Fueling Optimism

A funny thing is happening in the race to find a fuel-efficiency solution for North America: One of the world's oldest engines is in position to become the front-runner.

Hydrogen may indeed be the ultimate fuel of the future, and hybrid-electric vehicles and ethanol grab headlines. But in the next 10 years, the diesel engine promises to be by far the most rapidly adopted alternative powertrain.

Driving its new-found popularity is a dramatic new clean-fuel mandate that kicks in Oct. 15.

That's when service stations in the U.S. are required to sell ultra-low sulfur diesel fuel. It's an environmental initiative considered as significant as the introduction of unleaded gasoline and catalytic converters.

Coupled with advanced emissions control technology, the new fuel will make possible a flurry of new high-volume light-duty engine programs from Detroit and foreign-owned auto makers.

Even Honda Motor Co. Ltd., better known as a seller of HEVs, is jumping on the diesel bandwagon, joining the likes of DaimlerChrysler AG and Volkswagen AG.

A J.D. Power and Associates study released in April predicts U.S. demand for diesel-powered vehicles will nearly triple during the next 10 years, from 3.2% in 2005 to more than 10% by 2015. Some supplier projections are even more aggressive, predicting 10% market share by 2010 and 15% by 2015.

That means diesels will far outpace HEVs, despite their high visibility. J.D. Power predicts HEVs only will have a 4.9% share of the U.S. market by 2013, up from 1.3% last year. Anthony Pratt, senior manager-global powertrain forecasting at J.D. Power, says his company does not have a formal HEV forecast for 2015, but says current scenarios do not suggest HEV share will rise much above 5%.

The reasons are simple: Diesels deliver 20% to 40% better fuel economy in all kinds of driving and, unlike ethanol or E85 (a 15% gas/85% ethanol mix), diesel fuel is readily available. The U.S. Department of Energy says there were 169,000 gas stations in the U.S. in 2005, with only 761 offering E85. Conversely, 70,980 stations, or about 42%, offer diesel.

Diesels also have gobs of low-end torque, and that makes them an ideal alternative powertrain for light-duty pickups, which are among the highest-volume vehicles in the world. Last year, General Motors Corp., Ford Motor Co. and Chrysler Group built 2,190,889 light pickups (Chevy Silverado, GMC Sierra; Ford F-Series and Dodge Ram) for a 13% share of the U.S. market, according to Ward's data.

“The market really ripe for the picking is the kind of (Ford) F-150 (light-duty pickup) and (fullsize) SUV markets, where we don't really see any diesels at the moment,” says Julian Dench, Siemens VDO Automotive vice president-North American diesel powertrain systems.

For years, GM, Ford and Chrysler have offered diesels for medium-duty versions of their pickups, but now word is leaking out they also have new engines in the works for their much higher volume light-duty pickups.

In late August — a day after Ford announced a new ultra clean-burning medium-duty diesel — GM announced it would introduce a new-generation V-8 diesel aimed at the light-duty market sometime after 2009.

The new engine, targeted at improving the fuel economy of a fullsize light-duty pickup 25%, will be a premium V-8 with class-leading torque, power and refinement. It will have dual-overhead cams, 4 valves per cylinder, common-rail fuel delivery and a compacted graphite iron block.

Fullsize pickup sales — crucial to Detroit auto maker profits — have fallen as gasoline prices stubbornly hover near $3 per gallon. The first auto maker to market a product that affords the fuel efficiency of diesel technology will capture the industry's holy grail, suggests Global Insight analyst John Wolkonowicz.

“We will see a ‘dieselization’ going into the pickup truck (and) heavy-SUV market,” says John Moulton, Robert Bosch Corp. president-powetrain division.

“It will give consumers an option for a proven technology” that presents better fuel economy with a greater fun-to-drive factor, Moulton says. “All the North American OEMs are working on programs” for light-duty diesel pickups and SUVs to launch by the end of the decade, Moulton says.

