve got them to thank for that. I mean, the bottom line here…

Stewart: You mean CAFE, our friends at CARB and so on…

Banks: Yeah. And the emissions. You know, it forced the advent of things like the Bosch common rail technology and the magnificence of electronics, which just completely continues. I mean, the Jetta out there is sensing the cylinder pressure in all four cylinders.

I mean, my little Kistler cylinder pressure probes cost me like 1100 bucks apiece. They come in the car! Now these are BERU, soon to be Bosch, but the bottom line is, that thing is demanding a torque value and then checking to see that it actually occurred. That’s incredible, and that’s all through the range. [Next short sentence not audible.]

It ensures that the performance of the vehicle is cradle-to-grave the same and that the emissions output is similar. This is part of the emissions technology, but we’re gonna leverage this cylinder pressure in other ways.

Stewart: I know we’re gonna want to hear more about that. Without giving away the things you do for your suppliers, can you comment a little bit on what you think are the imminent advances that we’ll see in the diesel cars?

Ullrich: Yeah. I mean, what we are currently working on, obviously, we’re at one stage where we have basically now achieved a 50-state compliant diesel engine, which is a big step forward. As Gale has said, in some respect the diesel is now cleaner than the gasoline vehicle.

And this will not be the end. Bosch spends roughly ten percent of the revenue in R&D and we have new technologies coming in which will further accelerate the improvement of diesels. As I have shown in my chart, we could envision and see further reduction potential, up to a 40 percent on what we already see today.

Stewart: So better mileage, CO2 reductions…

Ullrich: Correct. Better mileage, CO2 reduction; we also will have the usage of alternative fuels or renewable fuels. What Gale has mentioned, the second generation of renewable fuels is a potential great opportunity for us to further enhance the diesels.

And we actually have currently a test fleet here in California running which is running on 100 percent renewable fuels and we feel very comfortable with this.

Also, with respect to where the future we be going, you don’t have to necessarily change a whole lot in the vehicle to use the next generation of renewable fuels.

Stewart: Ok. Well, I know there are a lot of questions out in the room…

Alysha Webb: I have the microphone… I have a question for Lars. You sound very optimistic, and for Bosch you have to be that way, I guess, but if you look at the numbers, you quoted a JD Power study that shows nine percent diesel in 2015. I read a SEMA study that shows, if gas is at $6 a gallon, 7.5 percent of powertrains sold will be diesels. So that’s still not a huge percentage, especially compared to Europe. My question is, you said that we have to get consumers to understand they have to choose their powertrains the way they choose their consumer goods. How do you do that? Is that a marketing task? Does that require… Is it a government regulation task? How do you get people to think about powertrains the way they think about consumer goods?

Ullrich: I think it’s a good question. What we have seen on the consumer side, ultimately the price and the affordability plays a big role into that, and that’s why I have shown here also the total cost of ownership. In Europe, much more consumers are looking at how much does the overall vehicle and the operation of the vehicle cost me, from the day of purchase until the day I basically sell it again?

And I think we will see the same trend here in the U.S., because consumers here in the U.S. will have to be more intelligent in respect to what they do with their money.

That is something where we see a large trend toward the total cost of ownership way of thinking, and that will also ultimately drive the market share.

Stewart [to Banks]: You have some add-on?

Banks: One thing to consider, for a lot of people an automobile is also an emotional purchase. You know, for a lot of people an automobile is clothing that you drive.

So demonstration of the technology, showing that the technology is hip, cool, it’s not a semitruck, it’s a rippin’ good ride with a diesel powerplant — that’s why we’re engaged. You know? We’re demonstrating diesel. They use the word “fun” in Europe, and it is fun. In fact, when I drove that little critter out there to Yosemite I thought, “This truly is fun.”

But then you amp up “fun,” and at some point it’s just, “Holy Christ! This thing runs. This is a cool thing to have.”

So part of the Bosch focus through Banks is to demonstrate it, show it, get it out in the public domain, get it talked about. That’s what you guys do.

Stewart: There is a big marketing challenge there, and also a lot of activity that we know about from VW and Audi and so on. They’ve really taken on the challenge of popularizing diesel with motorsports, with their marketing campaigns and so on. But what you’re saying is that, get ‘em behind the wheel. Just let ‘em drive it and they will want to choose it. And I think there may be some validity to that. If dealers can do that, there’ll be more diesel sold.

Zoran Segina: I come from Europe, so you’re preaching to the converted. I love diesels like a Mercedes with a 260,000-mile engine that is considered basically in its infancy, or for the marine, my Yanmar  marine diesel that will last 11,000 hours with the proper maintenance. But now we are talking common rail injection that has, if I understand Lars, about 24,000 psi. Additionally, uric acid — I’m even willing to do it in my tank, if necessary [tittering] to achieve the Bin 2 Tier 5. Reheated fuels: diesel has been known to be extremely durable, lasting for literally a million miles without a problem. Once you introduce the new technology, how much does it affect the durability of the diesel engine from which it has been so well known over the years?

Ullrich: If we just look into the pressure numbers, for example, the European diesels have been running for a long time already on 30,000 psi, roughly. So from a pure pressure perspective, we feel comfortable from a component perspective to extend the warranty on that.

The other components, as you have mentioned, with SAR we are gaining new information about that. However, we see already that these systems have been used in the commercial vehicle arena for a long time already in Europe. We were actually the first one to choose this technology, reduce further the fuel consumption, to basically improve the overall operational cost of the fleet vehicles.

And we see from a technical perspective we do see not a sacrifice in respect to the durability of the diesel engine, or that we jeopardize the image of the diesel engine of what you have mentioned.

