Potential Stranded Capital Analysis 

on EPA Light-Duty Technology 

Cost Analysis
NOTICE

This technical report does not necessarily represent final EPA decisions or 

positions. It is intended to present technical analysis of issues using data 

that are currently available. The purpose in the release of such reports is to 

facilitate the exchange of technical information and to inform the public of 

technical developments.

EPA-420-R-11-019

November 2011

Assessment and Standards Division

Office of Transportation and Air Quality

U.S. Environmental Protection Agency

Prepared for EPA by

FEV, Inc.

EPA Contract No. EP-C-07-069

Work Assignment No. 3-3

Potential Stranded Capital Analysis 

on EPA Light-Duty Technology 

Cost Analysis
CONTENTS 

Section Page

Executive Summary ..................................................................................................................... 1-1 

1 Introduction ........................................................................................................................ 1-3 

1.1 Objectives ................................................................................................................. 1-3 

1.2 Capital Investment and Tooling Definitions ............................................................ 1-5 

1.3 Case Studies Evaluated ............................................................................................. 1-6 

2 Methodology for Developing Stranded Capital Investment and Tooling Values .............. 2-7 

2.1 Analysis Set-up: ........................................................................................................ 2-7 

2.2 Stranded Capital & Tooling Case Study Steps ....................................................... 2-11 

3 Key Assumptions in the Stranded Capital and Tooling Analysis .................................... 3-13 

4 Case Study Results ........................................................................................................... 4-13 

5 Glossary of Terms ............................................................................................................ 5-15 

i 
 LIST OF FIGURES 

Number Page

Figure 2-1: Sample Stranded Capital Section of SCTA Worksheet ............................................ 2-9 

Figure 2-2: Sample Stranded Tooling Section of SCTA Worksheet ......................................... 2-10 

Figure 2-3: Stranded Capital and Tooling Case Study Steps..................................................... 2-12 

ii
iii

LIST OF TABLES 

Number Page

Table ES-1: Potential Stranded Capital Analysis Results ($/New Vehicle Technology 

Configuration) .............................................................................................................................. 1-2 

Table 4-1: Summary of Potential Stranded Capital and Tooling Estimates .............................. 4-14 
Potential Stranded Capital Analysis on EPA Light-Duty Technology Cost 

Analyses 

Executive Summary 

The United States Environmental Protection Agency (EPA) contracted with FEV, Inc. to 

determine incremental direct manufacturing costs (IDMC) for a set of advanced lightduty vehicle technologies. The technologies selected are on the leading edge for 

reducing emissions of greenhouse gases in the future, primarily in the form of tailpipe 

carbon dioxide (CO2). Examples of technologies evaluated include: downsized 

turbocharged gasoline direct-injection (GDI) engines, advanced transmissions (e.g., 8-

speed automatic, 6-speed dual clutch), and hybrid electric vehicles. 

To develop incremental direct manufacturing costs, advance vehicle technology 

configurations were evaluated against baseline vehicle technology configurations, 

representative of the current state of design, and having similar overall driving 

performance. For each case study, both the new and baseline configurations utilized a 

common set of boundary conditions for the analysis (e.g., technology maturity, 

production year, production volumes, manufacturing location, equipment life). Using the 

same boundary conditions for both analyses, a consistent framework for all costing work 

was established. A detailed description of the costing methodology used to develop the 

incremental direct manufacturing costs can be found in EPA report “Light-Duty 

Technology Cost Analysis Pilot Study (EPA-420-R-09-020).” 

In selected cases where the boundary conditions and parameters assumed in the primary 

analysis differ, an adjustment can be made to the incremental direct manufacturing cost 

accounting for these differences. Examples of case study specific parameter adjustments 

are volume differences, technology maturity differences, timeframe differences, and 

production duration differences. 

Using conservative assumptions, this report investigates the potential saddling of cost 

onto a new technology configuration as a result of the production equipment and/or 

tooling for the baseline configuration being abandoned before the planned fully 

depreciated life. An applicable scenario is when a new technology configuration is 

launched into production forcing a baseline technology out of production prematurely. In 

this case any production equipment and/or tooling, which can only be used to produce the 

baseline technology, and which cannot be redispositioned to another plant continuing to 

make the baseline technology, would be removed from service and sold for scrap. It is 

assumed the financial loss associated with abandoning capital investment and tooling 

from the baseline technology configuration would indirectly be recovered by the new 

replacing technology over some number of years of its production. 

