Clean Energy Fuels Corporation And Navistar International

A strategic partnership is a relationship wherein to or more companies agree to work together, usually formalized in a contract. Companies form strategic partnerships when they are unable to accomplish their goal alone, or it would be either too expensive or too risky to undertake the task alone. In the case of America’s Natural Gas Highway, the companies Clean Energy Fuels Corporation and Navistar International formed a strategic partnership in order to overcome the dilemma of consumers being unable to purchase cars that ran on eco-friendly fuels such as natural gas, electric, or biofuel because of a lack of fueling stations that supplied these fuels. There was a lack of these fuel stations because there were no customers for the fuels. To
overcome this catch-22 Clean Energy Fuels Corp and Navistar International formed a partnership. Forming this partnership was necessary for the project as it guarantees customers for the fueling stations, reducing the risk taken on by the fuel company. Additionally, it guarantees fueling stations for eco-friendly fueled vehicles for the shipping company. These mutual guarantees mitigate the risks for both of the companies, and without this risk mitigation companies were hesitant to undertake building natural gas, electric, or biofuel fueling stations or switching to shipping fleets fueled by those energy sources.
Clean Energy Fuels Corporation are a natural gas fuel company. They describe their mission as, “changing the way the world fuels its vehicles.” The company is working to make natural gas the preferred fuel for the United States. Clean Energy Fuels is working towards this goal because they think it will make the United States energy independent. Additionally, they are pushing for this change because natural gas is both better for the environment and safer.
Navistar is a commercial truck company that provides both trucks and parts and services for diesel engines. Navistar places a large emphasis on sustainability because they believe emission reductions are the next big steps in product innovation.
Clean Energy Fuel Corporation and Navistar International’s project, America’s Natural Gas Highway plans to establish a string of natural gas fueling stations across the United States, spanning coast to coast. This allows for shipping companies to be able to switch to natural gas as a fuel source for their shipping fleet without fear of not being able to reliably refuel. The agreement also ensures energy companies who build natural gas fueling stations will have customers for their natural gas. However, this plan requires four major players, these include: a truck maker, a fuel supplier, a truck stop chain, and a natural gas driller. Navistar International fulfills the truck maker requirement, and Clean Energy Fuels Corporation is the fuel supplier. Two additional companies, a truck stop chain and a natural gas driller, have agreed to contribute to the partnership. Pilot Flying J Travel Centers is providing the locations for the natural gas refueling stations. They are the largest network of truck and travel stops. The natural gas driller is Chesapeake Energy. They are the second largest driller of natural gas in the United States. In addition to being the natural gas driller, Chesapeake Energy has also invested $150 million towards the initial rollout of America’s Natural Gas Highway.
There are a number of factors that led to this strategic partnership.
First, is the growing interest in being environmentally friendly. Companies are pressured to use green alternatives by both the government, and consumer behavior. The government promotes eco-friendliness by offerings subsidies for using green fuels; these subsidies include grants or tax credits. The government deters environmentally unfriendly behavior by issuing fines for pollution and by passing stricter emission standards. Consumers influence the companies to eco-friendly by avoiding products or services from companies that pollute or harm the environment in another way. Alternatively, consumers may seek out a company’s products because they are an environmentally friendly company. Another contributing factor is the cost savings that are offered by natural gas. The average cost for a gallon of compressed natural gas in the United States is $2.11, a gallon of regular gasoline is $3.39, and a gallon of diesel is $3.89. A third factor is cultural. A move to natural gas powered vehicles could mean energy independence for the United States. The unrest and political turmoil in the Middle East has led to a desire for the United States to no longer depend on that region for oil. The introduction of fracking has led to an abundance of natural gas being harvested in both America and Canada. The last major contributing factor to the partnership is the lack of competition in the natural gas fuel station market. In
2011 there were only 913 natural gas refueling stations across the entire United States, some of which were for private use only. This partnership plans to add an additional 150 natural gas refueling stations across the country. The factors of environment consciousness, monetary savings, a cultural desire for independence, and a lack of competition in the natural gas refueling market led to the strategic partnership between Clean Energy Fuels Corp and Navistar International.
Just as there are several opportunities in the external environment that contributed to America’s Natural Gas Highway, there are several external threats to the strategic partnership.
One threat is the low prices of gas. Since the advent of the plan oil prices, and subsequently gas prices, have gone down significantly. This disincentives trucking company from switching to natural gas powered shipping fleets because there is less cost savings in fuel. Companies need large cost savings in fuel to offset the expense of the natural gas powered semi-trucks. A semi-truck that is powered by natural gas costs about $200,000 which is double that of a diesel truck. Managers of the partnership can try to overcome this problem by lobbying the government to increase government subsidies for companies that purchase natural gas powered trucks. Additionally, they can lobby for stricter emissions standards which regular gas may struggle to meet. A second threat to the partnership is the environmental danger that fracking may pose. Without fracking the surplus of natural gas will decrease sharply, and as such, the price of natural gas will increase. There have been few studies done about fracking, but an increase in seismic activity and pollution has been correlated to fracking. These correlations could lead to a government ban of fracking, and has already led to public outcry. Managers of the project can work to save fracking by funding studies to prove its safety. Another threat to the
alliance is, as more natural gas powered trucks are put on the road, and the risk decreases, more fuel suppliers will enter the natural gas market. Managers can lessen this threat by offering additional benefits offering better pricing and locations. Lastly, technology is a threat to the deal. There is increasing demand for electric cars. At the time the deal was established, electric cars were largely impractical, being too expensive, having limited range, and having few places to recharge. However, not technology has advanced and electric cars are becoming more affordable, having increased range, and have ever increasing recharging stations. The best way to overcome this threat is to speed up the timeline of the project and try to grab as much as the market as possible before electric cars become more ubiquitous.