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June 01, 2006  |   Comments (0)   |   Post a comment

Q&A: Rising Fuel, Bus Prices are Key Challenges

International's Michael Cancelliere says school bus operators need to examine idling practices and routing efficiency to minimize the impact of high fuel prices. Meanwhile, he predicts a 5 to 8 percent increase in volume of bus sales this year.

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What is the monthly fee?

It varies by fleet size, but it’s generally $30 to $35 per month.

Has IC Corp. made any manufacturing improvements over the past year or so? And have you found ways to reduce manufacturing costs?

Quality, quality, quality. We continue to make advances in the quality of the buses we build, and all of our key quality metrics are validating the effort that we have put into achieving higher quality.

We have gained significant efficiencies at both our plants [in Conway, Ark., and Tulsa, Okla.], resulting in better quality product. We attribute these gains to the leadership of Ed Hartung at the Conway plant and Grant Pick at the Tulsa plant, who along with their teams have made process improvements and are focused on the right areas.

At both of our plants, hourly employees’ incentives are tied into CARE scores, which is a quality metric. The benefits of quality not only reduce our manufacturing costs — fewer hours to build the bus, less rework, lower warranty costs, less in-transit breakdown — it also provides our customers with more uptime, as well as reducing the prep time for our dealers. So our customers win, our dealers win and our employees win with continued improvements in quality.

We attribute a lot of these quality improvements to what we call our IPV [in-process validation] stations. Throughout our plants we have stations for the body line, the chassis line and the bump track. Our No. 1 thrust is building it right the first time. Beyond that, we’ll have a final in-house IPV station where we will go through every single bus in detail to make sure that the quality levels are achieved on the line. If we miss something on the line, we make sure that it goes back to that part of the line and is fixed before it gets into the hands of the dealer and the customer.

Then we’ll put it on the dynomometer to test the engine and test the electrical connections, and then we’ll select a certain number of buses to do a CARE audit. We’ll go through 10 pages of a checklist to make sure the vehicle meets our standards and our dealers’ and customers’ standards.

There’s a tremendous amount of attention paid to improving quality. Beyond the metrics, we continue to get anecdotal evidence from our dealers that the amount of prep time has been cut down to a fraction of what it used to be.

In addition to that, we’re also implementing design changes to help reduce the number of hours it takes to build a bus. There’s a lot of different schools of thought on technology. When we designed our new CE, we took an approach that we’re proud of that’s referred to more as evolutionary rather than revolutionary. That was based on feedback from our customers who have to live with the product for 10 to 15 years. That’s the path we continue down to meet the needs of our customers.

Do you think the school district procurement practices for school buses should be improved? Is there too much reliance on lowest-qualified bid?

For the most part, customers do a good job of spec’ing buses out to meet their individual needs. Most customers do not buy off the lowest bid. They do take many other factors into consideration, such as quality, responsiveness after the sale, driver acceptance, technician acceptance, timeliness of delivery and past experience.

We are fortunate to have the largest and best dealer network in the industry, and our customers place a value on that as well.

While there are some states that truly are lowest bid, that is by far the exception. The vast majority of states look at all of the elements of the cost of ownership and operation and expect the winning OEM to be competitive. I think it’s an efficient process and, for the most part, provides flexibility to make the right business decision based on more than just price.

The customers care about quality, which can create a dichotomy. A customer might want the highest-quality bus at the cheapest price. But those two things don’t always go together.

Are you still working with the three national industry associations? Are you seeing much progress in the partnership?

Absolutely. And we highly value the effort that the associations have devoted to the cause. In fact, we’ve taken our goal of speaking with one voice to the next level by recently inviting the other two large-bus manufacturers to join, which has been a nice addition to the group.

The passion and work ethic of the leaders of the three associations continues to impress me and is part of what makes the chemistry great. From developing a shared vision for the industry, we’re working together on projects like School Bus Watch and School Bus Safety Week and presenting a united voice to lawmakers on Capitol Hill. We’ve definitely made significant progress.

One of the most recent efforts has been to evaluate the merit of a comprehensive public relations plan to help this industry tell its amazing story of safety and security to legislators, school administrators and parents across America.

This will help to create awareness of the importance of school buses and ensure that additional funding becomes available to help this industry.

What’s being done at the federal level to help school bus operators with their funding challenges?

As you know, the FTA [Federal Transit Administration] has billions of dollars a year in subsidies available, and when you look at the role that the school bus plays and its safety record, you would certainly think it would qualify as a vehicle or industry that would be worthy of federal support.

What’s the greatest challenge facing the industry right now?

I’m not sure there’s any one great challenge; I think there are a number of challenges. Certainly, the increase in fuel prices and bus prices, balanced against our customers’ desires to provide excellent service to parents and children while operating under a tight budget, is a huge challenge for our customers.

Just as they have to reduce idle time to improve fuel economy or adjust their overall routing strategies to improve productivity as we discussed earlier, we’ve got to make those same improvements as an OEM. When fewer yellow buses are on the road or fewer children are riding a school bus to school, nobody wins. We are committed to finding solutions that allow our customers and dealers to win well into the future. Certainly, additional funding for school buses is part of the solution as well, whether it is at the state or federal level. Funding is required to not only purchase buses but also for our customers to maintain, safely operate and provide service. Conversely, any unfunded mandates, no matter how well intentioned, do not serve the industry well. We continually fight against these.

Our customers are also faced with the challenge of staying current with technology changes. Think about engines, braking, vehicle emissions and multiplexing. Multiplexing is great for diagnostics. For example, we now have 40 percent fewer wires in our instrument panel thanks to multiplexing. What used to take two hours to diagnose can now be done in 10 minutes, provided technicians are current in how to diagnose these systems. We offer workshops throughout the year to our customers so they can enjoy the benefits of multiplexing.

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