Westport Innovations Inc. (NASDAQ:WPRT) operates a substantial business as a Ford Motor Co. (NYSE:F) Qualified Vehicle Modifier, or QVM, meaning it can take so-called "gaseous-prep" Ford vehicles and convert them to run natural gas.
Paul Shaffer, Westport vice president and managing director of its Dallas, Texas-based Ford program, sat down with Motley Fool contributor Jason Hall at Act Expo in Dallas in May. They talked about the history and strength of the Westport WiNG program, as well as the huge potential of the new Ford F-150 -- which Ford introduced in a V8 natural gas version at ACT Expo -- to be a game-changing product for Westport in the coming years.
Jason Hall: Hey, Fools! Jason Hall here. I’m in Dallas, Texas this week at ACT Expo. The good folks at Westport Innovations were kind enough to give me an opportunity to speak with Paul Shaffer. Paul works with the Ford Westport Wing program. You want to tell a little bit about what you do, Paul?
Paul Shaffer: Sure. Thanks for the invite and I enjoy sitting down with you. I’m responsible for the Ford business. We operate out of Westport, the Dallas location. So, we cover a wide array of Ford products. So, everything from the F-150 -- the big announcement yesterday on that -- all the way up to the F-750, which is a 6.8 liter V-10. Then on the E side we’ve got the E series E-450.
So, a lot of the shuttle busses that operate throughout the country -- DFW -- we do a lot of DFW busses. Then the new Transit Van, Transit Wagon that Ford is offering. So, all of those are offered in gaseous prep, and we offer systems for that. That’s a variety of dedicated bi-fuel; a mixture.
Hall: And it can be anything from the smallest version of the Transit which could be used as a taxi, to a local delivery van or something that somebody’s using to -- a baker might be using to deliver product, all the way up to a vehicle that’s 10 thousand, 12 thousand pounds and hauling industrial equipment off to a site somewhere -- a construction site. And everything in between, right?
Shaffer: It is. It’s really trying to figure out and work with clients the right size, what vehicle, what application works for them, and then being able to say “Where are these tanks going to fit, and how do we ensure that we’re keeping the productivity that they’re accustomed to?” Whether it be on the gasoline side, or the diesel side.
Hall: Right. So, you talk about the dedicated fuel system that’s running natural gas, or a bi-fuel system that has the ability -- depending on the range they need, depending on access to fuel they may have where they’re going -- to go with a solution that provides both types of fuels, right?
Shaffer: That’s the key because what you don’t want is end users that can’t do it because there’s limited infrastructure. I think the bi-fuel gives that bridge to get to the dedicated side so as infrastructure continues to increase we have the capability to take them to all natural gas versus a mixture of both.
Hall: Right. Now, one of the things that I’ve observed in the past few years is the Ford program as it exists today at Westport, has really evolved. In talking earlier I learned that you’ve been a part of that evolution for a long time. So, if you want to talk about that, going back to BAF and on through.
Shaffer: Sure. We started in 1992 under the Bachman NGV. It was Bachman NGV and then we moved into a little propane. So, it became Bachman AFV. Then we moved to Dallas in 2004 under the -- changing our name to BAF Technologies. Then in 2009 Clean Energy purchased us.
Hall: Clean Energy Fuels, the fuel provider?
Shaffer: Correct. So, we were owned by them from 2009 until 2013 when Westport acquired. So, what we really had to do was sit down and go “How are we going to take the product that Westport has, and that BAF has and marry those together, and offer the industry fleet what they need?”
So, obviously you had personnel on each side. So, how’s that going to work? Where are we going to produce the vehicles? There was a little turbulence for about six months where we were sorting all that out, but I think where we’re at today is a much better position to offer, really, an array of products that really meet, pretty much, every need the customers have on the light and medium duty side.
Hall: I think it’s interesting you bring that up because in a way there were some precursors to Westport’s entire operation and how it shifted in focus, and how it’s narrowed focus on the more ‘today priority’ things. If you look at what happened by going to the Clean Energy Fuels days, when Clean Energy acquired you guys there were some things going on.
It was after Westport made the acquisition that the Kentucky facility was opened as part of the Westport Wing Program. Was that…?
Shaffer: Actually, the Louisville facility was opened prior to that.
Hall: It was prior -- that was prior to that. One of the things it sounds like you guys -- as you were finding out what your best use of resources was -- it just made a lot of sense to really consolidate that into a single facility that could handle the bandwidth, get your best people together to really focus on providing the best solutions.
Shaffer: Yeah. I don’t think it’s rocket science to know you can’t operate three locations on Ford business today.
Shaffer: In the future? Maybe, but where we’re at today is: how do we make sure that we’re taking the business that we have today and we’re right sizing that so we get the company profitable, that we move to where we need to be and then take further market share and grow the business?
Hall: So, the Westport program, when it comes to the QVM -- the Qualified Vehicle Modifier -- that’s the program for taking these engines off the factory from Ford that have been hardened, start engines, then you guys can do the modifications to. Westport’s one of the largest of those QVMs.
Shaffer: Well, we’re the largest in the amount of volume that we do, and we’re also the largest in terms of how many products we offer within the Ford portfolio.
Hall: It really is a broad portfolio. I think the F-150 is --in ways it’s still the key to the kingdom, right? That’s the most popular fleet vehicle in the U.S. Now, let’s talk about that new F-150. For people that don’t know, there was an announcement yesterday (May 4) with the new V-8. First time you can get an F-150 natural gas V-8. Right?
Shaffer: Correct. There’s been some offerings in the past, but not with the hard…
Hall: With the current model.
Shaffer: Correct. So, we’re excited about it. Obviously the vehicle is truck of the year, it’s a very popular fleet vehicle and fleets haven’t been able to purchase it.
Hall: Right. It’s in demand.
Shaffer: They’ve had to buy the F-250 because that’s the only one that’s been offered in gaseous prep, or they’ve bought the OEM version on the GM side, or the Dodge version.
Shaffer: So, now you really have -- out of all the OEMs you have Ford now offering a half ton pickup that really doesn’t have a competitor. So, you’re going to have -- it’s going to be better for drivability for your drivers at the fleet level, it’s going to have better fuel economy, they’re taking about 700lbs off the weight of the vehicle. So, your total capacity isn’t really much different than what it is on the F-250 side.
So, there’s a ton of opportunities for this to be incorporated into the fleet. I’m talking to them on a daily basis -- not only the fleets, but the Ford dealers and our installers, and fleet partners. I’ll tell you, the overwhelming consensus is that they’re going to gravitate and move from these 2500, or F-250 trucks down to the F-150.
Jason Hall owns shares of Clean Energy Fuels and Westport Innovations. The Motley Fool recommends Clean Energy Fuels, Ford, General Motors, and Westport Innovations. The Motley Fool owns shares of Ford and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.