MARINE OIL TECHNOLOGY North American Marketing

1
MARINE OIL TECHNOLOGYNorth American Marketing
2
Presentation Preview

• Trucking (Class 6 8 Trucks)
• Trucks, Aftermarket, and Service
• Merchant Marine (large ships, tugs, etc.)
• This presentation will discuss American trucking
  in-depth and take a look at the commercial marine
  market.

3
Trucking Market Size (U.S.)Vehicles in
Operation 2005 Sales

• Approximately 3.3 million class 8 trucks
• Another 3 million class 6-7 trucks
• Total commercial vehicles 10.5 million
• New CL8 Sales 2005 248,000 (34)
• New 6-7 Sales 2005 169,000 (23)
• NOTE Class 3 (pick-ups and vans) 23

Source RL Polk
4
CLASS 8 TRUCKS (U.S.) Vehicles In Operation (VIO)
Sales by Year

• Industry highly cyclical
• Trucks go to salvage at 10-15 years of age
• Fleets run trucks longer
• Secondary market, resale value important

5
Market Share (U.S.) 1996-2005Heavy Trucks by OEM
North American Trucking Industry is Highly
Consolidated 1996 to 2005 Model Year Represents
1.83 million trucks on road
Freightliner Group Freightliner, Sterling,
Western Star, Thomas Bus PACCAR Corporation
Peterbilt, Kenworth Other Ford (3.7), White
GMC (1.15), remaining 7 divided by 67 brands
Source RL Polk
6
Market Share (U.S.) 2005Medium Duty by OEM
North American Trucking Industry is Highly
Consolidated 1995 to 2004 Model Year Represents
1.4 million trucks on road
Hino (Toyota) Class 6-7 trucks increased market
share by 94 over 2004
Freightliner Group Freightliner, Sterling,
Western Star, Thomas Bus PACCAR Corporation
Peterbilt, Kenworth Other Nissan Diesel,
Mitsubishi Fuso, Izusu
Source RL Polk
7
Trucking (U.S.) Carrier Type Vocational
breakdown

• 90 of Class 8 trucks registered in U.S. are
• Fleet For-Hire (Swift, JB Hunt, Schneider, etc)
• Private (Safeway, Wal-Mart, Waste Mgmt, etc)
• Lease-Rental (Ryder, Rollins, Penske, etc)
• Individual (aka Owner-Operator)
• Vocational Breakdown
• 24 is General Freight transport
• 25 is Owner Operator transport
• 10 is Construction Related
• No other vocation represents more than 8 of the
  market

8
Why Class 6-8?
9
Commercial VehiclesOil Filter Demand 2005

• The U.S. demand for engine oil filters, class 3-8
  trucks, is 36.7 million units
• This is a 1.2 billion market
• 57 of demand for truck filters is Class 8

Source RL Polk
10
Commercial Vehicles 2005Engine Lubrication Oil
Demand

• Annual U.S. demand for diesel engine lubrication
  oil is 285 million gallons
• This is a 1.9 billion market
• 60 of demand for engine oil is Class 8

Source RL Polk
11
Class 8 Trucks 2005 DemandEngine Oil Filter
Market (U.S.)

• Oil Filters
• 57 of market
• 21 million filters used annually
• 684 million industry segment
• Lubrication Oil
• 60 of market
• 171 million gallons of engine lubrication oil
• 1.14 billion market
• Price of base mineral oil stocks rises with crude
  oil prices

12
Breaking into the medium and heavy duty truck
market in U.S.
Aftermarket Parts Sales Parts sold and installed
after delivery of new truck New Truck Parts
Sales Parts sold when truck is ordered from
OEM OEM Data Book lists parts available to spec
truck (i.e. Eaton or Rockwell transmission)
13
U.S. Class 6-8 Aftermarket Parts Market 2005
Aftermarket parts sales for Class 6-8 trucks in
the U.S. is a 14.4 billion market. OEM
aftermarket parts operations, both truck and
engine, account for 51 of all parts sales.
Source MacKay Company
14
U.S. Class 8 Service Repair Market by Channel
Due to OEM warranties and fleet integrated
service operations, the total value of the
service market is difficult to quantify, but
estimated to be around 11 billion
Source Wards Automotive
15
Regional Distribution Earth Co Motors
The Earth Co Motors Network Includes 68 Retail
Outlets
16
OEM National AccountsTo be handled through MOT

• Truck/Engine OEMs
• Freightliner
• PACCAR
• Volvo
• International
• Hino
• Caterpillar
• Cummins

• National Accounts
• Federal Express
• Swift Transport
• U.S. Government
• Wal-Mart
• Waste Management
• JB Hunt
• Penske