Diesel fuel has about 10% more energy compared with gasoline. Add that to the more efficient nature of the diesel engine's compression-ignition design, and diesel vehicles generally achieve about 30% better fuel economy than comparable gasoline powerplants.

This inherent efficiency already has made diesels more popular than gasoline engines in Western Europe, and that trend will continue to expand worldwide, J.D. Power says.

Global market share for diesel-powered light vehicles is predicted to rise from 18% last year to 26% by the middle of the next decade.

Diesels vs. HEVs

Even though auto makers today are investing heavily in HEV technology and GM and Chrysler will offer HEV versions of their fullsize SUVs and pickups, few think they have the potential to match diesels in popularity.

Modern technologies such as direct fuel injection (DI), variable-geometry turbochargers and other advances also have allowed diesels to become nearly as clean and refined as conventional gasoline engines.

“We're very optimistic (about the future of diesels),” says Margo Oge, U.S. Environmental Protection Agency director-Office of Transportation and Air Quality. “This decade will be known for the transformation of the diesel engine, similar to how gasoline engines were revolutionized in the 1970s.”

This is not the first time high fuel prices have sparked interest in diesels. Their popularity took off in 1978, peaking in 1981, when 520,788 new diesel vehicles were sold for a 6.1% share of the market, according to Ward's data.

Some industry executives predicted diesel's share would rise far higher, but the first passenger-car diesel offered by GM was a hastily converted gasoline-burning V-8. It quickly developed embarrassing quality and durability problems that tarnished the reputation of all diesels and scared away customers.

Interest waned further when fuel prices headed downward. By 1989, only 12,714 diesel vehicles were sold, accounting for less than 1% of the U.S. market.

The coming resurgence would not be possible without the introduction of ultra-low sulfur diesel fuel (ULSD).

Available in Europe for years, ULSD prevents clogging of exhaust aftertreatment systems, such as soot-reducing particulate-matter filters and enables new diesel vehicles to meet the EPA's stringent new Tier 2 Bin 5 emissions regulations that take effect Jan. 1.

The new fuel contains less than 15 parts-per-million of sulfur vs. 500 ppm in the low-sulfur diesel currently found at most U.S. pumps.

However, experts are quick to warn that HEVs, along with sophisticated gasoline powertrains, represent formidable competition to diesel engines in the immediate future. And not everyone — most notably Toyota Motor Corp. — is convinced diesels are a slam-dunk.

“In the light-duty sector, we don't see (diesels as viable),” says Dave Hermance, executive engineer-Advanced Technology Vehicles, Toyota Technical Center U.S.A. Inc.

However, Hermance says Toyota is “very market responsive,” and if the Big Three light-duty diesels take off, the No.1 Japanese auto maker will respond. But Toyota is more interested in diesels for ¾-ton or 1-ton applications, Hermance says, noting penetration rates in those segments are quite good in the U.S.

Even so, many insiders doubt HEVs will become as popular as proponents hope.

“There's been a lot of hype in North America around hybrids, and certainly for big cities there's a place for them,” says Siemens VDO's Dench.

Siemens VDO views HEVs as more of a secondary, lower-volume technology than mainstream internal combustion engines for the next decade or so, he says. “I think we will see going forward a number of competing technologies.”

“I'm actually very positive and surprised at the speed of change and acceptance of diesels (in the U.S.) on all levels: politicians, environmentalists, customers and the media,” DaimlerChrysler AG Chairman Dieter Zetsche says.

Although DC is working on HEV and hydrogen fuel-cell technologies, diesels represent a “no compromises choice (of alternative powertrains), offering performance, fuel economy and comfort,” says Simon Godwin, DC's manager of regulatory affairs.

Despite diesel's promise, there are significant hurdles. A confusing bureaucracy of regulations and a skeptical public stand in the way of clean-diesel vehicles and widespread acceptance in the U.S.

“We're at the threshold of a boom in high-efficiency vehicles,” says Casey Selecman, manager-North American powertrain forecasts at CSM Worldwide in Northville, MI. “It's a testing of the market, (with auto makers) trying to play in a niche for diesel vehicles.”

