Thursday, 25 July 2013

Sat waiting at the Bus Stop - Pre AGM 2013

As I start to write this blog, the AGM will have been in progress for about 40 minutes. Having not seen any smoke signals prior to it, and working late last night, I made the tactical quality of life decision not to go, and reading the interim statement issued this morning before 11am confirms that being there won't have changed my investment decision, missed out on champagne, nor the strategic direction of the company which has - as you will no doubt know - taken on a more commercial intent in the past 12 months.

Investment wise, we are now all sitting at the proverbial bus-stop. Waiting. Others on the discussion boards have come along and waited, muttered something about them always being late, the queue has got longer, shorter, being late, is it electric, some have turned up asking if taxis stop here or if anyone knows when the next bus will arrive. The answer to all this is: nope, not really.
We had an exciting moment a few years ago when the grass around the bus stop got mown, but that soon moved on and out of sight to another place.
The one thing you do know at a bus stop though is that one day, one day, a bus might just turn up, and the longer you wait, the more probable you hope it becomes.

You see, this isn't one of those fancy bus stops with a digital display counting down the minutes to the next buses arrival, it doesn't really even say where it's going to go, just that there are some destinations on its route. It's one of those buses you would have caught in the 1980's where you only really knew what was happening when the driver of a different bus going in the wrong direction would shout out some information to you about it being broken down.
So far as we know it's not currently broken down, but the route in the future includes Japan, Italy, England, Sweden and the US. We know it's been to Germany once or twice too, but beyond that, we just sit and wait. The rain and wind sweeps around the sides, and every now and again someone comes and pins up a revised timetable. Fortunately nobody has come and pinned up an "no stopping here" sign yet, so let's have a more detailed look at the new timetable...

Main Drive Transmissions

Allison have paid for exclusivity and are batch paying down the last £6M. They have £2.6M left to pay before 31st march 2014. Testing is always a bottleneck so new test rigs have been made to get the production design and "production representative variator components from production suppliers" finally tested.
In terms of developing a manufacturing supply chain - proving out your suppliers components is a standard ISO9000 quality compliance process. You get a new supplier to make real world parts - not just one off samples, and then you test them to check they are ok. If they are ok, you sign off the supplier and their manufacturing process, one day place your order and then get it into pre-production when all the other parts are ready.
Then you build pre-production units (usually with the proven and tested first parts), test those and then test your entire design to check all is ok, and in the meantime you build a factory to put it all together, train people to make them, load your supply chain with parts, and then if everything is still ok, you start to build them... so in my estimate that's at least two years away if not three - because - well - it's huge and the test rigs don't need to be sorted until March 2014 - and that's 8 months away.

We have to remember that all this has to go together to fit into a bus, so the demand for the transmissions needs to fit into that product marketing as well. Oh, another potential delay.
It is however good that the critical path of testing has been addressed by Torotrak. It's also interesting that TRK have kept it in house, Allison have not decided to have test rigs installed at their site (or so I infer - perhaps I'm assuming that?)  It does seem that £2M of the remaining license fee is subject to this testing, so BAM!, now you know where the license fee has gone - test rigs. By March 2014
Speaking as an ex-engineer, you can never have enough test rigs, so it's good to have them funded rather than not funded !

So, no clear ETA for Allison, but guess at Q4 2016 (remember the legislation kicks in 2017)

No mention of the European Truck and Bus Manufacturer (ETBM) was made in the statement, so unless something comes out of the AGM, we refer to the last statement which said they were going to make a decision as they had found that even long distance trucking benefited from the transmission, which was a nice surprise apparently.
No ETA possible

MKERS / Flybrid
1. Cars
The amount of press and publicity noise around the VolvoS60 demo with the Kers unit fitted suggests this is getting serious. Companies don't put out that much marketing and PR of a prototype unless they are at the "seriously considering" stage of consumer reaction. The noise seems to have been generated by straight cut gears instead of helically cut ones -

