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Compact Diesels - Not So Compact Profits!
By Brendan Baker
"Compact" may not be the first thing you think of when you think of a diesel engine, but today more and more products are being powered by these types of engines. For most people when they hear the word "diesel" they think "big rig" or something that weighs as much as a small building.
Though this is true to a degree, so too is the fact that small water-cooled diesel engines now power everything from generators and small construction equipment to golf course and landscape equipment. New applications for the compact diesel are an increasing trend, which is why this market deserves a closer look.
These engines, dubbed compact diesels, have the potential to make good profits for engine builders. This market is particularly suited for traditional automotive rebuilders because you won’t have to buy a lot of new equipment. Most of your traditional automotive tools and equipment will crossover to rebuild these smaller diesel engines.
"I can rebuild the three-cylinder Kubota and make twice the profit in the same amount of time it takes to rebuild a small block Chevy – and sometimes even in less time," says John DeBates, co-owner, Auto Machine, Inc., St. Charles, IL.
"With the 350 Chevy, I’m competing against every production remanufacturer in the country as well as many other custom engine rebuilders (CERs). With the Kubotas almost no one is remanufacturing them, or if they are it’s very limited." A new three-cylinder Kubota will run in the neighborhood of $5,000, and Debates says he can usually rebuild one for $3,500-$4,000, depending on the condition of the injectors.
Diesels are generally more expensive initially than their gasoline counterparts to manufacture because the parts need to be stronger to withstand the high compression ratios. But where diesels are more economical is in their greater durability and fuel efficiency.
"Most compact diesels will run forever," says DeBates. "Usually what happens is the engines get tired and begin consuming oil around 7,000-8,000 hours, which is a long time." Some engine builders even claim these engines only last 3,000-4,000 hours. However, this depends on the specific application and design of the engine.
A few years ago DeBates and his brother, who is also his business partner, decided that they needed to find more markets for their shop’s services. "We had always done restorations, but we wanted something more," he says. That’s when they decided to give compact diesels serious consideration. They did their research and found that, indeed, there was a market in the area and it hadn’t been served yet.
There has been some debate as to what types of engines are classified as compact diesels. One engine builder said anything less than 200 cid is what is considered a compact diesel. However, DeBates defines it a little more broadly. He considers this class to be anything less than 300 cid This makes up mostly Kubotas, Yanmars and Mitsubishis. These engines power everything from forklifts to gen sets. But, he says it doesn’t really make a difference what they power since most of the time he only gets the engine.
What makes this market so appealing to engine builders is the fact that there are so many of these small water-cooled diesels being used in such a variety of applications. And in many cases, the equipment is owned by corporations that need someone to service these engines for them. DeBates, for example, does all the machine work for a regional Kubota dealer with a remanufacturing division. He also gets work from several local golf courses.
According to DeBates, most of the small Kubotas are used in turf equipment and lawn maintenance for golf courses and landscaping. "I call them ‘turf people,’ " he says. "This is where I get many of these Kubota jobs." DeBates’ shop does quite a few Yanmars, too, because they’re in many small John Deere tractors.
Scott Wichlacz, Manitowoc Motor Machining and Parts, Manitowoc, WI, also says that Yanmars and Kubotas are the most popular compact diesels in his shop. Only, they don’t do many complete engines. "Most of our work is for implement dealers, and people with turf equipment and skid steers," says Wichlacz. "We’re mainly just doing the machine work for them, they’re doing all the assembly/disassembly."
Wichlacz says that what has happened to the market in the last few years is that water-cooled compact diesels have been replacing the market for small air-cooled gasoline engines. "What used to be air-cooled Wisconsin gas engines are now water-cooled diesel Kubotas and Yanmars," he explains.
"I think that what we’re seeing is the air-cooled market is diminishing. Consequently, this market has probably diminished more than the compact diesel market has grown. However, there seems to be a growing population of compact diesel equipment over what there used to be in air-cooled gas applications."
At the moment, Wichlacz believes the market is in a transitional phase. But the market for rebuilt compact diesels should increase after some of the newer equipment starts to age.
"There will be more out there than with the air-cooled gas, but it may take a while for the market to catch up and the diesels to wear out and need rebuilt," Wichlacz points out.
There is nothing tricky about machining these small diesel engines. Grinding crankshafts, boring blocks and resurfacing heads are basically no different than doing the same type of work on traditional gasoline engines. "Most of the compact diesels we work on are less than two feet in length and weigh less than 25 lbs. – they’re similar to a four-cylinder automotive engine," says Auto Machine’s DeBates.
So how does a compact diesel differ from your small block Chevy or Ford? "It hardly differs at all," says DeBates. "The valves are cut the same way, the crank is ground the same way. Basically, any automotive machine shop would likely have 90 percent of the equipment to do these jobs already."