1-1 
Within the context of this report, the term stranded capital and stranded tooling will be 

used to define capital investment and tooling which has been decommissioned prior to 

the end of its fully depreciated life. In the FEV analysis, the fully depreciated life and 

useful life are assumed to be the same as a means of simplifying the analysis. 

The foundation for the stranded capital and tooling analysis are the previously completed 

EPA Light-Duty Vehicle Technology Cost Analysis case studies. For each case study, 

the FEV manufacturing team assembled a cost estimate for the total capital investment 

and tooling, which could only be used to manufacture the baseline technology. Any 

baseline technology capital investment or tooling, or portion of capital investment or 

tooling, which could be used to manufacture other products, was not included in the cost 

estimate. Using a straight-line depreciation method, the estimated stranded capital and 

tooling impact was calculated for three, five, and eight years. The average useful life 

used in the calculation was ten years with an assumption of zero residual value. The sum 

of the stranded capital and tooling for each of the evaluated periods (i.e., 3, 5, and 8 

years) was then divided by 2,250,000 new technology vehicle units; 2,250,000 vehicle 

units representing the sale of 450,000 units/year over five years (450,000 x 5). 

Table ES-1 the results for six case studies are presented, showing the potential stranded 

capital impact at three, five and eights years of product life, based on the methodology 

and set of conservative assumptions described in the report. The table includes the 

results for two dual clutch transmission (DCT) studies, an 8-speed automatic 

transmission (AT) study, two downsized (DS), turbocharged (T), gasoline direct injection 

(GDI) studies, and a powersplit hybrid electrical vehicle (HEV) study. 

Table ES- 1: Potential Stranded Capital Analysis Results 

($/New Vehicle Technology Configuration) 

Replaced 

Technology 

New 

technology 

Potential Stranded capital cost per vehicle 

with new technology, 

with product life ended after: 

3 years 5 years 8 years 

Conventional V6 DSTGDI I4 $56 $40 $16 

Conventional V8 DSTGDI V6 $60 $43 $17 

6-speed AT 6-speed DCT $55 $39 $16 

6-speed AT 8-speed AT $48 $34 $14 

6-speed DCT 8-speed DCT $28 $20 $8 

Conventional V6 Power-split HEV $111 $79 $32 

1-2
1 Introduction 

1.1 Objectives 

The objective of this work assignment is to determine the potential magnitude of stranded 

capital investment and tooling costs, associated with the launch of a new advanced 

vehicle technology configurations, prematurely replacing existing/baseline technology 

configurations. The case studies investigated in this analysis are based on advanced 

technologies considered leading edge for reducing emissions of greenhouse gases in the 

future. Further, the case studies selected for this analysis are the same for which FEV has 

previously developed incremental direct manufacturing costs as part of prior work 

assignments completed for EPA. 

In the original incremental direct manufacturing case studies, the same boundary 

conditions and parameters were employed for both the baseline and new technology 

configurations evaluated. This methodology provides a common framework for costing, 

allowing a good means of comparison. As part of these established boundary conditions, 

it was assumed both the baseline and new technology configurations would run their 

planned full production life cycle. Additional details on the incremental cost analyses 

can be found in the following published reports and in reports being prepared for 

subsequent case studies. 

• Light-Duty Vehicle Technology Cost Analysis – Pilot Study (EPA-420-R-09-020) 

• Light-Duty Vehicle Technology Cost Analysis – Report on Additional Case 

Studies (EPA-420-R-10-010) 

• Light-Duty Technology Cost Analysis, Power-Split and P2 HEV Case Studies 

(EPA-420-R-11-015) 

To understand the tooling and capital investment financial impact of the baseline 

technology not running a full production life cycle, the potential result of a new advance 

replacement technology being regulated into production too quickly, EPA contracted 

with FEV to conduct a potential stranded capital investment and tooling analysis. It is 

recognized that an accurate analysis would need to know just how quickly the new 

technologies (government standards) were phasing in, and would also be very specific to 

individual companies, factories, and manufacturing processes, particularly in regard to 

finding alternative uses for equipment and facilities. Such a thorough analysis would be 

a prohibitively large undertaking. Nevertheless, in order to account for the possibility of 

stranded capital costs, FEV has performed a bounding analysis, using conservative 

assumptions, of the potential stranded capital costs associated with rapid phase-in of 

technologies due to new standards, using data from FEV’s primary teardown-based cost 

analyses. 

