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carl.froehlich(at)verizon
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 Posted: Sun Jan 22, 2012 10:58 am Post subject: Why do (I)O-540s cost so much? |
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I suspect Porsche does not have to fund the liability burden that Lycoming
does. Some time ago I heard (not verified) that up to 60% of the cost of a
new Lycoming goes to cover liability. Considering the failure of all tort
reform efforts in Congress, Lycoming can only look to more liability claims.
Now look at the drivers for Lycoming to not modernize the engine. A 20 year
old plane crashes and kills the pilot and passenger because they ran out of
fuel. A new Lycoming that gets better fuel efficiency would tell the
lawyers that "if the old engine was updated, then the old engine contributed
to the plane running out of fuel - so Lycoming is liable". Pick your
scenario - any change implies the previous engine model had a defect and
opens the doors for them to pay more claims, no matter how farfetched.
One reason to build an experimental plane is that an old man Cessna is
running a paltry $350K, a Mooney or Cirrus pushing $500K. They have even
more liability risk than Lycoming.
And no, I am not a lawyer.....
Carl
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Bob Turner
Joined: 03 Jan 2009
Posts: 885
Location: Castro Valley, CA
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| Posted: Sun Jan 22, 2012 4:33 pm Post subject: Re: Why do (I)O-540s cost so much? |
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yes, liability is part of the story. If you die in a plane crash your life is somehow worth a whole lot more than if you die in a Porche crash. Juries are supposed to be our peers. As Pogo said, "We have met the enemy, and he is us."
But there are other issues. Porche doesn't have a large share of the car market, but I'll bet they make 10 times, or maybe 100 times, more engines than Lycoming does. That means a $100 million investment in a modern mass-production factory makes sense for them, and brings the average cost down. It doesn't make sense for Lycoming. It's almost like every part comes out of a custom machine shop.
Finally, there's the lack of competition. Porche raises its prices until it's afraid drivers will buy a different car. Lycoming raises its prices until it's afraid people will drop out of aviation.
Lycoming and TCM have a virtual monopoly. Due in part to the tight regulation of the industry. I remember when Superior first introduced PMA cylinders. Over night, prices of all cylinders (including Lycoming) dropped in half. Of course prices of everything else with no competition remained high, leading to nonsensical things like a simple steel pushrod (no competition) costing nearly as much as a complete cylinder assembly!
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Bob Turner
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jesse(at)saintaviation.co
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| Posted: Mon Jan 23, 2012 11:16 am Post subject: Why do (I)O-540s cost so much? |
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I was reading this thread with interest while I waited to read somebody making the points that I think are the most important in the cost discussion. They might not be in this order, in my opinion, but these are all huge contributing factors.
1. Cost of certification - this is a huge cost, which is why there aren't many changes over the years. Look at the new 172's versus the 1970's models. Slight differences to the same general airplane.
2. Economies of Scale - as mentioned, the porsche engine is probably produced in quantities a lot higher than the IO-540.
3. Alternatives/Competition - the cost of the engine effects the cost of the vehicle. If the Porsche engine cost was $45,000 instead of $12,000, then the car would cost at least $33,000 more, so people would go elsewhere, because they can. With the Lycoming, what alternatives are there? Continental, if anything, depending on the airframe that it is mounted on. With this in mind, Lycoming charges $45,000 because they can. Porsche doesn't because they can't.
4. Aircraft vs Automobile - Liability insurance is hugely higher for aircraft parts, I am sure, than for automobiles. If the Lycoming stops making noise, people very likely may die. If the Porsche stops making noise, people will have to call a tow truck. If I was an insurance company, I know who I would charge more.
There are, I am sure, a lot of other factors in the pricing structure, but I think the overall reason Lycoming charges so much is because they can, plain and simple. Supply and demand.
do not archive
Jesse Saint
Saint Aviation, Inc.
jesse(at)saintaviation.com
C: 352-427-0285
F: 815-377-3694
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rv10pro(at)gmail.com
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| Posted: Mon Jan 23, 2012 6:36 pm Post subject: Why do (I)O-540s cost so much? |
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Astutely Accurate on all points. On Jan 23, 2012 11:19 AM, "Jesse Saint" <jesse(at)saintaviation.com (jesse(at)saintaviation.com)> wrote:[quote] --> RV10-List message posted by: Jesse Saint <jesse(at)saintaviation.com (jesse(at)saintaviation.com)>
I was reading this thread with interest while I waited to read somebody making the points that I think are the most important in the cost discussion. They might not be in this order, in my opinion, but these are all huge contributing factors.
1. Cost of certification - this is a huge cost, which is why there aren't many changes over the years. Look at the new 172's versus the 1970's models. Slight differences to the same general airplane.
2. Economies of Scale - as mentioned, the porsche engine is probably produced in quantities a lot higher than the IO-540.
3. Alternatives/Competition - the cost of the engine effects the cost of the vehicle. If the Porsche engine cost was $45,000 instead of $12,000, then the car would cost at least $33,000 more, so people would go elsewhere, because they can. With the Lycoming, what alternatives are there? Continental, if anything, depending on the airframe that it is mounted on. With this in mind, Lycoming charges $45,000 because they can. Porsche doesn't because they can't.
4. Aircraft vs Automobile - Liability insurance is hugely higher for aircraft parts, I am sure, than for automobiles. If the Lycoming stops making noise, people very likely may die. If the Porsche stops making noise, people will have to call a tow truck. If I was an insurance company, I know who I would charge more.
There are, I am sure, a lot of other factors in the pricing structure, but I think the overall reason Lycoming charges so much is because they can, plain and simple. Supply and demand.
do not archive
Jesse Saint
Saint Aviation, Inc.
jesse(at)saintaviation.com (jesse(at)saintaviation.com)
C: [url=tel:352-427-0285]352-427-0285[/url]
F: [url=tel:815-377-3694]815-377-3694[/url]
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