Westport Innovations Discussion On Cummins Conference Call

| About: Westport Fuel (WPRT)

There's a bullish nugget for Westport (NASDAQ:WPRT) investors from the Cummins (NYSE:CMI) conference call (full transcript) on Tuesday, May 1st at the 41:10 mark. Cummins Chairman and CEO, Tom Linebarger, completely blows off a specific question regarding the 15-liter engine and the difference between traditional spark ignition and Westport Innovations high pressure direct injection (HPDI) technology.

Here is the transcript and my editorial comments / opinions.

Question: Ann Duignan from JPM

Hi, good morning guys - Its Ann Duignan. um Could you talk a little bit about your 15-liter natural gas engines spark ignition um your competitors have been pretty vocal out there in the market place talking about the fact that um a 15-liter spark ignition simply wont work um or will work technically but you will give up a lot of power and fuel efficiency. Could you just talk a little bit about your strategy using spark ignition verses high pressure direct injection etc. ...

Editorial comments - This is why investors should listen to conference calls - or hire someone to listen. This is an excellent question that directly impacts our Westport Innovations investment case (case can be seen here). The chairman/CEO has been thrown a "lob ball" question by Ann. He has been given the opportunity to differentiate Cummins 15-liter project.

For the readers not up on the Cummins / Westport joint venture, the 15-liter engine was specifically excluded from the recently updated JV. This "exclusion" has created some "angst" in the analyst community about the Cummins / Westport relationship and was the catalyst for WPRT stock to fall from $50+ to little more then $30 in eight weeks.

So if am the chairman/CEO, I am going to answer the specific question and discuss spark ignitions, their value, what Cummins is doing, why Cummins feels it will compete with HPDI, etc. Read what he says - I couldn't believe it.

Response : Tom Linebarger, chairman/CEO

Yea, well, so ah um you know we have as you know quite a bit of experience with spark ignited now in um on highway markets. Pretty much we are the only one with an on highway presents today in spark ignited engines or natural gas engines period and we have been using that technology for sometime. Um our our view of course is that demand for spark ignited natural gas engines is driven by the the the lower much lower price of natural gas in the market today. It's still, from a fuel point of view, ah there is not as much infrastructure there is other adaptations that have to be made to the truck to store the fuel that are are are difficult and still issues to be worked out but the price of natural gas has come down low enough where there is a whole bunch of customers interested in trying natural gas to drive various kinds of fleets. There already the ones that come back home every night are already using it but but some of the fleets who are doing regional hauls and things like that are interested in trying it. And of course we have ah in our Cummins / Westport joint venture already ah we are already launching a 12-liter engine which has got enormous interest and the idea the 15-liter engine is as people continue to extend out the range from which they want to take natural gas engines ah that's a natural extension ah to the 15-liter so that's our logic. We have you know as I mentioned in my ah my words people are customers are telling us they are interested in the product again we will see when we get there. But um our view is that if natural gas price stay anywhere near where they are and infrastructure continues to build out it will be significant interest in that technology and we think its the best match between simplicity affordability efficiency ah and performance for the customers and all those things of course matter to our customers.

Editorial comments - What the heck is he talking about? Did he even come close to answering the question? Gosh no - he sounds like he doesn't have a clue about what she was specifically asking - or he would have answered. Instead he created some baloney to blab about for 2 minutes. I could be wrong but a chairman/CEO can do better when answering a specific question.

Seriously - my jaw dropped when I was listening - you should listen as well. He could have discussed how they were going to get around the "table top" performance curve seen by traditional natural gas engines - but he didn't. He could have discussed there "in-house" development of their own 15-liter engine - but he didn't. He could have contrasted the HPDI technology with the traditional natural gas engine - but he didn't. He could have talked about how they would differentiate their product from WPRT - but he didn't. He could have explained the difference between traditional spark ignited engines and high pressure direct injection technologies - but he didn't.

The bullish point for Westport is - he didn't have an answer a very specific question. The reason - we may never know. Could be, he just had a bad day - could be, he is not up to speed on the JVs or about the technologies - could be, Westport's HPDI technology was not for sale at any price and Westport carved out the 15-liter from the joint venture (not the other way around as feared) for WPRTs benefit.

As an investor sometimes you have to read the tea leaves a bit - sometimes you are right - sometimes you are wrong. Only time will tell.

Disclosure: I am long WPRT.