1-3
A planned production life of 10 years was assumed for all equipment and tooling. The 

cost impact of canceling production of the baseline technology after three, five and eight 

years was evaluated. For each production run scenario (i.e., 3, 5, and 8 years) total 

potential stranded capital investment and tooling values were developed. For this 

analysis, the assumption is the early introduction of the new advance technology is 

responsible for prematurely ending the production life of the baseline technology. 

Therefore, the new technology should be accountable for recovering the stranded capital 

investment and tooling from the baseline technology configuration. Amortizing the 

combined total stranded capital investment and tooling by 2,250,000 new advance 

vehicle units (450,000 units per year x 5 years), an added cost per vehicle was established 

for each production run scenario. 

A simple, three-year baseline product cancellation example to illustrate the above: 

• $100,000,000 of dedicated baseline technology production equipment is identified 

to produce part “ABC.” 

• Assuming a straight line depreciation, and 10-year useful life, depreciated value 

per year is equal to $10,000,000. 

• Following three years of manufacturing, the baseline technology is replaced by a 

new technology configuration “XYZ.” 

• Part “ABC” is used in no other product made at this factory or another factory, 

and the equipment used to make part “ABC” is not reconfigurable to make some 

other part. 

• Remaining value of baseline equipment at point of cancellation $70,000,000 (7 

years x $10,000,000 depreciation expense/year). 

• Amortization volume based on estimated new vehicle technology configuration 

sales over five years equals 2,250,000 vehicle units (450,000 units/year x 5 years). 

• Estimated additional cost per new vehicle technology unit, accounting for baseline 

stranded capital and tooling equals $31.11/vehicle ($70,000,000 stranded capital 

and tooling /2,250,000 vehicle units). 

1-4
1.2 Capital Investment and Tooling Definitions 

Capital investment is defined as the facilities, machines, and other equipment used in the 

manufacturing process that are not directly in contact with the part produced. Simple 

examples of capital investment include stamping presses, injection mold machines, 

welding equipment, and diecast machines. Tooling, on the other hand, is generally the 

part-contacting components of the manufacturing process. In relationship to the example 

listed for capital investment, a stamping die, injection mold, weld tips, and diecast molds 

would all be examples of tooling. There are grey areas as to what constitutes tooling 

versus capital equipment, especially for component assembly processes. Generally, the 

OEM (original equipment manufacturer) will have detailed definitions for the less clearcut manufacturing operations. For this analysis, a deeper understanding of what is 

considered capital investment versus tooling is not required. 

All capital investment and tooling has a useful life expectancy, typically based on 

anticipated service hours or units produced. For example, assume a progressive stamping 

die has a purchased financed value of $250,000. The life expectancy of the stamping die 

is eight years, producing 450,000 engine brackets per year with a zero dollar residual 

value at end of the die’s life. The company that owns the die is using a straight-line 

depreciation method to expense the die. If, after four years, the part produced by the die 

is considered obsolete, approximately half the value of the die ($125,000) is 

unrecoverable (i.e., stranded tooling). Because the majority of tooling is generally 

considered dedicated, stranded tooling is generally more prevalent in comparison to 

stranded capital investment. This is especially true when automotive part and vehicle 

manufactures purchase production equipment with higher flexibility; a trend which has 

been growing over the last several decades. For the incremental direct manufacturing 

case studies, FEV assumed a flexible manufacturing environment when developing the 

cost models. FEV also assumed multiple manufacturing facilities and/or production lines 

existed, producing similar products, facilitating the ramping down of baseline production 

components and the ramping up of new technology components. 

In the previous engine bracket example, the progressive stamping die would be run on a 

400-ton stamping press (capital investment). Since the stamping press can run several 

different parts, simply by switching out the production dies, the stamping press would not 

become stranded upon deletion of the engine bracket. The terminology used within this 

analysis to identify capital investment, which can be utilized to produce several different 

parts, is referred to as flexible capital investment. 

