Reno engine company’s target market: 18 rebuilders
Joe Malfa and Mitch Wagner intently watch computer monitors on the table in front of them as they gather data about the performance of a roaring diesel engine a few steps away.
The continued collection of data is critical as their Reno-based Speed of Air Inc. looks to raise additional funds to begin a sharply focused effort to bring the company’s technology to market.
How sharply focused? Speed of Air, which has spent the better part of five years developing its technology, identified precisely 18 companies that are likely to be among the first to adopt its technology that improves the performance of internal-combustion energies.
Eric Robinson, the company’s chief executive officer, explains the company’s development:
Malfa, the company’s president who has worked with engine technology for 40 years, always has been looking for ways to make internal combustion engines more efficient.
In 2008, he pitched an idea to longtime friends Robinson and Wagner, who’s now the company’s chief financial officer, and they took the steps that led to creation of Speed of Air.
Their first step was the office of patent attorney David Plumley of Christie Parker Hale LLP in Glendale, Calif., who developed the patent protection that surrounds the Speed of Air Technology.
That technology involves changes in the surface physics and air-flow dynamics of the internal elements of an engine— as well as coatings to improve the thermodynamic performance of components such as turbocharger and exhaust-manifold assemblies.
Independent tests found the Speed of Air technology reduces fuel consumption by 7.5 percent in a Cummins 5.9-liter diesel engine while increasing horsepower by 23.4 percent and reducing hydrocarbon emissions by 58.4 percent.
The company tested the technology, too, on hay-cutting machinery on a farm near Eureka. The farmer reported sharply lower operating costs.
The company’s founders have invested $1.2 million — not to mention abundant sweat equity — in development, testing and patent protection of the technology.
But now Speed of Air needs to cut through all the noise and ballyhoo that surrounds the crowds of folks who say they’ve found ways to make engines more efficient.
That, Robinson says, is why Speed of Air is focused so closely on 18 potential customers. They’re the major players in the business of rebuilding diesel and natural gas engines.
Nearly every industrial engine — some 15 million are in use worldwide — is rebuilt on a regular schedule, creating a $7 billion annual business.
The field is dominated by engine manufacturers such as Cummins and Caterpillar, Robinson explains, but independent rebuilders handle about 30 percent of the engine-rebuilding work worldwide.
Speed of Air figures those rebuilders are hungry for a product that gives them a competitive edge, and the Reno company’s solution doesn’t require extensive training. Pistons and liners that use the Speed of Air technology, for instance, are installed just like traditional products.
The company expects to manufacture kits, probably in Reno, for distribution to rebuilders. It also expects to license its technology directly.
Within the narrow market of independent rebuilders, Speed of Air has sharpened its focus even more.
Much of its early work focused on the Cummins 5.9-liter engine that’s widely used in light- and medium-duty vehicles such as delivery vans. Rhein Associates Inc., a Canton, Mich., company that specializes in market consulting on the diesel industry, estimates more than 1 million of those engines are in service in North America.
A second focus for Speed of Air has been technology for a big Caterpillar natural gas engines used as a stationary gas compression source in the petroleum industry. Texas is cracking down on emissions from those engines, and Speed of Air sees a big opening for its products.
By focusing on rebuilders, rather than manufacturers, Robinson says the company hopes to avoid the frustrations of trying to convince a big company to take a chance on licensing technology developed by a startup.
But Malfa, Wagner and Robinson think they’ve got a shot with the big engine-makers once Speed of Air makes inroads with independent rebuilders.
“We try not to let ourselves think too far into the skies,” says Robinson.
On the other hand, the company’s expectations are anything but modest.
“In five years, if we could be doing $300 million to $500 million, we’d be happy,” Robinson says.
With the investment capital that it’s seeking, Speed of Air would develop a sales and marketing program and continue research and development at its South Reno facilities.
The rate effective Jan. 1, 2020, is 1.65 percent of wages paid to employees. That is two-tenths of a percent lower than the current rate, giving a significant break to businesses that pay the tax.