There are, though, a few things different about rebuilding these engines. If you’re doing "completes" on these engines you will need to be careful with the fuel injectors and the injector pump. "We don’t do in-house injector work," says DeBates. His advice, when doing completes, is to take the injectors and pump off first and send them out to someone who specializes in them to have them certified.
They’ll check the pump’s fuel pressure and see whether the pump should be rebuilt. Debates says it costs about $200 to get the pumps and injectors certified, but it can cost as much as $2,000 to have them rebuilt, which can throw a wrench into your estimate. The condition of the injectors and the pump can sometimes dictate if the engine is worth rebuilding.
"A situation like this may put your estimate too close to the cost of a new engine. However, most of the time the pump and injectors can be rebuilt for about $500 to $1,000. Then when you put them back in again you’ll know they’re right."
"It’s cost effective to rebuild the pumps up to a certain point. Usually on a four-cylinder the pump can be rebuilt inexpensively, but if it’s completely shot then sometimes it becomes the thing that kills the whole job," says DeBates.
Another potential issue is parts. There are few sources yet for aftermarket parts for these engines so you will likely have to go to a dealer, or become a dealer, to get the parts. And sometimes these parts can cost a real premium. But, overall, it’s still less expensive for the customer who chooses a rebuilt engine.
Engine Rebuilders in Oakes, ND, specializes in remanufacturing skid steer powerplants, which today is mostly water-cooled diesel Kubotas as well as some Perkins and Duetzs, too. "Basically all we do is skid steer engines for Bobcat, John Deere, New Holland and a few others – it’s our niche market," says owner Tom Gulsvig. He has run exchange programs for dealers all around the country for the past 30 years. Gulsvig says he is fortunate to have been able to build up a large inventory of cores, especially for some of the older out of production engines.
Through its exchange programs Gulsvig’s shop has been able to keep dealers stocked with rebuilt engines for many of the older models. However, when manufacturers drop the dealer price on their engines that are still in production it has been tough to compete. "It’s made it difficult in some cases to compete," admits Gulsvig. "But then that opens up the market to the end user for us." Meaning that these engines, too, will need rebuilt someday.
Gulsvig says that by analyzing his sales history he knows that he will probably sell 8-10 Kubota V-2203s, which can be thought of as the small block Chevy of the compact diesel market. It’s a four-cylinder compact diesel with about 45-50 hp.
According to Engine Rebuilders’ shop manager, Lynn Gulsvig, Kubotas are, percentage-wise, the most popular engine in their shop, too. Some of the problems he sees with these engines are certain Kubota models have had head trouble. The cracked heads are correlated to them having indirect injection, which runs hotter than direct injection engines. This method of injection retains more heat in the pre-combustion chamber area of the head and, therefore, is more prone to cracking.
Auto Machine’s Debates says compact diesel work has helped his shop stay busy during the traditionally slower winter months. "I’ve talked to a lot of people about this," he says. "And I feel it’s an option for companies that may be struggling to fill their schedule." Currently Auto Machines has about 10-12 golf courses for which it rebuilds compact diesels. "The next target is municipalities," says DeBates, "since they, too, have large fleets of these engines."
This market has a lot to offer traditional, and maybe not-so-traditional, automotive engine builders, to enhance their bottom line. The machining required is no more difficult or time consuming than what many engine builders are already doing. And the potential is there to make significantly more profit compared to a gas small block rebuild. EB
Here are a few sources of information on compact diesels that you may may wish to check out before you plunge into this market.
One good source of compact diesel information is a book, which is offered for sale through the Engine Rebuilders Association (AERA), entitled an Introduction To Compact And Automotive Diesels. It is written by Edward Ralbovsky. The AERA sells the book for $65 for members and $85 for non-members.
The book doesn’t reference specific engines, rather it gives comprehensive coverage of the latest designs for direct and indirect injection.
Another good place to get service information is through Intertec Publishing. They offer a variety of automotive books and manuals. The Small Diesel Engine Service Manual, published by Intertec Publishing, covers air-cooled and liquid-cooled diesel engines up to 160 cid. (2600cc).
It includes information on engines from manufacturers such as Continental, Deutz, Farymann, Isuzu, Kirloskar, Kubota, Lister-Petter, Lombardini, MWM, Mitsubishi, Onan, Perkins, Peugeot, Slanzi, Volkswagen, Westerbeke, Wisconsin and Yanmar. The book sells for about $27 - $35, depending on where you buy it, and it is available on the Internet.
And don’t forget your local public library – it’s often overlooked but can be an excellent source for automotive information. And it’s free!
According to a study conducted by the Freedonia Group, U.S. demand for diesel engines and related aftermarket parts is expected to grow 4.8 percent a year to $17.5 billion by 2005. The study says significant gains are expected in light-duty, generator sets and marine equipment. Non-vehicle engines are expected to see faster gains than vehicle engines.
And demand for parts to maintain and rebuild these engines is expected to outpace newer engines due to the slowing economy where consumers are likely to postpone new equipment purchases. This bodes well for engine builders wishing to participate in this market.