In comparison, dedicated capital investment is production equipment constructed to only 

manufacture one part. If the part becomes obsolete, independent the reason, the capital 

becomes stranded. In some cases where a portion of the capital equipment can be reused, 

the equipment is considered semi-dedicated. Therefore, only a defined portion becomes 

stranded. 

1-5
More discussion on the designation of dedicated, semi-dedicated, and flexible capital 

investment and tooling will be covered in the methodology section (Section 2.1). 

1.3 Case Studies Evaluated 

The specific cases evaluated within this report include those previously studied for 

developing incremental direct manufacturing costs for a set of advance light-duty 

technologies: technologies aimed toward reducing greenhouse gas emissions. This work 

was completed by FEV for EPA. 

The six advance technology configurations analyzed were: 

• A 2.0L, I4, 4-valve, dual overhead cam (DOHC), dual variable valve timing (dVVT), turbocharged, gasoline direct injection (GDI) engine, compared to an 

equivalent conventional 3.0L, V6, 4-valve, DOHC, d-VVT, naturally aspirated 

(NA), port fuel injected (PFI) engine. 

• A 3.5L, V6, 4-valve, dual overhead cam (DOHC), d-VVT, turbocharged, GDI 

engine, compared to an equivalent conventional 5.4L, V8, 3-valve, single 

overhead cam (SOHC), VVT, NA, PFI engine. 

• A 6-speed wet dual clutch transmission (DCT), compared to an equivalent 6-speed 

automatic transmission. 

• An 8-speed automatic transmission, compared to an equivalent 6-speed automatic 

transmission. 

• An 8-speed wet DCT, compared to an equivalent 6-speed wet DCT. 

• An 2.5L NA PFI engine, electronically control continuously variable transmission 

(eCVT) power-split hybrid electric vehicle (HEV), compared to a conventional 

3.0L NA PFI engine, 6-Speed AT baseline vehicle. 

1-6
2 Methodology for Developing Stranded Capital Investment and 

Tooling Values 

FEV assembled a cross function team (CFT) of manufacturing experts (employees and 

those otherwise under contract) to perform the analysis. The CFT, with an average 

relevant experience level of 24 years, employed technology expertise from several areas, 

including: design and development, vehicle integration, production development, 

manufacturing engineering (supplier and OEM), cost estimating, and product 

benchmarking. 

The core members of the CFT first developed the methodology and tools required to 

conduct the analysis as discussed in detail in Section 2.1. Following the analysis set-up, 

the first case study was selected for the evaluation. The study steps are presented in 

Section 2.2 along with the aid of Figure 2-2. The same process steps were repeated for 

all technologies evaluated. 

2.1 Analysis Set-up: 

1) Determine and define the conditions for establishing “Stranded Capital & Tooling.” 

Determination based on input from EPA and other sources reviewing prior “LightDuty Vehicle Technology Cost Analysis” studies. Examples of established analysis 

boundary conditions include:

• Average investment and tooling fully depreciated life of 10 years

• Production life duration for baseline equipment: 3, 5, and 8 years

• Total new vehicle technology configuration amortization volume (5 years x 

450,000 vehicle units/year)

2) Determine case studies to best represent the impact of Stranded Capital losses in total 

effort to implement emission reduction technologies.

3) Develop stranded capital and tooling analysis (SCTA) worksheet (Figure 2-1 & 

Figure 2-2). Key worksheet data fields include:

A. Component/Assembly Name 

B. Investment & Tooling description

C. Investment & Tooling Categorization 

D. Investment & Tooling Value as New (i.e., estimated purchase cost) 

E. Estimated Stranded Capital Investment and Tooling Loss (3, 5, and 8 years)

4) Developed categorization of investment and tooling. 

