Countdown to dexos
(Continued)

“OEMs certainly have the right to establish specifications that best protect their engines, but the outcome of GM’s decision to pursue the dexos specification independently is a specification that is not identical to the ILSAC GF-5 spec. While it’s not a necessity to create different products for each specification, in order to be competitive I believe that most marketers will have separate products,” he said. “It’s an unavoidable consequence of GM’s dexos specification that the market will see a ‘GM oil’ and a ‘non-GM oil.’”

McCollum said marketers do not want to see the motor oil market fracture like the automatic transmission fluid (ATF) market has, with most OEMs setting their own specifications and requiring their own fluids.

“We don’t want to see an unlicensed ‘one-size-fits-all’ engine oil like we see in the ATF market. We can’t lose certification integrity like that,” he said. “Having said that, we have to work with OEMs to find out what levels of protection they need and design products to meet those needs.”

Will the introduction of a “GM oil” along with the “non-GM” GF-5 specification complicate the motor oil market? To quote the commercial, “Does Charlie Daniels play a mean fiddle?”

“Is the motor oil market about to get a lot more complex? Absolutely,” said Fran Sciacchitano, an account executive with additives manufacturer Infineum, who added that with a synthetic dexos product for GM vehicles, a conventional GF-5 product for most domestic and Asian automakers, and more European OEMs moving to specialty grades like synthetic 5W-40, moving motor oil in bulk may become a logistical nightmare.

In fact, Shell Lubricants used the recent iFLEX convention to introduce its “Ecobox” packaging concept to the installed market. The Ecobox system consists of a six-gallon nylon bag inside a corrugated carton. The bag is fitted with a plastic spout that can be turned on or off, and is outfitted with a custom-designed pump system that dispenses motor oil faster than pouring individual quarts. Shell officials said the product is one answer to what they said is likely to be a burgeoning motor oil product mix in coming years. The company claims using the Ecobox system will result in 89 percent less plastic landfill waste than the equivalent 24 quart plastic bottles, and the Ecobox carton is fully recyclable.

Another area of contention involves GM’s licensing structure for GF-5. While the final licensing fee remains a bit unclear, Johnson said that marketers will pay a $1,000-per-year-per-formula royalty fee to license the dexos specification, regardless of how many brands will be included in that formula. GM is also expected to implement a per-gallon royalty fee that will be passed on to installers, a move that it says will pay for development of needed motor oil tests.

“We need replacements for most engine tests by 2014, a process that could cost $35 million to $40 million,” Johnson said. “A license fee for dexos will help generate revenue to develop those tests and future specifications. If the tests disappear, then the licensing disappears and it’s a free for all.”

Johnson added that the license process will also ensure that the right products are installed in vehicles, as well as simplify product identification.

Some marketers are pushing back against GM’s licensing plan for dexos, citing concerns that GM will not add licensing fees to its own Goodwrench-brand products, meaning dealerships that carry those products might also be exempt from paying those royalties. Few marketers are happy about the proprietary specification, which most see as the first salvo in a battle that could indeed fracture the North American motor oil market.

In fact, Valvoline recently became the first company to state publicly that it will not offer an officially licensed dexos product. While the company will offer separate synthetic products that meet both the dexos-1 and dexos-2 specifications, it will not participate in the official license program. The company notes that it will stand behind its products that meet the dexos specifications, and also claims that using Valvoline products that meet the dexos specifications — even if they are unlicensed — will not void the vehicle’s warranty. (It’s possible GM might have a differing opinion on that matter, however.)

Other marketers have expressed similar concerns.

“In Europe, we have six products to meet OEM specs,” said one marketer representative who asked not to be identified. “In the U.S., we only have one. Plus, too often in Europe an OEM gets in bed with one marketer, and it makes it tough for other marketers to compete.”

Regardless of any pushback, GM plans to begin using dexos-licensed products as factory fill later this year, and expects that most motor oil marketers will play along, license fee or no license fee.

Johnson said the company will make an effort to educate consumers about the new specification and its necessity, and will even note the dexos requirement on the oil caps and in the owners manuals of 2011 and later vehicles that use the products.

Should operators hold out hope that a hypothetical GF-6 category launched somewhere around 2015 or 2016 could close the gap between the dexos and ILSAC specifications? Not likely, one marketer said.

“It’s possible, but moving the ILSAC specification closer to dexos would go against the ‘minimum’ performance standards required by ILSAC,” McCollum said. “At this point, it would be difficult to get all parties on board to raise what has been a floor to a fairly high performance ceiling.”

Only the future can tell if other automakers follow suit and develop their own proprietary specifications and further fracture the motor oil market, a situation that would be a logistical nightmare for lube operators. For now, lube operators are preparing for dexos-spec products that will have to be shipped, stored and installed separately from their other bulk products, a situation similar to that posed by Euro-spec 5W-40 synthetics, only on a larger scale.

The silver lining to dexos could be in higher ticket averages. Lube operators who are able to educate drivers of new GM vehicles about the reasons why their oil change is so expensive could soon see those drivers paying double or even triple the going rate for conventional oil changes, which could make seeing those customers a little less often a little less painful.

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