Management 12th Edition by Richard Daft

Exercise 18

Part three: Planning
Companies Form Strategic
Partnership to Build America's
Natural Gas Highway
Consumers face a series of important questions when shopping for a new vehicle: Electric or hybrid? Regular or diesel? Powerful or fuel-efficient? Sporty or economical? Yet for eco-minded consumers who seek the ultimate in green motoring, the decision to purchase a vehicle often comes down to one simple question: Where do I fill it up?
Where to refuel is a perplexing issue for buyers of alternative-fuel vehicles. This is because cutting-edge green vehicles lack a nationwide fueling infrastructure. The United States has more than 100,000 standard gas stations, yet few are equipped to fuel vehicles that run on electricity, natural gas, or biofuel. For most consumers, that's a deal breaker.
Despite the push for cleaner autos, today's car buyers find themselves in a Catch-22: an ecologically responsible vehicle might fit in with their needs and desires, but if there is no place to fill up, they can't drive it, so why consider buying one? A similar dilemma exists for fleet purchasers, automakers, and gas station chains: why purchase or even manufacture alternative-fuel vehicles if there aren't any filling stations? On the other hand, why build filling stations if no one is purchasing or making alternative-fuel vehicles?
Fortunately for consumers and the environment, Clean Energy Fuels Corp. and Navistar International have a plan to solve this chicken-and-egg dilemma. In 2012, the California alternative fuels provider and the Illinois semi-trailer truck giant announced a strategic partnership to build America's Natural Gas Highway, a first-of-its-kind network of natural gas fueling stations across the United States. Slated for completion by the end of 2013, America's Natural Gas Highway will feature 150 liquefied natural gas (LNG) filling stations in major metropolitan areas across the country-San Diego, Los Angeles, and Las Vegas out west; Houston, San Antonio, and Dallas in the Texas Triangle; New York in the east; and major cities in the Midwest and South. Well-placed stations on in-between routes will tie the whole network together, resulting in a coast-tocoast refueling infrastructure for natural gas vehicles.
Top-level planners behind America's Natural Gas Highway say their goal is to offer transport companies a package deal made up of eco-friendly fleets, inexpensive fuel, and reliable fueling stations. "Navistar and Clean Energy have come up with a breakthrough program that offers customers a quicker payback on their investment, plus added fuel cost savings from day one of operation," says Navistar CEO Dan Ustian. "Together our companies will demonstrate how a naturalgas- integrated vehicle offering the right distribution and fueling solution can be integrated into a fleet's operations to reduce costs and drive efficiencies."
For a natural gas highway to work, effective collaboration must occur between a truck maker, a fuel supplier, a truck stop chain, and a natural gas driller. Navistar and Clean Energy have the first two bases covered: Navistar will sell its best-in-class LNG truck fleets to shippers, along with a mandatory fiveyear fuel-purchase contract through Clean Energy. News releases indicate that two other companies are included in the plan. Pilot Flying J Travel Centers, the largest network of truck and travel stops, is providing service locations where trucks can refuel. Likewise, Chesapeake Energy, the No. 2 natural gas driller in the United States, is investing $150 million towards the initial rollout. So Navistar sells natural gas trucks to shippers, Clean Energy supplies the fuel, Pilot Flying J provides the fueling stations, and Chesapeake drills natural gas and provides investment capital.
The plan sounds good on paper, but can it work? Clean Energy CEO Andrew Littlefair says America's Natural Gas Highway is already well underway. "Clean Energy has already engaged over 100 shippers, private fleets, and for-hire carriers that have shared their operations to qualify for the economic opportunity of operating natural gas trucks. This has helped us in turn plan the first phase of the natural gas fueling highway," Littlefair says. Clean Energy's chief marketing guru, Jim Harger, adds that the financial advantages of the plan are such that transport businesses simply can't refuse. "You get the same lease cost of a diesel truck and get fuel savings too," Harger says.
There are many good reasons to think that America's Natural Gas Highway will succeed. However, executives at Navistar and Clean Energy say their plan will work because natural gas is the energy of the future and requires no government subsidies. "We remain committed to provide natural gas fuel for transportation because it has genuinely proven to be the cleaner, cheaper, domestic alternative fuel choice," says Andrew Littlefair. Navistar's chief agrees, adding that natural gas is both economically sustainable and good for the environment. "The program will allow the industry to transition to natural gas-powered vehicles without relying on government handouts," Ustian says. "This is going to work far differently than any other program in this field for alternative fuels. It can stand on its own and stand very tall, and that's why it's going to be successful."
Why do businesses form strategic partnerships? Does the creation of America's Natural Gas Highway require such a partnership? Why or why not?