The school bus industry has been hit with tough fiscal conditions over the past few years. School bus sales have declined significantly, and many districts have made cuts in transportation service that have reduced the number of buses they need.
Still, Phil Horlock, president and CEO of Blue Bird Corp., sees reasons to be optimistic. The manufacturer has sparked much interest in its propane buses, and orders are on the increase. Also, in March, Blue Bird’s redesigned Type D buses go into full production.
Horlock joined Blue Bird in January 2010 following more than 30 years with Ford Motor Co., where he held a number of executive positions in finance and operations, with global responsibilities.
In this interview with SBF Executive Editor Thomas McMahon, Horlock discusses propane and other alternative fuels, analyzes the state of school bus sales in general, and shares insights about Blue Bird’s heritage.
SBF: What is the school bus market looking like for 2013?
PHIL HORLOCK: We’re seeing that it’s certainly as good as 2012 — even a little better, I’d say. Flat to moderate growth. When you look at Type C and D buses, it’s about a 25,000 unit industry. Remember, though, that’s well down from the 35,000 units back in 2007 and 2008. So, we’re still 30% off the pre-recession level.
There’s no question that school districts have learned to operate with fewer vehicles. There have been structural changes in the industry: routes have been cut, and school starts staggered, reducing the number of units in operation. That also means that there will be fewer new buses required compared with the number in 2007 and 2008.
We did some analysis that was pretty interesting. Looking at the state funding situation across the United States — and while this isn’t necessarily focused in education or on school buses — some 42 of 50 states said that they plan to increase spending this year. How much of that goes into the school bus market, we’ve yet to see, but I think that is an encouraging sign.
I would also say we’ve definitely seen a nice increase in the level of interest in alternative-fuel products. That portion of our product mix is growing substantially.
That leads in to my next question. Blue Bird recently got an order for more than 400 propane buses, for a new Student Transportation Inc. contract in Nebraska. How significant is that for Blue Bird, and in terms of the industry’s acceptance of propane school buses?
It’s significant on two fronts. First of all, it was by far the biggest single order of propane-powered buses that Blue Bird has ever received. That’s a huge milestone, obviously, for us. It was also the largest transportation agreement for Student Transportation Inc. [STI]. What we’re seeing with propane is that customers are beginning to understand now the relevance of it and how safe it is. It’s environmentally friendly, it reduces America’s dependence on foreign oil, and it is so cost-effective. That’s the great thing about propane.
With a lot of alternative-fuel vehicles, there’s a huge acquisition cost you’ve got to put in first, and it can take many years to try to recover your outlay. Propane’s a little different. Yes, there’s a bit of a premium you pay versus diesel [for the bus], but a gallon of propane is about 40% or 50% of the cost of a gallon of diesel, and the federal government just introduced again the 50-cent-per-gallon incentive for propane that they had a couple of years ago. That’s a further savings. So although the initial cost for a propane bus is a little higher, within a couple of years that is paid for by the fuel savings.
When you rack that up over 10 or 12 years, it’s a huge savings. Typically, a propane bus will save around $3,000 to $3,500 in fuel costs per year. So over 10 years, you’re talking $35,000.
For STI, that was the whole issue that really caught Omaha’s attention: “Hey, we can give you brand-new buses here. They’re clean, they’re efficient and they’re going to save you cost per mile.”
We’ve been on a big education exercise with customers these last couple of years, covering how propane works, why it’s efficient for them and how easy the infrastructure is to come by, and I think we’re seeing the impact of that now.
Our sales are up on propane. Our incoming orders are double what they were a year ago. So that gives you a sense of the growing interest in this part of the business.What would you say is the biggest challenge or concern that some operations have that might keep them from venturing into alternative fuels?
We have made a big and concerted effort with our partners in this area, particularly ROUSH CleanTech, who is the fuel system supplier on our propane product. We also have outstanding relationships with propane suppliers throughout the U.S. and Canada. We partner with those folks and go out on the road to talk to potential customers about how easy it is.
I’ll give you an example: The propane infrastructure can be installed in 24 hours. The propane filling station goes right in the school district’s yard, next to the diesel tank. CNG [compressed natural gas] infrastructure is far more expensive to put in place, but once it’s in place, the cost of CNG as a fuel is very, very low. The lowest of all.