17
U.S. Largest Fleets by Trucks Owned (2005)

• Truck Load
• Swift Transport
• 18,545 Tractors
• Schneider Carriers
• 13,654 Tractors
• JB Hunt
• 11,452 Tractors
• Werner Transport
• 10,125 Tractors
• Landstar Carriers
• 8,291 Tractors

• Less Than Truckload
• United Parcel Service
• 10,407 tractors
• 75,774 total trucks
• Federal Express (combined)
• 6,845 tractors
• 56,533 total trucks
• DHL Worldwide
• 612 tractors
• 20,323 total trucks

18
Summary of Market ForcesWhy buy the MOT/COT Oil
Processor?
19
U.S. Market Forces Labor Costs

• Technicians
• Truck Diesel Engine Technician shortage
  currently about 38,000 positions
• Technician shortage expected to reach 100,000 by
  2012
• Well-qualified technicians earning 100,000/year
• Source U.S. Bureau of Labor Statistics

• Drivers
• Long-haul driver shortage estimated at 20,000 in
  2005
• Shortage expected to exceed 100,000 by 2014
• Average wages 60,000 in 2005, up 8 from 2004
• Average wages expected to reach 85,000 by 2010
• Source Randall-Reilly Publishing

20
U.S. Market Forces 2007 EPA

• In 1999 U.S. Environmental Protection Agency
  mandated a phased-in 95 reduction of diesel
  engine emissions by 2010.
• Original EPA estimates for 2007 standards were
  2,000 per engine. Actual costs have caused
  truck prices to rise 5,000 to 8,000 each.
• Low sulfer diesel expected to cost 0.04 to 0.07
  more per gallon
• Engine exhaust recirculation at higher
  temperature to burn off more soot, raises engine
  operating temperature
• Low sulfer fuel is less lubricating to engine,
  will increase lubricating oil demands
• Fleet engineers fear up to 2 loss in fuel
  economy, increased maintenance costs, higher
  truck life-cycle costs

21
2007 EPA Engines Cummins

• Cummins Engine OEM introduced its 2007 EPA
  compliant particulate filter at the Mid-America
  Truck Show in March.
• Note size of particulate filter and demand on
  space and weight

22
Truck Life-Cycle Costs Increasing

• Schneider CEO Chris Lofgren 2007 engines will
  increase operating costs 18,000 per unit over
  6-year cycle.
• Schneider runs 11,000 Class 8 tractors.
• Schneider is one of Freightliners biggest
  customers
• 18,000 divided by 600,000 miles 0.03
• Fleet cost per mile (cpm) averages 0.60, so 5
  increase

Source Randall Publishing
23
Inside the mind of an American fleet buyer.

• National Truck Equipment Association Advises
  these major categories of life-cycle costs
• Initial Purchase Price (original equipment specs)
• Operating Maintenance Costs
• Vehicle Productivity
• Resale Value

MOT/COTs challenge is to prove that specing new
trucks with the Oil Processor (or adding in the
aftermarket) will reduce operating and
maintenance costs, increase productive through
less down time, and substantially increase resale
value.
24
CHALLENGES AHEAD

• Make sure chip technology keeps up with fuel
  technology Testing for optimal design for
  low-sulfer diesel and biodiesel
• Defend patent claims as broadly as possible for
  computer chip technology in oil-processing
• Penetrate OEM channels
• Develop independent distribution network

25
Number of competitive evaporation chamber units
and substitute filter products is on the rise

• The 300 rise in crude oil prices since 2002 has
  caused renewed interest bypass filter technology.

The Filtration Solutions Worldwide truck/trailer
advertisement at Mid-America Truck Show in
Louisville, Kentucky March 2005
26
Commercial Marine Vessels
27
U.S. Merchant Marine Fleets
Statistics less available than trucking
industry. Many ships owned by U.S. companies are
flagged in other nations. Most engine OEMs for
trucks sell for ocean going propulsion.
28
U.S. Cruise Ship Market
U.S. cruises by Cruise Line, 2003-2005.
29
Great Lakes Vessel Market

• Great Lakes Vessels (Tug, Tow, Barges)

31,449 vessels on Great Lakes 70 of vessels
owned by fleets of 100 units
30
U.S. Inland Coastal Vessels

• Estimated 33,000 vessels (tugs, barge, etc) in
  service on U.S. inland and coastal waters systems
  (excl. Great Lakes)
• Inland and coastal water way commercial traffic
  is 900 million tons of annual cargo
• Experiencing renewed growth due to increased
  intermodal freight in U.S.

31
QuestionsDiscussion