Frank Bohanan: You mentioned the linkage between fuel price and the acceptance of diesel. One of the issues with fuel price of diesel is obviously refining capacity. To what extent do you see there being any relief in the refining capacity so that diesel’s price will be more stable? I guess in general, how do you see the price stability of diesel over the future, given the refinery restrictions?

Banks: Frank, diesel in the U.S. tends to be a commercial fuel. Vocational use. Gasoline is used for business uses but also mainly pleasure as well. So the price point on diesel is impacted by the fact that the guys that use it, class 4 through class 8 trucks, let’s say, have to buy it. Whatever the price is, they have to buy it, or they’re not runnin’ their truck and they’re not delivering the goods.

Once we get more pleasure use of diesel, where people pull back — you know, when gasoline’s up, people use less. When diesel’s up, guys are still buyin’ it. So as the fleet increases, we’re gonna have more avocational use of diesel, which I think will help stabilize the price.

The second thing is, we ship a lot of diesel overseas currently. So I don’t know where the capacity issue truly is. Maybe you do.

Third, as we go to non-traditional production methods on diesel, and hopefully people compete with the large oil concerns grow up, like the dot-com boom, and we get legitimate competitors with home-grown diesel, that’s gonna enter into the price as well.

So there’s a lot of components here that might be very favorable for diesel.

Stewart: There’s a lot going on there in the news in the last month. Chevron announced 600 million towards scaling up an algae operation in North America, and Valero, if you were to check, they have announced that they’re going to increase their diesel fraction and concentrate more on producing more diesel for the domestic market. So it seems as though there’s already been some reaction. Now whether or not these prices stay low, I mean, no one knows, but we’ll see. Yes.

Mike Levine: Question I’ve got is especially with 2010, and this relates more to the trucks. Now you see urea STR systems and I know that Bosch is making the injection systems for Ford, for example, the cost on these solutions, you know, to get rid of NOX is adding thousands of dollars to the cost of these engines. So whatever increase in efficiency there seems to be, we’re seeing that lost at the purchase price to what they’re going to be paying more up front for the urea system. So the question I have is, do you have an average cost, now that you’re making the urea system, for how much this seems to be adding to the cost of a truck for 2010? And second follow-on would be, is there also hope on the horizon that maybe there is a solution, like maybe supercritical injection, that eliminates the need for urea catalytic reduction system? So is there an average cost this is adding to diesel engines for 2010 and what’s the solution for that in the long term that might eliminate this as a cost?

Ullrich: Yeah. Maybe a statement on the cost side, ahm, obviously we supply the SAR system, however there’s not an exact price point which I can relay to you on this, because each OEM has a different pricing strategy in respect to how they relay that to the consumers.

In respect to the next advantages or the next steps to what we do is from a component supply perspective we obviously work on for the cost reduction ideas. As we get more systems into the field, the economics of scale plays a role and we also have technical enhancements to further reduce the cost of the components, very similar to all the other technologies out in the market, and systems become more affordable also.

Bob Saber: Do you have any comments about the pullout by particularly Japanese manufacturers, and one, Honda in particular, who seem to have a promising 1.5 liter diesel engine that would run without urea injection, just with the catalyst operation? What does this say about the future of diesel in small cars?

Ullrich: I think that’s a very good question. I think what surprised everybody was the economic downturn and the economic influence on that. And that for sure had also a large impact on some of the decisions that were done at some of these OEMs.

Nevertheless we are still looking forward that these projects which have temporarily been put on hold are getting reactivated and what we see is right now with these small engines, like the Jetta, for example, they have great success in the market and the OEMs need to watch out for that, that there is not already a train leaving the station which they should have needed to hop on. [Chuckles.]

Banks: And by the way, the Jetta does not have urea injection, so it can be done in Germany as well as Japan.

Tim Considine: You talk about 9 percent, 7 percent; whatever the percentage is, if we look at the car market today, it’s not going to be American cars. Do you gentlemen have any feeling for, do you see anything positive in American manufacturers making diesels for cars?

Banks: A number of American manufacturers — well, the three… [Laughter.] …have foreign entities and those foreign entities make diesel engines already and sell ‘em in their sheetmetal in foreign markets. So Ford…

GM, in their earlier iteration, had this quadrant system, where they looked at vehicle mass, load, usage, etc., and then tried to develop the engine or powertrain technology for each quadrant. For light vehicles, their choice was some form of hybrid, not diesel. And this was presented me by Charlie Freese, who was head of diesel development for GM. It was kind of a disconcerting thing for me.

Now that we know the Volt is $43,000 or God knows what the hell number, and sure as hell doesn’t get over 200 mpg, I mean, hah! What’s with you guys printing that number unqualified, anyway? Don’t you get the background to tell ‘em, you know, that’s from here to the curb?

I mean, there’s got to be some truth to some of these claims instead of sensational press.

But the bottom line is, every one of ‘em has diesel engines. Every one of ‘em. And they could integrate them… And they’re in platforms which they make overseas. It’s too damn’ easy.

So… I can remember four years ago in the Diesel Technology Forum, when I was on the board of that, telling the guys in there, the guys from Caterpillar and Cummins, the Germans are comin’, the Germans are comin’! Sure as hell, it’s true. And now we’re caught with our pants down.

Now it’s a good thing the Germans came. They’re showing, look, this can be done. So the naysaying is over. It’s happening.

The bottom line is, when and where? Who? We’ll see.

Ullrich: That is an interesting thing. Like it demonstrates that it can be done now and we need to do it now. The question is just, who will be the next fast follower?

Stewart: Alright, I’m afraid we’re low on time. I’d like to thank our guests today. [Applause.]