Balancing today’s diesel truck demands with tomorrow’s EV potential

Balancing today’s diesel truck demands with tomorrow’s EV potential

“If you can’t get excited about the future of trucking, you must be dead.” Daimler Truck N.A. CEO and President John O’Leary has a point. Every aspect of trucking is exciting right now, but that excitement is spread across the emotional spectrum.

Electric and automated trucks awaken the imagination as fleets usher in the beginning of a new era of truck technology, but they haul an unshakable sense of uncertainty; a feeling that you won’t overcome until you start running the technology for yourself. On the other hand, tried-and-true diesel trucks that dominate trucking today are dependable and predictable (mostly), but the peace of mind is hampered by supply chain constraints and continued parts shortages.

That emotional dichotomy flows into trucking equipment strategies as fleet, OEMs, and suppliers (basically everyone) balances the needs of today’s diesel trucks with future plans for electrified powertrains. The transition is both far away—DTNA’s target is to offer only zero-emissions vehicles by 2039, for example—and close at hand (2039 is only three or four truck lifecycles away, based on standard truck lifecycles).

It was this balance that O’Leary spoke to during his keynote presentation at TMC 2022. You can watch his full remarks in the video below.

I had the chance to sit down with O’Leary after his speech to talk about how he approaches short-term practicality with enthusiastic long-term planning. Here’s the conversation.

Fleet Equipment (FE): Thanks for taking the time. I enjoyed your speech this morning and the balance of practicality and innovation that DTNA is delivering on.

Can you tell me about how you manage that dichotomy between trying to deliver on the demand for diesel and supply chain challenges while keeping an eye on what the possibilities of tomorrow and investing in new powertrain technology, charging infrastructure and beyond. How do you balance this?

O’Leary: That’s the big challenge these days. Obviously, diesel continues to be 99% of our book of business, and it will continue to be that way for a while. So we can’t walk away from that. In the speech, I noted that electric trucks are not a light switch moment where one day we wake up and everything is zero emission. Diesel usage is going to continue for a long time. People that worry, it’s going to go away in three years and then what are we going to do and where’s the grid? No, it’s going to be a very gradual transition. It’s difficult because we have to invest heavily into electric technology, both on the product side, as well as infrastructure and training and other capabilities. But we do have some time to do it.

FE: For sure, but the EV timeline might feel condensed because there are maybe three or four truck life cycles until the goal of only selling zero-emissions trucks in 2039 is here. That’s not so far away, right? Fleets have to start having the conversation now while keeping the business going. It’s a hard juggling act for sure.

O’Leary: Yeah, and we have multiple EV products offered today. We’re going to be delivering the eCascadia later this year and the eM2 early next year. We’re definitely well positioned in this segment. Again, it’s a learning process, not just for us in terms of design and manufacturing and service, but also for our customers to be able to handle those products in a safe manner. It’s a long road that we’re on, but it’s exciting to at least get out of the starting blocks.

FE: For sure. Your joint venture with NextEra Energy Resources and BlackRock Renewable Power that will invest $650 million to create a public charging infrastructure network is a substantial investment. I want to get to that, but in your speech you talked about what keeps you up at night–the parts availability and supply chain issues going on right now. Can you give us an update on how you’re just managing it day to day and what are you seeing in the short-term?

O’Leary: First, for the last two years, we’ve been impacted by COVID in terms of being able to deliver trucks because our first and foremost goal was to keep a workplace as safe as possible for our employees. We were able to accomplish that and keep delivering trucks. We’re still not completely out of the woods on that. We’ve seen a lot of drop off. We all see the statistics. Things seem to be getting dramatically better in terms of new cases and hospitalizations. So knock on wood. I would say it looks pretty good at this point in time.

Now you layer the issue with the supply chain on top of that; especially with microprocessors, which has been well-documented. For us, it’s been frustrating because last summer, experts and people further upstream in the supply chain were saying, ‘By fourth quarter we should be back to normal.’ So Q4 came and went, and we were not back to normal. Then we were hearing, ‘End of Q1.’ Not happening. Q2: probably not happening. Now we hear things like, ‘Maybe by the end of this year.’ All I know is that we come to work every single day, fighting the fight.

And it’s a knife fight. We’re trying to secure parts around the globe, using all of the different levers that we have with Daimler, with long standing agreements with suppliers, with the volume scale that we bring. At the end of the day, it’s still not enough. There are not enough trucks for the industry. As my competitors and I would all agree,we would love to be able to build more trucks because the demand is out there. The underlying demand of the market is strong. It’s a shame that we’re not able to meet that. But again, we fight every day and sometimes you have better days than others.