While most HEVs, which operate at low speeds in electric-only mode, are well suited to navigating congested stop-and-go traffic in cities such as Los Angeles, the overall efficiency gains of a diesel engine likely will appeal to highway-focused drivers who regularly commute over long distances at relatively high speeds, he says.

In addition, the high-torque nature of diesels makes them perfect candidates for powering larger vehicles.

The absence of a diesel in the fullsize light-truck and SUV segments likely is due to the economics of building a new light-duty design, but once a “killer application” is made, most auto makers will follow suit, Siemens VDO's Dench says.

The catch is diesels are expensive to develop. Costs for a single new diesel engine line can be double that of a conventional gasoline engine, running upwards of $500 million to $1 billion, Selecman says.

Joint-venture development efforts have been used by auto makers in Europe to disperse the cost of diesel-engine programs, sacrificing value for the auto makers involved, as the engine usually is the proprietary core of a vehicle.

“Joint ventures could make sense if one (auto maker) had technical superiority, but it's mostly a short-term solution,” Selecman says.

Steep development costs, along with additional amounts for emissions-cleaning equipment, generally are passed on to consumers in the form of higher-priced vehicles.

This is the case with HEVs, as well, but the segment is expected to become more affordable as volumes increase and the cost of next-generation lithium-ion (Li-ion) batteries decreases. Toyota, for example, plans to double HEV sales to 1 million units by 2012 and is committed to cutting hybrid-system costs by 50% over the next five years.

The Li-ion batteries are to HEVs what exhaust aftertreatment systems are to diesels — continued efforts to reduce cost and improve both technologies is critical to the future success of their respective powertrains.

Pricing will vary by auto maker, but markups for new diesel engines also are expected to be similar to those for HEV systems, at least $2,000 to $3,000. But as electronics and emissions technologies improve, the price of diesel-powered vehicles probably will fall in an effort to stay competitive with cheaper powertrains.

“If you can work up front and clean up the engine combustion initially, that will have the biggest impact (on reducing costs) of diesel engines,” says Siemens VDO's Dench. “If you have a dirty engine and have to apply lots of aftertreatment with precious metals and exotic materials, that's really what's costing the money.”

Efforts to improve the diesel-combustion process ultimately may lead to the creation of a gasoline engine that reliably operates by homogeneous charge compression ignition. HCCI blends the efficiency of diesel-like compression ignition with the lower emissions of spark-ignited gasoline engines, thereby limiting the need for expensive aftertreatment systems.

However, due to the technology's need for highly sophisticated electronic controls, HCCI likely won't be a viable alternative powertrain for several years.

Add to that the additional expense of the new technology and required infrastructure and HCCI is but one system on a long list of competing technologies for diesels, says Allen Schaeffer, executive director of the Diesel Technology Forum.

Tapping a New Market

Supplying diesels to an almost untapped passenger-vehicle market such as the U.S. poses another challenge. Most of the models tagged for introduction have roots in an already capacity-strained Europe, where diesels are the powertrain of choice, garnering more than 50% of the regional market.

Current production capacity can handle initial small amounts of new diesels for the U.S., CSM's Selecman says. However additional capacity will be required should the U.S. market see annual demand for 500,000-plus units, about 3% of current light-vehicle sales.

This is similar to the situation with HEVs such as the Toyota Prius, which has experienced recent shortages in the U.S. due to an inadequate supply of batteries and advanced electric motors.

Emerging markets such as China and India could provide some production relief, Selecman adds, but an additional four to five engine plants would be needed to satisfy a potential 10% diesel market share in the U.S. and the resulting 1.7 million vehicles.

“U.S. auto makers will not establish domestic manufacturing capacity for diesels until there is a 100% business case,” Bosch's Moulton says. “For now, they can bridge the gap by importing.”

