Article

Incentives To Invest In Safety

A group of manufacturers and their allies are searching for a new path toward highway safety improvements.

April 2008, TruckingInfo.com - Feature

by Oliver Patton, Washington Editor - Also by this author

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A number of recent safety technologies can prevent accidents and save lives, but they are showing up on few trucks. Trucking companies hold back for a number of reasons, but high on the list is the need to see a return on investment in two years or less - it's simply a reality of a low-margin business.

Now a group of manufacturers and their allies are pushing for a way to alter the business equation so fleets will be more likely to take the leap. They are trying to convince Congress to grant a tax incentive to truck buyers who specify these kinds of technologies. That in itself is not a new idea, but this time the argument has an interesting twist.

"Part of the idea of this bill is to move the debate on safety beyond the traditional parameters of either letting the market decide and not having government intervention, or having government intervention in the form of a mandated rulemaking," says Ana Meuwissen, senior policy advisor with the Washington, D.C., law firm Nelson Mullins. Meuwissen used to be the chief lobbyist for the Motor and Equipment Manufacturers Association.

She described this approach as a path in the middle: "A progressive way of looking at safety that frankly was a path forward that both industry and government could cooperate on."

"In our own way, we were also trying to break this logjam that exists out in the industry of looking at safety in a very black and white type of environment and finding that there is a forward path."

The precedent for this approach is the use of tax incentives to promote alternative-fueled vehicles, Meuwissen explains. The Alternative Motor Vehicle Credit provision of the 2005 Energy Policy Act provided credits for various types of vehicles, including commercial vehicle hybrids such as those from Freightliner, International and Kenworth. 

"We have caught the attention of people on the Hill," Meuwissen says.

The bill, which was introduced last year and now is before the House Ways and Means Committee, covers four technologies: collision warning and avoidance, lane departure warning, stability control and brake stroke monitoring. It gives the Federal Motor Carrier Safety Administration and the National Highway Traffic Safety Administration the authority to add safety systems to the list. 

The Commercial Motor Vehicle Advanced Safety Technology Act (H.R. 3820) would give a corporate income tax credit equal to 50 percent of the cost of a qualified safety system, up to $1,500. The maximum credit for each vehicle would be $3,500, and the fleet would be limited to a benefit of $350,000 per year. The benefit would apply to school, intercity and local buses as well as trucks weighing more than 26,000 pounds. It would start when the bill is signed into law; there is no provision for retroactive benefits. The measure would expire at the end of 2012.

Under the proposal, the manufacturer would have to certify that the system is appropriate for the vehicle and will work if it is properly installed. If the system is retrofitted, the installer will have to certify that it works.

MEMA and its affiliate, the Heavy Duty Manufacturers Association, worked with Rep. Mike Thompson, D-Calif., to draft and introduce the measure. It has 13 co-sponsors: Dave Camp, R-Mich.; Peter DeFazio, D-Ore.; Charles Gonzalez, D-Texas; Steven LaTourette, R-Ohio; Sander Levin, D-Mich.; Ron Lewis, R-Ky.; Daniel Lipinski, D-Ill.; Sue Myrick; R-N.C.; Mike Rogers, R-Mich.; Heath Shuler, D-N.C.; Betty Sutton, D-Ohio; Ellen Tauscher, D-CA; and Fred Upton, R-Mich. 

A number of industry groups also are on board, including the Commercial Vehicle Safety Alliance (representing the safety enforcement community), the American Trucking Associations, the American Bus Association and the United Motorcoach Association. 

"We're actively lobbying Congress on behalf of this bill and the safety technology it will bring to the marketplace," says Tim Kraus, president of HDMA.

This sort of incentive typically is a difficult thing to achieve, in part because the accounting system on Capitol Hill requires that the money that is lost to the treasury through the tax break must be found elsewhere. That sum is not yet known: The bill has not yet been "scored" for its cost in terms of lost tax revenues. 

Another difficulty is that this is an election year, which can be distracting to the legislative process. It is possible, however, that Congress will consider a second economic stimulus package this year, says Catherine Boland, MEMA's director of government affairs. Such a bill could become the vehicle for this sort of measure

"Members of Congress are going to want to take something home to their districts that they have done, particularly if they represent an area where there have been fatal heavy-duty accidents," she says.

But if it doesn't happen this year, then the bill to reauthorize the federal highway program in 2009 would be an ideal vehicle, Boland says. "Right now, our main focus is on getting as much congressional support as possible."

