Industry Spotlight: Diesel Engine Remanufacturing In America

Manufacturing or rather Re-Manufacturing is alive and well in the heartland of America. Two companies are doing great things in the diesel engine remanufacturing industry: Capital Reman Exchange and CNH Industrial.

Diesel engine remanufacturing in its truest form is the process of recovering used engine components and machining them to better than new form as per original engine manufacturer guidelines. Sometimes remanufactured parts surpass brand new components due to engineering upgrades, reduced prices and a more competitive warranty. Remanufacturing simply does not repair or rebuild a used component from a point of failure but rather build up a core part to "better than new" standards. All parts are then tested to make sure they meet or exceed OEM specifications so that the product is top notch for the customer upon delivery.

According to the Six Leading Remanufacturing Associations the definition of Remanufactring is thus:

"Remanufacturing is a standardized industrial process by which cores are returned to same-as-new, or better, condition and performance. The process is in line with specific technical specifications, including engineering, quality and testing standards. The process yields fully warranted products. An industrial process is an established process, which is fully documented, and capable to fulfill the requirements established by the remanufacturer."

Diesel Remanufacturing Lifecycle Using Caterpillar Inc. as Example

Remanufacturing Industry Forecast

Automotive and diesel parts remanufacturing is expected to see steady growth up until the year 2024 according to market research firm Persistence Market Research. The market is projected to reach $139.8 billion by the year 2020. The firm concluded demand is highest when consumer spending is down worldwide. The remanufacturing industry is inversely tied to the economy as a whole. When customer spending is low they tend to look for cheaper alternatives to new parts. The most ample opportunity for growth lies with in price sensitive Asian markets such as India, China and the Middle East with expected growth to be about a 25.2% compounded annual growth rate. Currently the United States is the largest market for remanufactured diesel parts and engines.

The major drivers of the remanufactured parts and engines market are:

1. Increased demand from price conscience consumers in 2nd and 3rd world markets where older equipment is in dire need of overhauls
2. Concerns about leaving a carbon footprint with new manufacturing endeavors
3. Environmental concerns regarding the dumping/removal of old automotive parts
4. Increased regulation by the EPA making newer engines more expensive to maintain
5. Increasing use of remanufactured transmissions in electric and hybrid vehicles

The major challenges of the remanufactured parts and engines market are:

1. A narrowing price gap between remanufactured parts and aftermarket part suppliers from overseas
2. Competition from local repair shops
3. Extended vehicle/equipment warranties from OEMs

The major companies involved in global automotive and diesel engine remanufacturing are Caterpillar Inc., Detroit Diesel Corporation, Diesel Reman Machine, Diesel Power and Machine, Jasper Engines, Marshall Engines, Power Engineering Corporation, ATC Drivetrain, Capital Reman Exchange, ATC Drivetrain, Cardone Industries, Reviva, Robert Bosch, SRC and Standard Motor Products Inc.

Rethinking an Old Process: Capital Reman Exchange

Worker at Capital Reman working on a Camshaft.

Capital Reman Exchange was born in 2014 as a new venture between two partners with diverse backgrounds outside of the heavy duty diesel manufacturing industry. A large remanufacturing company in the Denver area shut its doors after 42 years of business. Brian Byrne and Brian Pfister saw an opportunity to fulfill a need in the remanufacturing industry in Rock Mountain Region and jumped in feet first. The partners have a Commercial Banking and Real Estate background which posed some unique challenges at first. However, having a fresh approach to the very old process of diesel engine remanufacturing has been more of an asset than a hindrance. The company has more than tripled in size in just two years and specializes in camshafts, crankshafts, cylinder heads, blocks, connecting rods, rocker assemblies and full engine rebuilds. Everything is done in house using state of the art precision machinery.

