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

Q&A: ‘Pre-Buy’ Activity Boosts School Bus Sales in 2006

Thomas Built Buses President and CEO John O’Leary says the manufacturing sector is seeing increased sales due to customers increasing their bus purchasing before the EPA’s stricter emissions standards take effect in 2007.

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Are you having any problems getting components on time?
We had a very difficult time getting wiring harnesses throughout the summer for our FS-65 and transit products, although that is now behind us. Despite record truck demand recently, the supply base seems to be doing a much better job of meeting OEM demand than it did during previous market booms.

A lot of discussion in the industry has focused on the incredible number of options available to school bus buyers. Where does Thomas stand in this controversy?
There is a simple axiom in manufacturing, which is that complexity adds cost and inhibits quality. Sure, we can do anything the customer wants, but there is a cost associated with that. I know customers hate to see price increases every year, yet I’m not sure people realize how much complexity across the industry has increased. If you walk down one of our production lines, you can see how little commonality there is among buses from different states.

The specs vary considerably from state to state, and they rarely get simpler over time. A transportation system dedicated to the delivery of schoolchildren is very expensive, so much so that the U.S. and Canada are the only nations that choose to take this approach on a widespread basis. The more expensive it gets, the more tempting it is for districts and politicians to throw this responsibility back at parents. North American student transportation as a whole needs to remain affordable or its very existence will be at risk.

I am not advocating all buses be exactly the same, but in some areas such as lights, traffic control and emergency equipment, there is a lot of potential for trimming the number of options down to a few “best” solutions.

In what ways can OEMs help their customers write better specifications for their bus procurements?
The OEMs all have the luxury of seeing what specifications are currently used around North America, and of those which ones are more prevalent and why. So if a customer has an end result he or she is trying to achieve, such as better warning light visibility, more maneuverability or greater fuel economy, we and our dealers can typically help them achieve that using an existing option, as opposed to the customer coming up with their own solution, which requires us to create a new option.

How is the Type A market? Are you seeing a surge in sales of Minotours to Head Starts?
Despite the Type A market slowing in 2006, we still believe in its growth potential, so from that perspective it is very attractive to us. We ran our Minotour plant at maximum capacity for most of this year, and we totally dominate the yellow bus piece of that market. However, we have not done as well selling into the non-traditional white bus piece of that market. That will change shortly.

Is Thomas planning any major redesigns of its products?
The feedback we get from industry people is that we currently have best-of-class products with the C2, HDX and Minotour, so we have no major redesigns scheduled for them at this time. Our forward-control Type D, the EF, is the sales leader in its market niche but will get a major facelift prior to the next EPA engine change in 2010.

Later this fall we will be making a major investment of roughly $12 million in our production facilities. Once the FS-65 is retired in October, we will renovate Plant 1 substantially. The Type D body will get a new, much more efficient layout, and we will move Minotour production into that building as well. We will transform all of our production facilities to the same world-class level as the C2 plant.

What’s the biggest challenge facing bus manufacturers these days?
Trying to differentiate yourself from your competitors. When a district makes a purchasing decision based purely on low bid, it takes out of the equation things that we as OEMs assume the customer values, such as driver comfort, visibility, turning radius, technology, innovation, fuel economy and broader issues such as dealer service and support, resale value, whether the company will stand behind the product, or even if the company will still be around in 10 years to support the product.

As most of your readers well know, not all school buses are the same, and yet many purchasing departments acquire them the same way they do pencils or light bulbs.

Personally, what’s your biggest challenge?
My biggest challenge is harnessing and sustaining the tremendous momentum we have at Thomas right now. People here who once resisted change are now leading it. We just concluded our annual dealer meeting, where we shared with them our plans for 2007, and they are more excited than I have ever seen them. My role is to ensure we keep our eye on the ball and deliver on our potential.


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