That effort began last year when HDMA hosted a ride-and-drive exhibition of these systems for congressional representatives and their staff in Washington, D.C.

As they look for that support, MEMA and its allies will have to answer the question, why not simply have the National Highway Traffic Safety Administration write a rule that requires the technology? 

The manufacturers that make these systems do not want to go that route. For one thing, the regulatory process is uncertain and takes years to complete, while a tax incentive might be passed relatively quickly.

"I think congressional action on something like this would be a little bit quicker than regulatory action," says HDMA's Kraus.

Stephen Campbell, executive director of CVSA, offers this perspective from the enforcement side: "We're trying to speed up the process. It's perfectly legitimate to suggest that if the technology works, why not mandate it. Do it as quickly as possible. [But] meantime, people are dying on the nation's highways, and if we can do something 30 days faster than the rulemaking process we need to do it."

From the suppliers' perspective, the rulemaking approach is also flawed because it puts them in a bad position with their customers. "Mandates would turn our friends and customers into enemies, probably," says Bill Patrolia, director of North American Truck Sales for Iteris, which makes a lane departure warning system.

"Coming to Washington would not be our first choice," agrees Ron Parker, chairman, president and CEO of MGM Brakes, which has a brake stroke monitoring system. "Working out of the market independently would be our first choice, but frankly, it's not working. It's working in [the transit bus industry], but as far as heavy-duty truck and trailer, it's not working. And I'm doubtful that without some help, speaking on the brake side of it, it's going to work."

Parker cites a 2005 study by the Federal Motor Carrier Safety Administration, "Factors in Decisions to Make, Use and Purchase On-Board Safety Technologies," which found that the main factor in the purchase decision is that the carrier can realize a payback on the investment with 24 months, and preferably within 12 to 18 months.

The cost of these systems makes that a bit of a stretch for many fleets. 

But the only way to bring the cost down is to sell more systems - hence the idea of a tax incentive as the middle path Meuwissen describes. "There is a progressive way of looking at safety and a more innovative way of looking how policy can impact safety out in the market, which is to have all these manufacturers working together with government and regulators on a consensus-based approach," she says.

There is considerable government interest in promoting these technologies, and in the idea of incentives.

FMCSA Administrator John Hill has long held that technology could provide a breakthrough to lower the rate of truck accidents, and he has been supportive of the idea of using incentives to promote the technology. In addition, the agency has been hosting a series of webinars in which fleets that use these systems talk about their experience and answer questions. And it maintains on its website a section with background information on the systems and their suppliers (www.fmcsa.dot.gov; click on Webinars and Safety Technologies).

The National Transportation Safety Board also is promoting the idea. It has adaptive cruise control and collision avoidance on its list of "Most Wanted" safety improvements.

Some progressive fleets have embraced these systems, and benefitted both in safety and on the bottom line. At an FMCSA webinar last fall, representatives of Maverick Transportation and Cargo Transporters said that the Iteris lane departure warning system has been a success for them.

As the name suggests, the system alerts the driver when he's accidentally crossing out of his lane (it does not go off at speeds less than 35 mph, or when the turn signal is activated.) A video camera attached to the windshield watches the road and feeds the information to a computer that interprets position, velocity and heading to determine if the truck is where it belongs.

At the time of the webinar, Maverick had the system on 1,200 trucks and was adding more, and Cargo Transporters had it on 90 percent of its fleet. Both reported that driver reaction has been positive - the device does not intrude except when there is problem and it requires no action other than a correction. 

They said the payoff on the devices, which cost between $750 and $1,450 per unit, is hard to quantify, because it can only be described as the absence of an accident that may have happened. But they were convinced of the benefit.

Jerry Waddell of Cargo Transporters said his fleet has experienced only two runoff accidents since the system was installed. In one instance, he said, the device probably saved his driver's life because the truck was drifting onto the shoulder where another truck was parked.

Waddell said it is astounding to him that anyone would question the investment. "Ask yourself how long it would take to pay for a $100,000 loss when your margin is 10 cents a mile."

The systems are available as factory options or for retrofit. Volvo Trucks North America has a stability control system as standard, non-deletable equipment on all its highway tractors. Volvo worked with Bendix Commercial Vehicle Systems to build the Volvo Enhanced Stability Technology system. Volvo is investigating the other three technologies but they are not yet available as factory options, according to Volvo truck product manager Frank A. Bio. 

Among the suppliers who are active in the campaign to win the tax incentive are Bendix Commercial Vehicle Systems, Eaton Corp., Iteris, Meritor Wabco, and MGM Brakes.

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