Their approach to success has been one of leveraging powerful business analytics data. All departments are managed via business intelligence software which allows top level managers to see in real time the “health” of their respective departments. Being able to make smart business decisions regarding, Quality Control, Parts Ordering, Vendor Management, Inventory Stock, Daily Consumables, Production Schedules, Engine Specs, Shipping, Lead Management, Marketing and Cash Flow all help give the company an edge over their competition. Everything is tracked and charted for analysis. The business remanufactures roughly 25 heavy duty diesel engines per month and have it all down to a very precise science. Mr. Pfister stated, “The difference between hitting that shipping deadline or not could be as small as the Cylinder Head Department missing 1 head bolt to finish the job. Inventory management is key to this business.” On a large production scale, many companies will struggle to remanufacture a custom engine in less than 30 days. The vast majority of customers (Truck Drivers, Mining Operations, Farmers, Contractors) can't wait  a month to get back to work. Every day down is lost revenue. Through various efficiency improvements Capital Reman has gotten that production time down to 2 weeks depending on volume. At any given time 5-6 engines are in the production queue and consequently 5-6 engines ship per week. One engine in for every one that goes out.

Capital Reman employee checks a diesel cylinder head

The company continues to grow at an alarming pace. The organization added an additional 10,000 sq. ft of manufacturing space last year and is in the process of acquiring another 4,000 sq ft of core storage space. Mr. Byrne stated, “We are bursting at the seams here at our current location. We didn’t expect the growth to come so quickly so soon however we are very dialed in as far as our marketing goes. So far it has been a tremendous success. We initially expected to fulfill the heavy duty diesel market here in Denver and the surrounding area but it turned out that we have organically grown all over the country and really all over the world. We have done business in New Zealand, Russia, Brazil and the Caribbean to name a few.” However, the owners are cognizant of growing too big too quickly. The company motto is "Safety. Quality. Customer. Company" Nothing gets done with out firstly putting out a quality product.

Recently, the Capital Reman has been experimenting with the idea of building long-block engines for stock based upon the most popular engines configurations on the market. The goal is to have hundreds of remanufactured drop engines ready to be shipped at a moments notice. Needless to say the organization has big plans for the its immediate future. In addition to building stock engines, Capital Reman Exchange expects to launch a new aftermarket parts division in early 2017. The new brand, containing 15,000+ SKUs, will focus on selling a wide range of smaller products to meet the requirements of diesel owners who have minor engine needs. “We have essentially streamlined a very artisan focused trade and made it accessible to the masses without sacrificing the quality. The sky is really the limit of what we can do here.", stated Mr. Pfister.

The Heavy Duty Diesel Remanufacturing Vertical is a very old industry by trade. The market is made up of many small machine shops throughout the country; most of which are 30 to 100 years old. Hardly, any new machine shops have opened up in the past 20 years in America. Every small town in the country has a diesel repair shop that can rebuild an engine but they all will have to purchase parts from the dealer at a premium; often times 4x-5x the price of a remanufactured part. Mr. Pfister said, “Some machine shops will just do camshafts or just build cylinder heads. What Capital Reman is doing is bringing all specialties under one roof and using 21st Century technologies to improve upon very old manual techniques.” Many of these old machine shops are closing because the younger generation doesn’t want to continue the family business. Remanufacturing is not a glamorous business and many young people choose to enter less demanding fields of work. As these businesses dissolve it leaves a void for this type of much needed work. The true shame of losing these types of companies is that the collective knowledge of 40 years or more remanufacturing craftsmanship is also lost. Many techniques and processes are written down on notecards or are simply in the heads of master machinists. Capital Reman has snatched up some quality veteran talent along the way but also has the means and desire to pursue strategic joint ventures with existing established partners looking to leave the industry.

"There will always be a need for remanufacturing as the process is a cheaper alternative to brand new engines and parts. Especially in the developing world where equipment is older, the demand is high, yet the customers are still very price conscience." said, Mr. Byrne. Capital Reman plans to build a brand new facility in the coming year that will meet the needs of the company for generations to come as well as inject fresh capital to continue to upgrade equipment.

Modern Remanufacturing at the OEM: Case New Holland

Inside CNH Industrial Crankshaft Dept.

CNH Industrial is a thriving remanufacturing facility located in Springfield, Missouri. The new company was founded in 2009 when Case New Holland began a joint venture with Springfield Remanufacturing Corporation (SRC). The organization has grown from 9 employees to about 250 and has spent roughly $11 million on capital upgrades to the machinery and the in-house facility. The manufacturing plant is 260,000 sq-ft on the outskirts of Springfield which is built using state of the art machinery to offer engines, components, drivetrains, hydraulics and fuel systems. The company offers a product line consisting of 4,000 items for Case and New Holland; up from 1,500 when the corporation began.

