GM Pegs Engine Tests at $50M


SAN DIEGO – General Motors has designed its Dexos licensing program to generate $35 million to $40 million required to develop up to seven new engine tests by 2014, plus up to $13 million per year for specification development, test maintenance and monitoring, end-user and installer education and quality monitoring in the marketplace.

Eric R. Johnson of GM Powertrain in Milford, Mich., gave an update on GMs trademarked Dexos engine oil specification and licensing program at the Independent Lubricant Manufacturers Associations Management Forum here on April 9.

By 2014 many current engine tests will be gone, Johnson said. OEMs cannot continue to fund the majority of oil specifications and engine test development without some reimbursement to offset a portion of the cost. Development of the Sequence VID engine test for GF-5 cost $5.46 million, and Johnson estimated that five to seven new engine tests will be needed over the next four years for future specifications.

Industry vs OEM Specs
Original equipment manufacturers engine oil specifications differ from industry specs, Johnson said. Industry specs such as those developed by ILSAC and ACEA are regional and establish minimum performance levels. With industry specs, oil becomes a commodity, Johnson contended, and the process can take a long time and drive down technological improvements.

In contrast, OEMs are global and have multiple performance demands. OEM specs offset limitations of the current industry spec system, where compromise results in the lowest common denominator. And OEM specs, Johnson continued, can be developed quickly, unlike ILSACs GF-5, which took six years.

GM produces vehicles in 37 countries, Johnson continued, with Asia now accounting for 31 percent of sales, North America for 30 percent, Europe for 22 percent, and South America for 17 percent.

GMs performance goals for Dexos, said Johnson, are:

1.To improve fuel economy and fuel economy retention.
2.To improve aeration performance.
3.To reduce emissions and lengthen catalyst life.
4.To maximize drain intervals.
5. To increase convenience and value for end users and installers.

Dexos 1 for gasoline engine oils and Dexos 2 for passenger car diesel engines represent significant improvements over GF-5 and API CJ-4 specs, respectively. For both factory fill and service fill, the primary Dexos viscosity grade is 5W-30.

Owners manuals of 2011 GM passenger cars will call for Dexos-licensed oils.

Dexos Licensing
Johnson identified four primary goals of the Dexos licensing program:

1.To ensure the right product gets into the vehicle.
2.To simplify product identification. Among other things, GM will require the Dexos logo on the front label.
3.To establish an ongoing mechanism for approving engine oil suppliers and monitoring quality.
4.To create a long-term, sustainable approach to generate revenue for future tests and specification development and quality monitoring.

General Motors will need five to seven new engine tests by 2014, Johnson stressed, at an estimated cost of $35 million to $40 million. Among these are the Sequence III wear test, the Sequence IV for valvetrain wear, The Sequence V for wear, sludge and varnish, the Sequence VID for fuel economy, and the M-111 sludge test.

The licensing fee will consist of $1,000 per year per formulation, for a five year term. In addition, a royalty to be paid by blenders will be based on the oil suppliers minimum available Dexos market, based on market data obtained by GM. Payments will ramp up over the five-year term of the license during the initial term, as Dexos gains anticipated market penetration.

Rebecca Cox, president of the Center for Quality Assurance, the firm under contract to GM to handle Dexos licensing, added, The first year royalty is very conservative; it ramps up slowly over five years. Asked about the royalty formula, Cox described it as an algorithm based on market data.

Fees will be applied to future test development, a total of $35 million to $40 million, Johnson continued. Specification development will require an additional $2 million per year; test maintenance and monitoring will take about $1 million per year; and end-user and installer education and quality monitoring will need $5 million to $10 million per year.

Johnson said Dexos will offer numerous benefits. One Dexos formula will also meet ILSAC GF-5 as well as some ACEA specs, he said. It will be easy to recognize the right oil, and it will improve the total car ownership experience. Dexos will provide reduced fuel and oil use over the vehicle life, Johnson concluded, and peace of mind regarding appropriate vehicle care and warranty preservation for GMs customers.

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