A quiet comeback: Isuzu refocuses industrial engine business in North America; revamped engine lineup provides new growth opportunities

Diesel Progress North American Edition, March, 2005 by Mike Brezonick

There is a truism that asserts that perception is reality. Yet in the case of Isuzu Motors America Inc.'s industrial engine business, that adage wouldn't appear to be quite on the mark.

Despite rumors to the contrary, the Plymouth, Mich.-based operation of the PowerTrain Division of Isuzu Motors America Inc., has remained active in the North American engine business. And following about a yearlong period in which the company made a series of internal staff, process and business changes, Isuzu has refocused its activities and is now optimistically targeting significant growth in the mobile and stationary engine markets over the coming years.

"There are some things that have happened over the last few years that really explain the environment we have been in as Isuzu," said Michael Clem, who was recently promoted to the newly created position of manager, Distributor Sales Planning. "Our core business is trucks. The Asian market has been depressed, so when your core businesses suffer it puts a tremendous financial strain on an organization.

"We also had a very strong SUV division and when we entered the market we were one of two or three players in SUVs. Today, there are 47, soon to be 53. So the margins that we've been able to generate in the SUV portion of our business have been depleted.

"The industrial engine business is a major component of the truck business--basically the engines we sell, with a few exceptions, are platforms for trucks. What's transpired is that the downturn in the Asian truck market and the softening in SUVs caused us to retrench our core industries, which are engines and trucks.

"Our commitment to those industries has never wavered. And if you would look at a snapshot of where we are today, you'd see we've increased our business in Asia and the Pacific Rim. We're number one in our segment in North America and we're still number one in Japan. We effectively have Tier 3 and Tier 4 products out there today in some type of wheeled vehicle. And as OEMs look toward us for these changes in footprints, you can bet that the platform on those trucks have changed by very few millimeters. So our envelope sizes have been consistent, which helps manufacturers make the transition to the newer engines.

"Internally, we've found a business model now that works. We don't beat our own drums much, but I really think we're a quiet giant."

Yet if silence is golden, there is little doubt that as Isuzu went through its internal retrenchment, events were left to speak for themselves, which led to some inevitable--albeit incorrect--assumptions in the engine marketplace.

"There were some things that happened--or didn't happen--that caused some confusion about Isuzu in the marketplace and some doubt in the company," said John Dutcher, manager of sales and marketing. "A couple of years ago, there was an arrangement between Isuzu and Yanmar that happened in Japan. At that time, it didn't really have anything to do with North America, but people heard about it here and thought the same thing (sharing of product) was happening in North America.

"At that time, it wasn't something that was happening in North America, so we tried to dampen talk about that. We are now going to be marketing seven models with a wide variety of ratings in North America and Europe, but we weren't back then and this caused a lot of confusion."

Another source of confusion for the market was an engine supply agreement between Isuzu and a major equipment manufacturer. After several years of supplying engines on a private-label basis for compressors and other equipment, the agreement ended in 2003. Isuzu still maintains a service parts relationship with that company.

"That supply of engines caused a lot of confusion, mostly inside our distribution channel and some of that continues," Dutcher said. "The other effect it had was that during that time, we had to politely decline some other opportunities. A lot of people called us and wanted to work with us, but because of that relationship, we couldn't work with them.

"Now we're in a position where we can work with them, but there are some that aren't aware that that relationship ended. So we're going through a process of telling some people, yes, we can talk to you now, and that has also taken some time."

Added to that is the fact that what Dutcher called "the profit corrections and the people corrections" within the Isuzu organization also muddied the waters. "If people did call back, chances are a lot of the people they had been talking to before weren't here to talk to anymore," he noted. "So that was another thing that caused some confusion in the marketplace. And we're still working through it.

"But I would say just about all of that is behind us now. We have a plan, we have a direction and we're moving forward. We've got good products and we can support them through our distributors. We're very optimistic."

On the product side, there would appear to be grounds for optimism, as the company, armed in part with new Isuzu-branded engines built by Yanmar, is offering the most extensive line of liquid-cooled engines in its history, covering an overall range of 4 to 475 hp.