President and CEO Phil Horlock says that Blue Bird’s incoming orders for propane buses are “double what they were a year ago.”
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.