Long Beach Moving on Trucks

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Despite an ongoing dispute with its sister port in Los Angeles over its truck replacement program, Long Beach is rapidly moving down its own road to put drivers behind the wheels of new, cleaner-burning trucks.

The Long Beach port recently issued a formal request for proposals to truck manufacturers and financial institutions that officials hope will partner with the port on its $2.2 billion program, which will replace the aging fleet of harbor trucks with vehicles that run on either “clean” diesel or alternative fuels, such as liquefied natural gas.

Big truck manufacturers will supply as many as 16,000 new rigs, while the financial houses will purchase and lease out the trucks either to independent owner-operators or to motor carriers. A preliminary RFP was issued March 7 that gives companies until April 3 to submit proposals. The port expects to announce participants in late April but details are still being worked out.

“This is focused on getting rubber on the road as far as clean trucks as rapidly as possible,” said Thomas Brightbill, a principal with CGR Management Consultants, who has been brought in by the port to help coordinate the program.

In late 2006, the ports announced a joint plan to clean the air in San Pedro Bay, with a key element being the replacement of fume-spewing diesel trucks that carry goods to local warehouses.

But the ports parted ways earlier this year over a labor-backed provision still supported by Los Angeles officials that would require the now-independent truck drivers to become employees of motor carriers. Motor carriers have resisted this move, which would open the door for drivers to unionize.

Long Beach, saying the employee model would get bogged down in the courts, decided to move ahead with a plan that gives drivers the option to remain independent.

Under the Long Beach model, independent drivers would directly lease or buy the new, heavily subsidized trucks. Alternately, motor carriers could buy or lease the trucks and have employees drive them.

Long Beach has contacted seven truck makers and about two dozen financial institutions to see if they would be interested in its version of the program.

Though the port will provide money to the program, the financial institutions that participate in the program will actually purchase the trucks initially. Wei Chi, the port’s assistant chief financial officer, said the port will simply “serve as an aggregator” in order to facilitate large volume purchases.

In seeking partners, the port has focused on companies that have participated in similar programs elsewhere, such as Bank of America Corp. The giant Charlotte, N.C.-based bank currently finances a federal program known as SmartWay Transport Partnership, which offers loans to trucking companies to purchase fuel-efficient technologies. Though the program has been successful, spokeswoman Colleen Haggerty said she did not know if the bank would submit a bid for the port’s program.

However, an executive with Kenworth Truck Co., one of the largest commercial vehicle manufacturers in the world, said the company was very interested in participating in Long Beach’s program, which is projected to cut harmful diesel emission by up to 80 percent from current levels.

“This represents a big opportunity,” said Andrew Douglas, western region sales manager for Kenworth, a division of Bellevue, Wash.-based Paccar Inc., which also owns truck maker Peterbilt Motors. “Kenworth builds a lot of trucks, so we certainly have the capacity and wherewithal to build to high levels. We still need to work through the (port’s bid) process, but it’s certainly our intent to respond.”

Kenworth manufactures about 60,000 heavy-duty trucks in the United States each year. Other manufacturers that have been contacted include industry leader Freightliner, based in Portland, Ore.


Three options

Money for the program will come primarily from a $35 cargo fee that will be assessed on loaded containers entering or leaving the harbor, which is expected to generate roughly $1.6 billion. The rest of the money will come from the port, the South Coast Air Quality Management District and state infrastructure bond money.

With the funds, the Long Beach port plans to offer motor carriers and drivers three financing options: lease-to-own, grants for purchase and grants for retrofit devices.

Under the leasing option, an applicant will trade an old truck and enter into a seven-year lease agreement with a financing entity. According to port data, the driver will incur a monthly payment of between $500 and $700 per month, even with port assistance of as much as $1,400 per month. At the end of the lease period, the port will provide funds to cover 50 percent of the cost of purchase.

Kristen Monaco, a trucking expert and professor at Cal State Long Beach, did a study in 2006 that gauged driver attitudes toward various programs to finance truck replacement. She found that a leasing program was the least popular among drivers because they do not actually own the leased vehicle, which she said did not sit well with many of them.

“It sounds kind of shady to them,” she said. “They are wondering if they will have a truck at the end of the day.”

Port officials said drivers who default on their payments will have their trucks repossessed.

A more popular option, Monaco said, was one that provides a grant for the purchase of a new truck.

The Los Angeles and Long Beach ports have offered a grant program for several years known as the Gateway Cities Clean Air Program. Under that plan, the port provides about 75 percent of the cost to replace a truck with a newer model.

Under the new truck replacement program, the Long Beach port will fund up to 80 percent of the cost of a new truck meeting 2007 emission standards. But the funds, which can run up to $75,000 for a clean diesel truck and $120,000 for an LNG vehicle, still leave the driver with a one-time payment of more than $10,000, which can be a major burden on the truckers who earn notoriously little pay.

“A lot of them borrow informally through friends or acquaintances,” Monaco said. “Something’s probably going to appear in the market to help drivers bridge that gap. There will be glitches, but there’s time to smooth them out. There’s time for the market to adjust, there’s time for drivers to adjust.”


Phased ban

The port has approved a phased ban of the oldest trucks that is set to begin in October. At that time, all pre-1989 trucks an estimated 2,100 rigs will be restricted from the harbor. The program will last for several years, culminating in a 2012 ban of all trucks not meeting 2007 standards.

That could provide a problem for drivers who opt for the retrofit option under the plan. The port has offered to give drivers a grant of up to $20,000 for a retrofit device to be installed on their existing vehicle, so long as it is a 1994 model or newer.

But Long Beach port spokesman Art Wong said most retrofitted trucks will not meet the port’s standard in 2012, so those rigs would need to be scrapped anyway.

He called the option “an interim solution” for some drivers but does not expect many takers. “We have to offer it but I don’t know how much we’re going to promote that,” he said. “By 2012 they’ve got to replace the retrofits.”

Instead, the port is heavily promoting alternative fuel vehicles, which result in less particulate emissions than diesel trucks.

Kenworth, which is currently setting up an in-house LNG truck production line with the help of Vancouver, Canada-based Westport Innovations Inc., is the only major manufacturer offering the environmentally friendly vehicles on a large scale.

“To date, we’ve built over 100 trucks, but most of those have been done as aftermarket upfits,” said Douglas, the company’s western region sales manager. “Now we’re ramping that up.”

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