2-7
2-8

A. Investment Categorization Definitions:

i) Flexible <FLX>: Can be used to manufacture parts in either the baseline or 

new technology configuration (0% stranded)

ii) Re-Useable <RU>: Equipment can be used in alternative industries, equipment 

sold off at defined percent (50% stranded) of remaining value

iii) Semi-Dedicated <SD>: Approx 50% of equipment is flexible (50% stranded)

iv) Dedicated <DD>: Custom manufacturing equipment (100% stranded)

B. Tooling Categorization Definitions

i) Flexible <FLX>: Can be used to manufacture parts in either the baseline or 

new technology configuration (0% stranded)

ii) Perishable <PER>: Frequent replacement of tooling (0% stranded)

iii) Semi-Dedicated Tooling <SDT>: Approx. 50% of tooling is dedicated (50% 

stranded)

iv) Dedicated <DD>: Commodity-specific (100% stranded)
Investment 

Categorization

3 Years 5 Ye

Resale Loss Remaining Investment Value Remaining 

Val

50% 70% 50

Ford 3.5L Engine (Surrogate) 

$ - $ 

OEM Engine Assembly $ - $ 

1 Engine Assembly Assembly Equipment DD $ 19,500,000 $ 13,650,000 $ 

2 Piston & Rod Assembly Assembly Equipment DD $ 3,000,000 $ 2,100,000 $ 

2 Cylinder Head and Camshaft Assembly Non-sync pallet transfer 

(assemble valve train complete and test)

DD $ 4,500,000 $ 3,150,000 $ 

$ - $ 

F Block with Plugs $ - $ - $ 

$ - $ 

2 Block machine CNC machines, semi-flex 

assembly machines & washers, robot load, part pallets (rgh. Machine, assemble brg. caps, finish machine, wash, assemble plugs, air test & inspect (V to I configuration)

DD $ 13,125,000 $ 9,187,500 $ 

$ - $ 

2 F Block cubed machine Included above FLX $ - $ - $ 

$ - $ 

3 F Block-Trimmed Trim Press FLX $ - $ - $ 

$ - $ 

4 F Block-Cast Die Cast Machine FLX $ - $ - $ 

$ - $ 

5 F Block-Raw Material NA NA $ - $ - $ 

$ - $ 

3 F - Liners Cylinder Block Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Dowel, Heads Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Dowel, Heads Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Dowel, A/C Compressor Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Dowel, Alternator Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Dowel, Bell Housing Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Plug, Coolant, Block, Large Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Plug, Coolant, Block, Medium Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Plug, Coolant, Block, Small Commodity Pricing NA $ - $ - $ 

$ - $ 

2 F Coolant Diverters Stamping press FLX $ - $ - $ 

$ - $ 

2 F Plastic Protector Mold press FLX $ - $ - $ 

$ - $ 

1 F Main Bearing, Crank, Top Bearing manufacturing equip. FLX $ - $ - $ 

$ - $ 

1 F Thrust Bearing, Crank, Upper Bearing manufacturing equip. FLX $ - $ - $ 

$ - $ 

F Crank $ - $ - $ 

5 1 6789 0 11

Indented Bill of Materials 

 Investment 

Value 

0123 "New" 

Flexible <FLX>: Re-Useable <RU>:Semi-Dedicated <SD>:Dedicated <DD>:(Definitions in Comment Box)

4 12

Investment 

Description

Estimated Stranded Investm

Figure 2-1: Sample Stranded Capital Section of SCTA Worksheet

2-9 
Tooling Categorization

3 Years 

Remaining Tooling 

Value

Rem

70% 

Ford 3.5L Engine (Surrogate) 

$ - $ 

OEM Engine Assembly $ - $ 

1 Engine Assembly Fixtures/Pallets/Misc DD $ 20,800,000 $ 14,560,000 $ 

2 Piston & Rod Assembly Fixtures/Pallets/Misc DD $ 3,200,000 $ 2,240,000 $ 

2 Cylinder Head and Camshaft Assembly Assembly part pallets, 

spindles, multi-spindle heads, special spindle columns, part feeders, air test seals and mounting plates, gauges

DD $ 4,800,000 $ 3,360,000 $ 

$ - $ 

F Block with Plugs $ - $ - $ 

$ - $ 

2 Block machine Machining - part pallets, 

tooling, machining part programs, inspection program, special gaugesAssembly - part pallets, spindles, multi-spindle heads, special spindle columns, part feeders, gaugesWashers - part programsPart Handling - dunnage, robot programs