The Players

VW currently is the leader in the U.S. diesel passenger-car market with its line of TDI (turbo direct-injection) vehicles. DC achieved relative success when it recently launched diesel versions of its Jeep Liberty cross/utility vehicle and Mercedes E320 sedan.

DC will be the first auto maker to tackle the new U.S. regulations with its Bluetec technology, a suite of scalable diesel components and aftertreatment systems that will debut later this year on the '07 Mercedes E320 CDI Bluetec, which features DC's new 3L V-6 turbodiesel.

Meanwhile, the E320's CDI V-6 will be available this fall in the '07 M- and R-Class CUVs.

Both vehicles will do without Bluetec, relying instead only on a particulate filter to achieve legal status in 45 states. A diesel version of the larger GL-Class CUV will appear in spring.

Some 40% of VW vehicles sold globally are TDI-powered, and the technology will continue to be one of its strong points, the auto maker says. “Diesels are a long-term solution, while HEVs are only transitional,” a VW spokesman says.

Nevertheless, VW will limit its TDI offerings for '07 while it perfects its aftertreatment systems and waits for widespread availability of ULSD to meet EPA regulations.

In addition, Ford's Volvo Car Corp. recently announced plans to spend $1.36 billion over the next five years to develop more fuel-efficient vehicles, including advanced diesel powertrains.

The auto maker reportedly is looking at ways it can launch a diesel-powered passenger car in the U.S. by the end by 2010.

Until recently, most Japanese auto makers have been skittish about committing to diesel engines for the U.S., preferring to concentrate on European diesel applications and honing their expertise with gasoline engines and HEVs for North America.

However, Honda, which has seen considerable success in Europe with its 2.2L i-CTDi turbodiesel, says it is developing 4- and 6-cyl. clean diesels for introduction in the U.S. by the end of the decade.

Honda's first diesel for the U.S. will be a 2.4L unit, which, unlike European mills aimed at the U.S., reportedly will meet the EPA's new Tier 2 Bin 5 emissions standards without the need for selective catalyst reduction aftertreatment, also known as urea injection.

Applications for the new engine are unknown, but most likely it will be installed in Honda's CR-V cross/utility vehicle or Civic small car by 2009.

Despite these developments, most Japanese auto makers believe economics remain unfavorable for diesels in the U.S.

Yo Usuba, Nissan Motor Co. Ltd. senior vice president-powertrain engineering, says fuel prices ultimately hold the key, but he declines to speculate on the threshold that would make diesels more affordable to develop.

What Lies Ahead

Moving forward, clean diesel will need to balance the increased costs of new technology as it continues to evolve with greater performance and fuel economy and further reduced emissions.

To that end, turbocharger manufacturer BorgWarner Inc. is teaming up with the EPA to advance the agency's Clean Diesel Combustion technology, which focuses on reducing NOx emissions by lowering the temperature of the diesel-combustion process.

The effort promotes the development of improved turbochargers and other components to precisely control airflow and exhaust gas conditions, areas in which BorgWarner has considerable experience.

In addition, engineering firm Ricardo plc is collaborating with a global auto maker to develop an advanced diesel engine capable of meeting U.S. Super Ultra-Low Emission Vehicle (SULEV) and Tier 2 Bin 5 requirements.

The research project aims to improve diesel engine combustion so that Tier 2 Bin 5 levels can be reached without aftertreatment systems.

Bin 2 levels will be met with the addition of advanced air-management systems, 2-stage turbocharging, advanced exhaust gas recirculation and closed-loop cylinder pressure-based engine controls, the company says.

Meanwhile, ArvinMeritor Inc. and Delphi Corp. both are working on plasma-based fuel reformers, which turn liquid petroleum fuel into a hydrogen-rich gas. The gas then is injected into the engine, or the exhaust stream, to improve fuel economy and dramatically cut NOx emissions.

In the U.S., Bosch's Moulton argues DI gasoline engines will be the biggest competitor for diesel, particularly for passenger cars, where lower vehicle cost and different performance requirements (less weight, no towing) mean DI gasoline engines may be a better, less-expensive solution.

