Jeremy Deering joined Torotrak in 2006. Prior to being appointed Chief Executive Officer on 31 August 2012, Jeremy was Finance and Commercial Director and played a key role in the Company’s licensing agreements and diversification strategy.
A change of CEO marks a change in strategy for Torotrak. just-auto’s Vanessa Scholfield, talked to new CEO Jeremy Deering, to understand his plans for the future and how his new strategy, will shape the future direction of the company
What is your background with Torotrak?
I was previously the company’s finance and commercial director with responsibility for several significant areas of strategy development. The move follows the departure of Dick Elsy, who has left to take up a new role as the first CEO of the UK’s High Value Manufacturing Catapult, a Government supported programme designed to boost the UK’s ability to transform engineering innovation into economic value.
Torotrak has been around for over 15 years and started out as a specialist developer of infinitely variable transmissions (IVT). In the period since then what has the company done in terms of developing the business?
Torotrak as a business was floated around 15 years ago. It had developed a new form of gearbox based toroidal technology that was designed to save fuel. At the time there were high expectations for its use in passenger cars and SUVs. However, it was a new technology that was vaguely concept ready but somewhat before its time. There was no pressure to save fuel in those days and the vehicle manufacturers were wary of new technology that was unproven. The company struggled to get sufficient interest in the concept and there was little interest in investment in fuel saving technology from the car companies.
What has changed since then for the company?
About 4 to 5 years ago the company got a second lease of life. It started to look at different markets such as commercial vehicles and several new technologies. These included variable superchargers and mechanical hybrid drives. This strategy paid off. The commercial vehicle market is particularly sensitive to fuel costs and any technology that can help save fuel is of interest to fleet and private operators alike. Hence there was a strong interest in our Infinitely Variable Transmissions (IVTs) and we also started a programme with Allison Transmission (Allison) in the US. Allison is the largest Tier 1 supplier of automatic gearboxes to commercial vehicle manufacturers.
At this time we went to shareholders and also approached a major European commercial vehicle manufacturer. Torotrak has completed a substantial test programme with the company that also holds a licence for heavy duty applications. Performance testing in typical long-haul applications proved positive and demonstrated that using our technology fuel savings of 20% are achievable in city buses and distribution trucks. Being able to demonstrate that we can deliver fuel economy gains in European long-haul truck cycles means we have a broader market for our technology which is an important development. This coincided with us reaching a commercial tipping point with Allison.
What is the relationship with Allison today and where will it lead in the future?
Allison’s production-intent programme will receive additional development resources from Torotrak following its payment of GBP 2.5 million as an advance payment against its 2013, GBP 10.6m option to secure final exclusive rights to main drive transmission applications in heavy-duty commercial vehicles. This includes GBP 1.25m for Torotrak specialist engineering support. The new funding will be used to enhance the design and analysis programme currently led from Allison’s headquarters in Indianapolis. We have already undertaken more than 25,000 hours of testing specifically for Allison in the past twelve months. They have paid around GBP 20m over the past few years for exclusivity with regard to our technology. Allison floated in the US this year and is a very growth oriented company.
What other development programmes do you have with partners?
We have completed a preliminary development programme with Ricardo, the UK based consulting engineers, Allison and major bus company Optare in the UK. This programme has confirmed that Mechanical Kinetic Energy Recovery System (M-KERS), using a flywheel controlled by Torotrak’s variable drive, can deliver fuel economy and emissions benefits. Testing with first-stage prototypes has allowed Torotrak to independently develop a system specification suitable for fleet trials, which is predicted to deliver a fuel saving of up to 20% for urban buses and trucks. Compared with comparable battery and supercharger hybrid systems, the Torotrak-equipped M-KERS is expected to cost around a fifth the price and to be significantly lighter, allowing for additional passengers or cargo. Legislation is also pushing manufacturers to make savings and will continue to do so for the foreseeable future.
Does M-KERS have an application in passenger cars as well?
Following positive results generated by the Flywheel Hybrid Systems for Performance Vehicles (FHSPV) programme with partners that include Flybrid Automotive, Jaguar, Prodrive and Ford, Torotrak technology was selected for a passenger car M-KERS research programme with Volvo. This programme has progressed well and is moving to prototype vehicle trials.
Furthermore, Torotrak has secured an additional GBP 600,000 payment from Tata Motors to extend its licence to secure options on M-KERS in heavy-duty vehicles and passenger cars and on V-Charge.
Looking ahead how will the Allison relationship continue to benefit Torotrak?
Allison is a shareholder with a 9% stake in Torotrak. However, looking ahead the company will have to pay for continued exclusivity despite being a shareholder. It is an important and very helpful relationship and one that we look forward to developing in the future. Vehicle manufacturers can substitute our product for an existing automatic and benefit on fuel economy and other attractive performance characteristics all for a competitive marginal cost. If Allison does take the final step and bring our transmission to market, we will get a royalty on every transmission produced. This forms one of the major planks of our strategy moving forward and one that helps underpin the company’s share price, with the company currently capitalised at around GBP 50m.
Are there any developments of note in other product areas?
We have a joint venture with Rotrex in Denmark. Rotrex makes specialist superchargers for high performance applications. Given the trend towards downsized engines in fleet vehicles and passenger cars, there is a strong need for higher performance, more controllable pressurechargers to provide the required performance and fuel economy. We looked around on the market and could not find a single device that would provide the necessary characteristics – which continue to become more demanding – at a price that would be attractive for volume applications. By putting our compact variable drive with a compressor we can get to full boost in 0.3 of a second at a price that will be very competitive against alternative solutions such as twin-turbo and turbo-supercharger systems. And because it is on the cold side of the engine, it also helps solve other issues such as back-pressure and keeping the exhaust gasses hot for the aftertreatment. This is an exciting development for us as it opens a new market by solving an increasingly pressing challenge for powertrain engineers.
The product we will bring to market will be outside the JV, which gives us the flexibility to work with Tier 1’s and 2’s and several are very interested. Discussions show that they are interested not just for applications focussed on affordable emissions reduction, but also for high performance applications. We are going to invest in four demonstrators to show a range of these applications and take the technology to the OEM’s and Tier 1’s for further trials.
It sounds like you have a pretty full development programme lined up. Can you sum up the major changes that you will oversee now that you are CEO?
Torotrak’s central strategy remains to develop and then licence its core technology. To accelerate this process, we will be increasing our ability to manufacture in low volumes, taking away much of the risk and investment for our customers developing and validating products that use our systems. In low volume markets such as off-highway, combining our capability with that of our specialist manufacturing partners now provides a route through to market introduction with higher revenues for Torotrak, bringing benefits to all parties.
We are also going to strengthen our advanced engineering services business, increasing its scale significantly. The time is right to adjust our approach to one of more aggressive, accelerated growth in order to supply products and expertise that capitalise on the substantial opportunities ahead that will allow us to introduce our clean technology into mainstream commercial and passenger vehicles worldwide
Writer: Vanessa Scholfield (just-auto.com)