DD $ 14,000,000 $ 9,800,000 $ 

$ - $ 

2 F Block cubed machine $ - $ - $ 

$ - $ 

3 F Block-Trimmed Dies DD $ 225,000 $ 157,500 $ 

$ - $ 

4 F Block-Cast Molds DD $ 14,062,500 $ 9,843,750 $ 

$ - $ 

5 F Block-Raw Material $ - $ - $ 

$ - $ 

3 F - Liners Cylinder Block Cast tube DD $ 20,000 $ 14,000 $ 

$ - $ 

2 F Dowel, Heads $ - $ - $ 

$ - $ 

2 F Dowel, Heads $ - $ - $ 

$ - $ 

2 F Dowel, A/C Compressor $ - $ - $ 

$ - $ 

2 F Dowel, Alternator $ - $ - $ 

$ - $ 

2 F Dowel, Bell Housing $ - $ - $ 

$ - $ 

2 F Plug, Coolant, Block, Large $ - $ - $ 

$ - $ 

2 F Plug, Coolant, Block, Medium $ - $ - $ 

5 1 6789 0 11

Indented Bill of Materials 

0123 4 12

 Tooling Value

"New" 

Estimated St

Tooling 

Description

Flexible <FLX>Perishable <PER> Semi-Dedicated Tooling <SDT>Dedicated <DD>(Definitions in Comment Box)

Figure 2-2: Sample Stranded Tooling Section of SCTA Worksheet

2-10 
2.2 Stranded Capital & Tooling Case Study Steps 

1) Select case study for stranded capital and tooling evaluation. 

2) Transfer component and assembly part names/descriptions from baseline Comparison 

Bills of Materials (CBOM) developed in the prior tear-down studies into the SCTA 

worksheet. 

3) CFT team review of stranded capital and tooling SCTA worksheet. Team members 

are assigned subsystem and system responsibilities based on industry experience. 

4) Using the baseline and new technology CBOMs (developed in primary teardown 

analyses), identify potential capital investment and tooling in the baseline technology 

configuration, which is not likely to be transferable to the new technology 

configuration. 

5) Based on Step 4 above, define manufacturing processes in detail, identifying 

equipment and tooling requirements. Summarize details in SCTA worksheet. 

6) From the categorization menu in the SCTA worksheet, establish categorization codes 

(e.g., flexible, dedicated, semi-dedicated) for investment and tooling items captured in 

Step 5 above. 

7) Enter in investment value ($) for components/assemblies with capital investment 

identified as re-useable, semi-dedicated, or dedicated. For tooling identified as 

dedicated or semi-dedicated, enter in tooling value ($). 

8) The SCTA worksheet automatically calculates the stranded capital and tooling values 

for the three-, five-, and eight-year truncated production periods. 

9) At the bottom of the SCTA worksheet, a combined total stranded capital and tooling 

value is calculated for each of the truncated production periods. 

10) An estimated cost per new advance technology vehicle is calculated for each 

truncated production period, using the values derived in Step 9 along with the total 

estimated new advance vehicle sales during a five-year period (i.e., 450,000 units/year 

x 5 years = 2,250,000 vehicles) 

2-11 
Figure 2-3: Stranded Capital and Tooling Case Study Steps 

For New and Baseline 

Existing unit cost impact: 

DEFINE OF TOOLING & INVESTMENT 

CBOM 

DIFFERENT 

SAME

PARTS SAME OR 

DIFFERENT? No 

Consideration $0 

Tool & Investment 

Estimate 

Define for 

TOOLING 

Define for 

INVESTMENT 

- Flexible 

- Reusable 

DEFINE 

RULES - Flexible 

- Perishable 

Transfer tooling and investment impact 

(assuming tools were bought then scrapped) 

Analysis based on 3-, 5-, and 8-year value remaining scenarios 

2-12
3 Key Assumptions in the Stranded Capital and Tooling Analysis 

Listed below are the key assumptions made as part of the stranded capital and tooling 

analysis. 

• All manufacturing equipment was bought brand new when the baseline 

technology started production (i.e., no carryover of equipment used to make the 

previous components that the baseline technology itself replaced). 

• Manufacturing equipment and tooling used to make the baseline technology 

components is straight-line depreciated over a 10-year life. 

• Factory managers do not optimize capital equipment phase-outs (i.e., they are 

assumed to routinely repair and replace equipment without regard to whether or 

not it will soon be scrapped due to adoption of new vehicle technology). 

• Estimated stranded capital is amortized over five years of annual production at 

450,000 units (of the new technology components). This is the same annual 

production volumes used in the incremental direct manufacturing cost studies. 