“Among those in the know, (the benefits of clean diesels) will get out pretty quickly. And as that happens, you'll start to see regulatory pressure on changing the taxation of diesels,” says John Mendel, senior vice president-automotive operations, American Honda Motor Co. Inc., referring to the importance of U.S. diesel-fuel subsidies and diesel-vehicle tax credits.

This won't cure America's addiction to oil. But it could be viewed as the first major step in a long, painful recovery.
— With Drew Winter, Bill Visnic, Alisa Priddle, Eric Mayne, Christie Schweinsberg and Roger Schreffler.

Diesel Fuel, Emissions Are Key Hurdles

Ultra-low sulfur diesel fuel allows a new generation of clean-diesel vehicles with advanced exhaust aftertreatment systems to operate on American roads.

However, the rollout of ULSD, integral to the U.S. Environmental Protection Agency's effort to reduce greenhouse-gas emissions, also ushers in a new challenge for diesel engines: burning as cleanly as gasoline engines.

Current Tier 1 federal emissions regulations place different requirements on gasoline and diesel vehicles, with diesels being allowed to emit slightly more oxides of nitrogen (NOx), a major contributor to smog and a disproportionate byproduct of diesel combustion vs. spark-ignition engines.

California, New York, Massachusetts, Vermont and New Jersey have adopted more stringent standards that group gasoline and diesel vehicles together and require slightly lower emissions of NOx, particulate matter (soot) and carbon dioxide.

New federal Tier 2 standards, which begin to take effect Jan. 1, group all vehicles together, regardless of fuel type; apply to vehicles up to a gross vehicle weight rating of 10,000 lbs. (4,536 kg), up from 8,500 lbs. (3,856 kg); and cover a 120,000-mile (193,121-km) vehicle life, up from the previous 100,000-mile (160,934-km) limit, the EPA says.

Of the 10 emissions levels — what the EPA calls bins — comprising the Tier 2 standards, Bin 5 is of the greatest concern to auto makers because its levels represent the overall average each company's fleet must meet.

Although this average allows some vehicles to pollute more than others, California's Low Emission Vehicle II standards, effective Jan. 1, 2007, require every vehicle sold to meet emissions levels equivalent to Tier 2 Bin 5.

In other words, for an '07 vehicle to be sold in California, the U.S.' largest market, it must be Bin 5-compliant.

The sticking point for diesels in the new Tier 2 regulations is oxides of nitrogen (NOx), which diesels produce in greater quantity than gasoline engines due to the higher temperatures and pressures in their combustion process.

To meet the new NOx requirements in all 50 states, most auto makers planning to bring clean diesels to the U.S. will rely on several exhaust system aftertreatment technologies, including particulate filters, oxidation catalysts and selective catalyst reduction (SCR), also known as urea injection.

Urea is an ammonia-based fluid that, when diluted with water and injected into a diesel engine's exhaust stream, helps a special catalytic converter to process NOx emissions into a harmless mix of nitrogen and water.

Although the specifics vary by auto maker, several gallons of a urea solution should last about 15,000 to 20,000 miles (24,140-32,186 km), or roughly the distance between routine engine service intervals.

“We know it (urea injection) works, but we want to make sure an infrastructure is in place,” says Margo Oge, EPA director-Office of Transportation and Air Quality.

Most proponents believe the industry will overcome the hurdle of ensuring compliance with urea usage.

“We just need a device to prevent (people) from cheating,” DaimlerChrysler AG Chairman Dieter Zetsche says.

One idea for urea compliance is a system of warning lights on the dash to indicate the set number of times the vehicle will start without urea before being immobilized.

The EPA says it will begin issuing individual rulings on urea injection systems later this year or early in 2007.

“We don't dictate technology,” Oge says of the EPA. “We're looking for (an auto maker's) game plan for a urea infrastructure and a game plan for compliance with that infrastructure.”
— Mike Sutton with Alisa Priddle