FE: Who knew that turning this giant supply chain machine on was going to be more difficult than turning it off. It’s way harder to get it going.

You also mentioned in your speech that you’re a numbers guy. So what are you looking at for indicators in short- and long-term to help you manage all of this? You mentioned the COVID cases as one. Do you have any other examples of numbers you really pay attention to?

O’Leary: There are macro numbers like the market size for North America. We definitely pay attention to that, and there’s been no drop off in that. Demand is still super strong. That’s one thing we look at when we’re figuring out what our build rate needs to be and how much staffing we need and even to some extent, how much investment.

We look at things like inflation, which has obviously been running fairly rampant in the past nine months or so. Those are macro level things.

Within the company, we’re always trying to be better. So we track quality, we track efficiency, we track fixed overhead spending. We track headcount and we’re always trying to be as lean as possible, as efficient as possible, as strong as possible, and with the highest quality as possible. We want to be the best at everything we do because you don’t get to stay on top of the podium with the market share that we command if you’re not executing really well on all those dimensions.

FE: Talking about people: There’s the labor shortage.

O’Leary: Yeah, and when you look at just how the labor has changed … We had a situation where McDonald’s down the street from our plant was offering something like $19 an hour to start and a $5,000 signing bonus.

So we actually had people–

FE: Now, wait a minute, how much is this a year? Let me check real quick. [Jots down the annual salary range on a scrap piece of paper.]

O’Leary: We had people at the plant doing the same calculus you’re doing. So we had to raise our wages. Nothing wrong with that. It’s great that people are making more money, but obviously it’s going out the door in terms of inflation. It’s a very crazy world that we’re in right now and something that we have to deal with. That’s why the 26,000 people that we have in our company come to work every single day focused on the customer. My job is to try to filter out as much of that extraneous stuff and keep things focused on the customer.


FE: Now the fun stuff—let’s talk about your future truck equipment technology outlooking. Most recently, your partnership announcement and investing $650 million in a public infrastructure charging network. It’s a huge step. From your point of view looking at developing a network on such a large scale, what are the big challenges? Is it getting utilities to the table? Is it where the money’s coming from? Is it all of it? How do you see the challenge ahead of you?

O’Leary: It’s not so much where the money’s coming from. I’ll lead with that because as you know, we’re involved, there are other people who are interested and involved. There are still deals to be done and agreements to be made, including on the government side. Again, it’s a long-term ramp as we talked about earlier. Over time, the money will continue to flow in.

Certainly, when you’re dealing with the grid and with utilities, especially outside of major urban areas, it gets to be more problematic in terms of the work that has to be done to strengthen the grid, to pull the wire from wherever it is now to some truck stop out in the middle of nowhere so that you can do megawatt charging. That is not a small feat.

I don’t want to necessarily paint with an old brush, but in the past, we found that dealing with utilities and different energy regulatory agencies was … it wasn’t always the fastest, most customer friendly process. Now, I do think that quite a few utilities understand that this is a huge opportunity for them, and they’re changing their outlook and speed of operation. But that’s going to take a while to get all that going.

Trucking customers are very open to it; it’s a bell-shaped curve. There are some that are on the leading edge. There are others who don’t want to hear about it. There are people that are asking a lot of questions and trying to consider how this is going to impact their company going forward. There’s an opportunity for us to help customers understand the operating requirements, as well as the safety requirements, which are so critical in this space.

FE: One last question. I asked you what keeps you up at night, but what are you excited about? What gets you up in the morning? What’s your favorite thing right now?

O’Leary: I’m kind of the person that needs to have a challenge. I get bored easily. If it was five or six years ago where none of the future technology was on the horizon and the supply chain was perfect, I would be fairly bored. Of course, there are always opportunities to be more efficient, but with all of this innovation: If you can’t get excited about the future of trucking, you must be dead; you must have no pulse.

When I think about everything we’re doing and sometimes it’s humbling to understand all the changes we’re trying to tackle at once.

For me, it’s a great opportunity to be able to learn and drive a company into these amazing new directions. That’s exciting. I’m able to learn from the genius people that we have working for us in autonomous and in electric and in connectivity, and then convert it into something that our customers absolutely love and are going to keep them buying our vehicles.

So even though the workload is intense and the climb up the mountain is steep, it’s also super exciting to be a part of.

FE: Very cool. We’re definitely looking forward to seeing how it all comes together. I appreciate you taking the time. This was wonderful.

O’Leary: Thanks, Jason. Really appreciate it as well.

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