4 Case Study Results 

The results for the stranded capital and tooling analyses for the six evaluated case studies 

are captured below in Table 4-1. In the table, the total stranded capital and tooling values 

are present for each technology at each production truncation period. The “New” column 

in the table represents the estimated purchase price of the baseline vehicle technology 

capital and tooling prior to any depreciation. This value only represents the portion of 

equipment and tooling which cannot be used to manufacture any other component or 

assembly without extensive rework and financial burden. 

A unit cost, in addition to the total lump sum values, is also present in the table. These 

values represent the total stranded capital and tooling lump sum values amortized over 

five years at 450,000 units/year of the new vehicle technology configurations. 

Because many of the detailed spreadsheet documents generated within this analysis are 

too large to be shown in their entirety, electronic copies can be accessed through EPA’s 

website http://www.epa.gov/otaq/climate/publications.htm 

4-13
4-14

Table 4-1: Summary of Potential Stranded Capital and Tooling Estimates 

Summary of Potential Stranded Capital & Tooling Estimates 

Component Costs New @ 3 Yrs. @ 5 Yrs. @ 8 Yrs. 

Engines 

3.0L V6 NA PFI to 2.0L I4 

Turbo GDI 

Inv. & Tlg. $ $181,781,500 $126,827,050 $90,590,750 $36,236,300 

$/Unit $80.79 $56.37 $40.26 $16.11 

5.4L V8 NA PFI to 3.5L V6 

Turbo GDI 

Inv. & Tlg. $ $194,417,889 $135,672,522 $96,908,944 $38,763,578 

$/Unit $86.41 $60.30 $43.07 $17.23 

Transmissions 

6-Speed AT to 6-Speed DCT 

Inv. & Tlg. $ $205,756,250 $123,039,875 $87,885,625 $35,154,250 

$/Unit $91.45 $54.68 $39.06 $15.62 

6-Speed AT to 8-Speed AT 

Inv. & Tlg. $ $163,786,250 $107,503,375 $76,788,125 $30,715,250 

$/Unit $72.79 $47.78 $34.13 $13.65 

6-Speed DCT to 8-Speed 

DCT 

Inv. & Tlg. $ $89,553,000 $62,687,100 $44,776,500 $17,910,600 

$/Unit $39.8 $27.86 $19.90 $7.96 

Fusion Eng. & Trans. 

Conventional V6 to Powersplit HEV 

Inv. & Tlg. $ $387,537,750 $249,866,925 $178,476,375 $71,390,550 

$/Unit $172.24 $111.05 $79.32 $31.73 
5 Glossary of Terms 

Dedicated: Custom manufacturing equipment (100% Stranded). 

Equipment design is specific to a component design such that 

there is minimal opportunity to retool and little value other 

than scrap metal. Dedicated hardware within the 

manufacturing process, while often generic in its component 

design, is in many cases configured in such that it is less 

likely to be reused. 

 Flexible: Can be used to manufacture baseline or new technology parts 

(0% Stranded). Equipment is generic and oftentimes an offthe-shelf design that can be easily redeployed for other 

component manufacturing within some constraints (turning, 

milling, work envelop size, etc.) 

Capital 

Investment: The facilities, machines and other equipment within the 

manufacturing process that are not directly in contact with the 

part produced. Among auto manufacturers, investment is also 

referred to as the facilities and equipment part of process 

(versus part-contacting tooling, cutting tools, fixtures, gauges, 

etc.). 

Perishable: Frequent replacement of tooling (0% Stranded). Perishable is 

often referring to the wearable part of the cutting tool or partcontacting components of the process that are prone to wear 

or have a given life. 

Re-Usable: Equipment can be used in alternative industries, equipment 

sold-off at defined percent of remaining value. Equipment 

can be components of either dedicated or flexible equipment. 

Semi-Dedicated: Approximately 50% of equipment is flexible and 50% 

dedicated or stranded 

5-15 
5-16

Stranded Capital: The abandoned equipment costs, either as new, or at reduced 

value when replaced after a prematurely truncated period of 

time in production. 

Stranded Tooling: The abandoned tooling costs, either as new, or at reduced 

value when replaced after a prematurely truncated period of 

time in production. 

Tooling: Generally the part-contacting components of the 

manufacturing process, such as part-contacting cutting tools, 

fixtures, gauges, etc.