Video: Hybrid help

Talent Names - Melissa Lee
By Melissa Lee Reporter
CNBC
updated 3/30/2006 1:17:15 PM ET 2006-03-30T18:17:15

As fuel prices have reached record highs, gas-electric hybrid cars have made it to the consumer mainstream. But using hybrids in commercial fleets is new.

For many companies, this new technology may be something of a gamble. Still, some big companies are investing in hybrids, and reducing fuel costs at the same time. One of those is UPS.

It takes a lot of fuel to move 15 million packages a day.

“We spent over $2.1 billion on fuel last year,” said Mike Herr, the shipping giant's vice president of environmental affairs.“That equates to about 4.8 percent of our operating revenue expenditure.”

That’s one big reason UPS has been on a 20-year quest to cut that cost. This June, UPS turns a critical corner, when 50 new hybrid electric vehicles, or HEV's, hit the road.

For UPS and other fleets that make frequent stops or get stuck in traffic, HEV's may just be the Holy Grail. That’s because each time an HEV brakes or idles, it generates power -- which cuts that vehicle's fuel consumption. That means UPS's new HEV's will use 35 percent less diesel.

FedEx, which has 18 HEV's, with 75 more to come, is looking at a 30 percent reduction.

There's even a way to harness the power of hybrids without the cost of replacing the entire truck. Ohio, for example, sent a trash hauler all the way to Peachtree City, Ga. to be retrofitted with new hybrid fuel technology.

In Peachtree City, U.S. Energy Initiatives, a startup with $650,000 in sales last year,  hybridizes trucks by custom-fitting each vehicle. The company recently overhauled a pick-up from Thailand, for example, so it can now use either compressed natural gas or diesel. Each kit costs $4,500 -- a tenth of what it could cost to overhaul an existing engine. For some, that investment makes economic sense.

“When you can demonstrate to them by spending $5,000 today, you'll save $20,000 over these next 8 months,” said company CEO Mark Clancy “That's when it begins to really get them to sit forward in their chair and take a hard look at us.”

U.S. Energy Initiatives has hybridized school buses in Texas and Oregon; its biggest push now is in the Far East. Clancy said the company is fitting out engine for customers as far away as China.

Still, for all its promise, today's hybrid technology is in its infancy, with many fleets opting, for now, to wait and see.

Eaton Corp. has been developing hybrids for two decades. This year, it launched commercial production of HEV powertrains. But even with high fuel prices and tighter emissions standards, hybrids haven't been an easy sell.

“Our customers utilize these vehicles to earn money,” said Ken Davis, vice president of Eaton's transmissions operation. “The fact is that we have to prove that this system will be as reliable as the system that they run today.”

But back in Georgia, UPS is sold.

“We have a big fleet,” said Herr. “We want to make use of that big fleet to test the technology -- not only to help make the industry better but also when we do get to that point where that technology is available, that we've used it. We know how to use it, and we know where to best put it to make our fleet the most efficient.”

That strategy is driving hybrid technology and delivering savings at the same time.

© 2012 CNBC, Inc. All Rights Reserved

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