Now that Flybrid is 20% owned by TRK and have options to go to 100% it would seem that OEMs are more interested in dealing with a single product supplier to put the whole Kers package together - so getting a T1 supplier sorted out should be more interesting times ahead.
ETA guess Q1 2016 given the new platform schedule from Volvo

2. Buses
Arriva trials remain on track for March 2014, with flybrid installed in a Wrightbus vehicle.
Flybrid are also making test rigs so they can get production going (see a common theme?)
2015 is current target for full commercial production capability with proven equipment.
ETA for first Buses on trial - Q2 2014
No ETA for Bus Production

Version 2 is on the test rig - once completed it will go into demonstrator vehicles.
ETA for V-Charge mk2 demonstrators is Q4 2013
Given the interest being shown from T1 and T2 partners, ETA Production ? guess at Q4 2016

Market forces
12 years ago I passed an academic analysis of the Market forces affecting Torotrak to the then finance director Rebecca. Even then it was clear (as it is with many products in the world) that demand for the product was going to be driven by legislation more than customer demand. If the CAFE regulations proposed in 2001 had been implemented as originally prescribed then it's likely that we would already have full IVT SUV's trucking about the USA. however they didn't and as with all things Government and legislative - it is getting there, just a bit slower.

We are now faced with the 2017 legislation deadlines in Europe and the USA that will start to drive financially based investment decisions by the OEMs

The legislation ultimately is driving the need for lower fuel economy. Bus operators quite like the idea of 20% lower fuel bills, but an OEM as long as they have the most fuel efficient vehicle in relative terms don't care how efficient it is - it just needs to be good relative to the competition.
It is only with the legislation pushing a performance value and a number onto the manufactures that the OEMs see it as a financial business decision to implement the technology. With the IVT, V-Charge and M-Kers offering the step change in performance that they need - Torotraks products and IP will become more and more interesting to them.

Mission Creep ?
I noticed a change to Torotraks mission statement the other day, slipped under the radar a bit, but of huge significance -
It now goes blah blah blah.."technologies that reduce vehicle emissions and improve transport efficiency"
This is a very very broad remit. It's so broad it's almost impossible to know where to start when asking "so what do you do?" if you met someone from Torotrak at a party

What was it before you ask ?
In 2008 the Annual report said "Torotrak is the world leader in full-toroidal traction-drive transmission technology, focused on the development of IVT (Infinitely Variable Transmission) and TCVT (Toroidal
Continuously Variable Transmission) systems which deliver outstanding levels of performance, functionality and commercial advantage in automotive, truck, bus, outdoor power equipment, agricultural and off highway

So now the new mission doesn't explicitly say anything about Toroidal transmissions, (that would put Flybrids CFT out), and nothing about IVT (that would put MKERS and V-CHarge out).
But at least we now know that they have ruled out any applications on static systems that might need a variable output (compressors, generators etc) because they refer specifically to vehicles.

So what's the updated timetable ? in possible time order

ETA for V-Charge mk2 demonstrators is Q4 2013
No ETA for V-Charge production
Buses ETA for first Buses on trial - Q2 2014
No Bus production ETA
Cars Production ETA guess Q1 2016 given the new platform schedule from Volvo - some preproduction demos before
Main IVT (large vehicles)
No clear ETA for Allison, but guess at Q4 2016 

If we're lucky, perhaps a few buses will turn up at the same time ? but don't hold your breath if they do we don't currently know their colour, speed or size. At least we know they might have a Torotrak Variator in them somewhere...

In the meantime, you and I will have to continue to sit at the bus-stop with Buzz Lightyear. to indefinite and beyond... (image removed unfortunately because it was just a jpg from a website, but the website address apparently red-flagged a few browsers)

I hope everyone enjoyed the AGM and the tech talk, and hope we haven't voted to dilute the share value down to zero quite yet.

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