Typically, it will cost about $30,000 to install a propane fueling facility. It’s about $500,000 to install a CNG fueling facility. With many of the agreements we have with our propane suppliers, when they have a fuel supply contract from the school district that orders a few propane buses, they will install that propane system free of charge.
Another thing that’s always on people’s minds is safety: “How safe is propane?” It’s an incredibly safe fuel, for two reasons. One is the fuel itself is very low on combustibility. It’s even harder to make combustible than gasoline or diesel. And the tanks themselves are very highly regulated, so the tanks on our buses are so tough. We have a video on our website where we show police officers shooting various caliber guns at a propane fuel tank, and still they can’t bust through it. A gas tank and a diesel tank can be penetrated much more easily.
The 2014 All American FE and RE buses were unveiled in October. What reactions have you gotten about the redesigned features?
All of our reactions have been very positive, first from our dealers and then from our customers who have seen it and then placed orders with us. We do believe it’s the best Type D bus in the market. We’ve been through this very carefully, benchmarking us against competitive buses. It’s got the best fuel economy; it has the best turning radius; the ergonomics in the cockpit are the best in class; it’s got the best capacity in its DEF [diesel exhaust fluid] reservoir.
I think what a lot of our customers also love is, with this new bus, we commonized a lot of parts in the passenger compartment. All of the windows are common with the Vision [Blue Bird’s Type C]. The sheet panels behind the driver are common. So it minimizes the number of parts that dealers have to stock and we have to stock. It really helps to reduce complexity.
We start full-scale production in March, and our customers are anxiously awaiting their first deliveries. We have a lot of orders on hand. So we’re very pleased.
That really goes back to the Luce family, who founded this company in 1927. That was what they were all about: a safe ride for our schoolchildren every day. The four things that the Luce family talked about are right at the front of our mission statement: We commit ourselves to safety, quality, durability and serviceability. This is our heritage, and it’s something we’ll always stand for.
Another thing, too: We were founded on very strong Christian principles here. Our original founder did a lot of work here in the community, and he employed a full-time chaplain in Blue Bird to give services every week for the employees. And we’ve continued that. We have a full-time chaplain, and every couple of weeks we have a service here. We invite family members to join us as well.
Another commitment of Blue Bird is to anticipate the need for change and be at the forefront of meeting customers’ needs. That goes way back to 1937: Blue Bird introduces the first all-steel school bus. Until then, all the bus bodies were made of wood. The first CNG, electric and propane school buses were all Blue Bird in the ‘90s. We want to keep being as innovative as we can be.
Blue Bird exhibited at a couple of events in China last year. Tell me about the opportunities you see there.
With its huge population, I think China, over the long haul, is going to be the largest school bus market in the world. The new [school bus] standards that were put out there, which are still being reviewed, show the government’s commitment to a professional, safe school bus industry.
I was just pleased that we were able to get out there, get our name known and build up a lot of connections. We’ve had many Chinese companies tour our plant as a result.
Still, our core business is far and away North America. We’re looking at China all the time, but we see it as more of a long-term opportunity, to be frank. Actually, we’re always on the lookout for opportunities, be it South America, the Middle East or other markets around the world. Over the years, we’ve sold in 60 different countries.
Are there any other new developments that you want to mention?
Well, we’re looking forward to celebrating that by May this year, 550,000 Blue Birds will have rolled off the line in our lifetime. That’s pretty exciting for us.
I think you’re going to see us do a few things to solidify our leadership in the alternative-fuels market. I can’t tell you what they are now. You’ll have to wait and see later this year.
And I just look at where we are at Blue Bird: We’ve grown market share significantly these last couple of years. We’re excited about the times we’re in here. Just a couple of years ago, we were closing our plant in North Georgia. We had too much capacity for the demand that was out there; we had to rationalize.
And now we’re all here in Fort Valley, except for our Type As that we make just outside of Montreal. But all our Cs and Ds come off the same production line here in Fort Valley. We’ve got a great, experienced team, and we’re very proud of that.