CNH Industrial boasts an impressive setup with the injector and fuel components departments that, upon initial inspection, rival that of operating rooms in hospitals. All fuel shop components are remanufactured in a soundproof room that is airtight as to not allow contamination by even the most minute airborne particles. All technicians wear sterilized gowns, masks and shoe protectors to keep out unwarranted dirt and debris. Injectors are highly mechanized electronic components that release a calculated amount of fuel at extremely fast intervals; opening and closing every 1.6 to 6 milliseconds. Injectors are directly tied in with the engine RPM and are regulated by the on-board computer (ECM) on newer electronic engines. On average an injector will open and close roughly 186,000 times per hour to release fuel into the engine to ignite compression. CNH Industrial rebuilds these delicate components in a $2 million dollar 1,200 sq-ft air-locked room which has been certified as a Class 6 Clean Room. The facility also includes a 500 sq-ft area for teardown and testing of fuel injection mechanisms. Dirt and debris are one of the biggest destroyers of an engine. Debris can clog up an injector or bearing and the whole engine component can fail. A piece of debris a thick as fishing line can ruin an engine. The clean room facility at CNH Industrial has the ability to filter particles a small as 1 micron. A human hair for example is about 70 microns. This gives you an idea of how precise fuel system manufacturing truly is.

CNH employee showcases the facility's capabilities.

The room is also climate controlled. Temperature, humidity and air flow all remain at consistent levels. The fuel room boasts 8 state of the art particulate filters to clean the air circulating at 4,800 cubic feet per minute while a blower system replaces the air in the room every 2 minutes. The room features two separate entrances guarded by a mag locks to control personnel access. The two step interlock system then decontaminates workers and material upon entering or exiting the clean room. This level of precision, often found when manufacturing computer microchips, is also present in automotive and diesel engine remanufacturing.

In addition to the fuel shop the CNH Industrial facility also contains a state of the art brand new hydraulics complex. The hydraulics division specializes in the remanufacturing of cylinders, pumps and valves. The $4 million dollar investment went fully online in 2015. Like Capital Reman, CNH Industrial facility primarily specializes in the hard internal components of the engine such as crankshafts and cylinder heads. The advanced remanufacturing and machining capabilities have to be technologically sound as this company is the primary diesel engine remanufacturing arm for Case/New Holland.

Springfield Remanufacturing Corporation is an employee own company with 8 subsidiaries including: SRC Automotive, SRC Electrical, SRC Lexington, SRC Logistics, New Stream Enterprises, CIONA, Great Game Business and Global Recovery Corp.

Whether remanufacturing engine components for an independent facility or for the OEM all levels of precision, analytics and technique have to be correct. There is very little room for error and only the top companies end up in business for very long. Only time will tell what the future may hold for the remanufacturing industry as a whole but things look bright for both Capital Reman Exchange and CNH Industrial as these two organizations set out to take manufacturing into the 21st century and beyond.

Sources:

1. Cramer, Brad. "Renewed at CNH Industrial Reman." Compact Equipment. N.p., 13 Jan. 2015. Web. 14 Dec. 2016.
2. Rapp, Raney. "Case IH Partnership Spurs Plant Growth." Farm Talk Newspaper. N.p., 06 Dec. 2016. Web. 14 Dec. 2016.
3. Springfield Remanufacturing Corporation: https://srcreman.com/about.php
4. Automotive Parts Remanufacturing Market Trends." Automotive Parts Remanufacturing Market Trends. Global Industry Analysis, Inc., Jan. 2015. Web. 14 Dec. 2016.
5. Automotive Parts Remanufacturing Market: Global Industry Analysis and Forecast 2016 - 2024." Global Industry Analysis and Forecast 2016 - 2024. Persistence Market Research, Feb. 2017. Web. 14 Dec. 2016.
6. Capital Reman Exchange: http://capitalremanexchange.com/
7. Remanufacturing Associations Agree on International Industry Definition." Remanufacturing Associations Agree on International Industry Definition | Motor & Equipment Manufacturers Association. Motor & Equipment Manufacturers Association, 14 Sept. 2016. Web. 14 Dec. 2016.