As explained in last months column, no one wants to talk about PC-10 (the proposed upgrade for heavy-duty motor oils coming later this year) because it is opening up a rare window of opportunity. The strategies lubricant manufacturers choose to pursue these opportunities could very well redefine their position in the marketplace for several years to come. And you can be sure there will be both winners and losers in the process.

One strategic option, and certainly the easiest, is to take a wait-and-see approach to CJ-4, as API has decided to call the new oils when they debut. Rather than being a market leader, this approach is about learning from the successes and failures of others and following their path to success. Because, who knows? Maybe demand for CJ-4 initially will be very soft. Maybe the only benefits gained by being first to market with CJ-4 will be bragging rights. And maybe even this, at best, will be a bittersweet victory, because the honor comes saddled with the burden of higher costs and confused customers. Although the risks associated with this wait-and-see option are comparatively low, so are the rewards.

Another strategic option is to simply let go of todays premium CI-4 PLUS oils and move forward with only CJ-4. The bet here is that most fleets will require CJ-4 for some percentage of their equipment, and that percentage will increase with time. Rather than servicing a mixed fleet of pre-and post-2007 engines with two different drums of HDMO, those who take this approach will gamble on fleets opting for the convenience of using only one product.

Although this option sounds elegant in its simplicity, its far from a safe bet. To start, CJ-4 is designed to meet the requirements of 2007 EPA-compliant engines used in on-road applications. Therefore, marketers who only have CJ-4 to offer could significantly compromise their ability to sell HDMO to the off-road market segment, due to the new oils higher price. Whereas some might think CJ-4 will cost less to make due to its lower ash and TBN, in reality it will cost more. In fact, some industry experts predict that the high-molecular-weight dispersants, ash-less antioxidants and other costs associated with CJ-4 will drive up the price of the finished product by 15 percent to 30 percent over that of CI-4 PLUS.

This price burden together with such potential baggage as shorter drain intervals and the possibility of little to no performance advantages make the CJ-4-only strategy risky. If a manufacturer bets on this hand and draws blank, it will be turning its back on the off-road business – a segment that accounts for roughly 42 percent of HDMO demand in the United States. In addition, if the adoption rate of EPA-compliant engines is soft in the on-road segment, this oil marketer may find it has few if any takers for its one-barrel solution.

For those that feel the CJ-4-only approach is too risky, another option is to market both CI-4 PLUS and CJ-4. This may sound like a no brainer. By carrying each product, a lubricant manufacturer can speak to the needs of both the new and the old engines – and its customers can enjoy the best of both worlds. But when you draw another card from the deck, it becomes much more complicated. For most majors, its not just about adding another product to the portfolio. Instead, it likely means adding another HDMO to a family of brands and/or multiple tiers of products.

For example, ExxonMobil might have to consider offering Mobil Delvac, Exxon XD-3, Exxon XD-3 Extra, and a synthetic version of both CI-4 PLUS and CJ-4. Similarly, Chevron could theoretically be looking at moving from one to two types of Delo 400, Texaco URSA Premium TDX, URSA, and RPM. Shell, ConocoPhillips and others could be in the same boat if they elect to pursue a dual-spec strategy. In addition to their branded products, the majors may also have to address a similar situation with unbranded and OEM-badged products.

Think about it. In inventory alone, a duel-spec strategy across the whole line of products could mean doubling a manufacturers bulk storage capacity for HDMO. And it doesnt stop there. This approach may also require a major to ask its marketers to double their bulk storage for HDMO, and for the end-user to do the same. This strategic option puts a lot of chips on the table and can result either in a big win or a big loss.