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January 7, 2016

Daimler's Mexican Scorecard is Strong

The perception that trucking in Mexico is akin to the wild west turns out to be largely true. Executives from three of Mexico’s top fleets said in a recent meeting that a black market in stolen diesel fuel, no enforcement of driving hours, poor infrastructure and operation of 20+ year-old trucks running on deferred maintenance makes it hard for legitimate carriers to price their services.

But that doesn’t stop Femsa Logistics, Frio Express and Fletes Mexico providing service comparable with the best United States’ carriers, said executives at a recent panel at a Daimler Trucks North America meeting in Puerto Vallarta, Mexico. At the meeting, Stefan Kurschner, president of Daimler Trucks Mexico (DTM) added that the constraints on trucking were impacting Mexico’s growth. “The economy is doing OK, but it should be doing better,” he said.

Kurschner said Mexico’s annual growth is 2.6 percent to 2.8 percent but he put it in context of emerging economies such as Mexico’s that should be showing at least 4 percent growth. He added that more than 173,000 commercial vehicles on Mexican roads are over 21 years old. “You can imagine what that does for road safety, the environment and also the economy,” he said.

Further complicating the issue is the uncertainty around diesel emissions. Currently the country requires an equivalent to EPA ’04 but the next step still has to be decided with either EPA ’07 or ’10 possible. And since the implementation is 2017 in a country where there is virtually no availability of low-sulfur diesel fuel, there’s considerable uncertainty in the market at what to expect and how much the changes will cost.

Other operational factors such as the high cost of diesel fuel – about 40 percent higher than in the US – were outlined an a fact filled presentation from Alex Theissen Long, director of logistics for Femsa Logistics, a Mexico City-based company that operates in much of Latin America. He was joined on the panel by Ramon Medrano, director general of Frio Express, a thoroughly modern refrigerated carrier from Aguascalientes, Mex., and Miguel Gomez, owner of Fletes Mexico offering trans-border transportation with a major presence hauling automotive freight.

All agreed that Mexico is facing a driver shortage just like it’s neighbor to the north. And this is despite the Mexican truck driver job is a top paying position. Yet it is still not a highly regarded job. And in the north of the country, drivers look to the US for driving positions as US-based carriers poach drivers with higher pay than in Mexico. 

Other impediments that raise the cost of operation are the widespread theft of fuel from the trucks’ tanks and the fact that the majority of Mexican truck capacity is provided by owner operators with less than five trucks, many of whom drive excessive hours due to a lack of driver hours of service regulation. 

Theissen compared the miles of paved highways in Mexico compared with the rest of North America saying the Mexican infrastructure is six time less than the US. Also, what has been paved carries heavy tolls which adds to trucking’s additional costs.

Aggravating the driver situation and adding to cost is the ‘manana’ attitude at shippers and receivers, said the panelists. Detention measured in days instead of hours is tolerated by low-cost carriers but cannot be accommodated by these modern fleets, they said. Much as he hated to lose customers, said Gomez, he had to turn away freight from shippers who operated in this way.

The media briefing in Puerto Vallarta was attended by press from all of North America, including Mexico and Canada. It was eagerly attended by the panelists who seek to publicize the truck transportation problems to encourage legislators to improve road safety by improving carrier responsibility. 

And part of that effort is to reduce the average age of trucks on Mexican highways, which currently stands at 17.9 years and impacts safety as well as the environment and the sales of new and recent used trucks.

Despite that, Daimler’s Kurschner said that in the last year, DTM has improved market share to 29.1 percent for classes 4 through 8. Class 6 to 8 is at 30.6 percent, up 7 percent over last year. This performance has been helped by the adoption of the Detroit Diesel 15 engine in Cascadia models, accounting for 90 percent of orders, said Kurschner.

Strengthening the Freightliner brand has also helped. One of the moves is to now price the trucks in Mexican pesos, ending the fluctuation in pricing – mostly upwards – due to the strength of the US dollar. Daimler is unique in this effort among Mexican truck makers and marketers in this pricing strategy, said Kurschner. Kenworth, incidentally, is the market leader thanks to a long presence in the Mexican market and manufacturing and selling trucks under the Ken Mex brand. Inexplicably, KW has dropped the Mexican name while Freightliner is working hard to establish its brand, he said.

Increasing the visibility of the brand is the purpose of a single-brand truck race series where Mexican race drivers – including two women – put on a spectacular performance at popular race venues around the country. The trucks are identical mechanically and based on M2s built at the Saltillo plant, so the racing is a test of driving skill. This is an entirely new motor sport for Mexico and enjoys enormous support by the fans.

Another coup was the company presence at November’s Expotransporte, the bi-annual truck show in Guadalajara. There, the Freightliner SuperTruck that was created with joint funding from Daimler and the US Department of Energy was the highlight of the display. This is the first time the SuperTruck has been exhibited outside the United States, where it was introduced at the Mid America Trucking Show in the spring and again in the fall where it was center-stage at the American Trucking Associations Annual meeting.

Adding regional managers to focus on fleets’ specialized needs has also contributed to sales gains, said Kurschner. Mexico’s geography and tough road conditions dictate personal attention and carefully selected truck models to survive conditions. DTM has also invested in expanding its parts network and roadside emergency service options to better support its customers, he said.



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