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Honda contract key to clean diesel turnaround - China Suspended Working Platform by grehh hernjer
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Honda contract key to clean diesel turnaround - China Suspended Working Platform by GREHH HERNJER
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| Article Posted: 09/21/2013 |
| Article Views: 64 |
| Articles Written: 1951 - MORE ARTICLES FROM THIS AUTHOR |
| Word Count: 795 |
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Honda contract key to clean diesel turnaround - China Suspended Working Platform |
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Business,Business News,Business Opportunities
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Ventura-based Clean Diesel Technologies is gearing up for the firstbig test of whether its merger strategy will pay off. The clean tech emissions control company said July 30 that it won acontract to supply catalyst coatings for four- and six-cylinderHonda Accords, some of the best-selling car models in NorthAmerica. The next day, it announced it would take in a $3 millionloan from a longtime shareholder to shore up its operating capital. The news marked the return of a marquis model to the company sofferings but comes as Clean Diesel struggles with an accumulateddeficit of $167.8 million.
Though Clean Diesel marked its firstcash flow-positive quarter earlier this year, it has never had aprofitable year, according to its filings with the U.S. Securitiesand Exchange Commission. The company, known as Catalytic Solutions before a merger with anEast Coast firm in 2010, makes the coatings for catalyticconverters in its Oxnard factory and has about 180 employees. Theconverters, whose final assembly is handled farther down the supplychain, clean up automobile emissions.
The company said its newofferings to Honda will meet stringent new California standards andwill use only palladium instead of more expensive metals such asplatinum and rhodium. Clean Diesel s predecessor, Catalytic Solutions, was founded inthe late 1990s in Santa Barbara by Stephen Golden. The company relocated to Oxnard and began making catalyticconverter coatings for Honda, Ford and GM there in the early 2000sbut fell on hard times when automobile sales collapsed in 2009.While its revenues expanded from $48 million in 2010 to $61.6million in 2011, it still marked a net loss of $8.3 million in2011. For the first quarter of this year, gross margin slipped to23.1 percent from 29 percent a year earlier. The company lost $2.8million on $16.9 million in revenue.
Clean Diesel has done work for Honda for years, but the Accordplatform represents one of the Japanese automaker s best-sellingmodels and therefore a much bigger opportunity. Craig Breese, CleanDiesel s CEO, told the Business Times that he hopes the contract,along with the company s other efforts, will help translate thecompany s improving cash-flow into profits. Honda is certainly one of the most important customers. We wincompetitions for different vehicle programs as [automakers] bidthem out, Breese said. We ve been fortunate enough to win the2013 platform of the Accord, and that s obviously a pretty bigdeal for us.
Catalytic converter coatings are only one part of the company sbusiness. It also helps the owners of heavy duty diesel trucks,which often last as much as 30 years, retrofit their engines tomeet tighter emissions standards. California has introducedregulations that require trucks made before 2007 to be retrofittedover the next few years. Over that 30- to 36-month period, as many as 100,000 vehicleswill be retrofitted, Breese said.
If you look at our historicalmarket share in California for the retrofit of heavy duty engines about 20 percent that could represent a very significantpiece of business for us. The London Olympic Games also provided a nice boost. The city ofLondon has implemented a low-emissions zone and rushed to clean upits air before the games began in late July. We benefited fromthat in a big way we sold more than 3,000 units in Londonalone, Breese said.
We continue to see opportunities like thataround the world. But it s the repeatable business that is the company s focus forthe long term. The retrofit business is frosting on the cake while the meatand potatoes are the company s engine control systems for newdiesel engines and, of course, its catalytic coatings. There, themain focus is on meeting automakers efficiency goals while reducingthe number of expensive materials involved, which includepalladium, platinum and rhodium. We dip the ceramic structure [of a catalytic converter sinternal parts] into this bath impregnated with these variousprecious metals.
We ve designed it so that it needs a lot lessabsorption of those precious metals to neutralize and inhibitthe toxic materials from occurring in automotive exhaust, Breesesaid. Breese said the key to long-term success is controlling costs,boosting repeat business and seizing opportunities when they arise.One such opportunity is a joint venture in China with a Japanesepartner. The Chinese market for automobiles is still in its nascentphases and presents a potentially huge customer base. We are actually participating in the Chinese market. We ve gotour foot in the water there, Breese said.
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