Green Business: FedEx's Hybrid-Truck Program Stalls

Why FedEx's ambitious goal of putting 30,000 hybrid vehicles on the road by 2013 has stalled.

Tim Acton rolls up to a stoplight in downtown Denver, and the diesel engine of his FedEx delivery truck purrs gently. As the light changes, a smaller, nondescript white truck in front of us guzzles to a start, belching out black smoke. "There's none of that smoke with these," Acton says, wrinkling his nose in disgust. "They're really clean, and much quieter."

I joined Acton on his delivery route this summer because his hybrid electric truck is part of the largest fleet of its kind anywhere. The vehicles get about 40% better gas mileage and emit 96% less "particulate pollution" than FedEx's regular medium-duty trucks.

Sound impressive? It's not. FedEx is nowhere near where it hoped it would be when it launched a hybrid-truck program five years ago. In 2003, the company predicted that the environmentally friendly hybrids had the "potential to replace the company's 30,000 medium-duty trucks over the next 10 years." Today, it has 172 of the trucks on the road. Something tells me FedEx isn't going to make its goal.

FedEx has good intentions and a hefty budget, but those haven't been enough. The truth is that even big, smart outfits such as FedEx need help creating new markets and adopting new technology. They need help from other companies, and despite what free marketeers like to believe, help from our government.

Mitch Jackson, FedEx's director of environmental affairs and sustainability, always knew he couldn't go it alone. His team, which included the green group Environmental Defense, decided from the start that it would share all engine technology it devised with anyone. "We were optimistic," he says, "that if we were out there helping manufacturers to sell it, then others would follow and create the market."

Jackson, 44 and a FedEx lifer, figured that other companies would realize the ultimate cost savings and start placing orders for test vehicles. They didn't — in large part because of the initial sticker shock. Priuses and other passenger hybrids carry a 20% to 25% price premium over comparable nonhybrids; the engines that Mercedes and the Cleveland-based Eaton Corp. produced for FedEx upped costs 75%.

FedEx also bet that federal incentives would defray expenses. The 2005 energy bill included provisions for commercial-hybrid-truck tax credits, but the IRS never put them into place. Frustrated, William Logue, COO of FedEx's U.S. express-transportation subsidiary, went before Congress in January 2007 and asked for help. "We would like nothing more than to put more of these incredible vehicles on the road, but they are very expensive," Logue pleaded. While on Capitol Hill, Logue also called for the federal government to create fuel-economy standards for commercial trucks. Amazingly, these have never existed, which is why your average medium-duty truck gets as little as 6 miles per gallon.

Recently, the future has started to look brighter, and we have high oil prices and more government involvement to thank. Last year's Energy Independence and Security Act finally mandates commercial fuel-economy standards, though they are unlikely to be implemented until late 2010. Large companies such as UPS, Coca-Cola Enterprises, and AT&T are now bringing hybrid trucks into their fleets, which will eventually push engine prices down.

For five years, Jackson has lived with the uncomfortable fact that his hybrids don't pay for themselves, even spread over the 12-year life of a truck and with gas prices sky high. But he holds steady to his goal: dumping all of FedEx's dirty combustion-engine trucks. When might that happen? Jackson, understandably, is out of the prediction business.

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2 Comments

  • The economic environment for eco-entrepreneurs definitely adding to Johnsons inability to project a cost friendly viable eco-solution for hybrids or PEV's and rightly so, but a new up and coming technology aims to change that. The folks at an unknown start-up called K-Energy Holdings Corp. have recently patented a technology that is expected to offer step van PEV applications exceeding the required 200 miles on a single charge, a groundbreaking catalyst for the PEV industry. Very exciting news if they can get funded!!!!!

  • Anonymous

    At least they launched the hybrid-truck program - and deadlines are there not to be meant but to guide the whole process to keep more or less on track. They are doing it, that's what really matters, even if the program is not 100% complete, 20,30,40 per cent is still better than zero and has a positive effect. statewide van lines