“The combination of Navistar‘s truck design, development and manufacturing expertise and Caterpillar‘s worldwide distribution creates a significant advantage for global customers through the ability to offer the right vehicle for the right application.” -Dee Kapur, president, Navistar Truck Group
Hoo boy. Here we go. By the end of today, we‘ll have news stories galore all over the place detailing the just announced “memorandum of understanding” Caterpillar Inc. and Navistar International Corp. to form a strategic partnership aimed at garnering more share of the global truck business, while cooperating on a variety of engine platforms.
They intend to work together to develop, manufacture and distribute commercial trucks in select regions outside of North America - which includes a full line of medium and heavy-duty trucks in both conventional and cab over designs. Will we see those trucks come into the North American market someday in the future? If I was a betting man, I‘d wager a few bucks that they will.
Caterpillar and Navistar also plan to develop a mid-range engines for diesel applications, such as school buses and utility trucks in the U.S. This engine development would support each company‘s stated path not to utilize urea-based Selective Catalytic Reduction (SCR) technology.
(Are Cat's on-highway products gone for good?)
“There are many opportunities for technology sharing and development that would result in the ability to better meet the worldwide demand for diesel engines in both on and off-highway applications,” said Jack Allen, president of Navistar‘s Engine Group.
Here‘s the big shot across the bow, however: Through this alliance, Caterpillar says it plans introduce a 2010 emission-compliant North American Cat branded heavy-duty truck for severe service applications, such as road construction, large infrastructure projects and oil and petroleum development ... but WILL NOT supply EPA 2010 compliant engines to truck and other on-highway original equipment manufacturers (OEMs). In other words, no more on-highway Cat engines -- period.
“Caterpillar and our dealers will continue to provide product support and service beyond 2010 for all Caterpillar on-highway engines regardless of truck brand,” said Douglas R. Oberhelman, Caterpillar‘s group president. “This new truck--targeted for 2010--will incorporate the legendary quality of Caterpillar‘s construction and mining machines and provide construction customers a one-stop solution.”
(A diesel particulate filter [DPF] Cat came up with to help its engines comply with 2007 emission regs ... which may also disappear from the U.S. market too ... )
In addition, with nearly 90% of its engine business being off-highway, Caterpillar plans to continue concentrating on opportunities to supply engines in the petroleum, marine, electric power generation and industrial markets--as well as produce engines for its own construction and mining equipment, Oberhelman said.
“In the past 15 years, Cat has become significantly less dependent on the sale of on-highway truck engines in the total contribution of our global engine profitability,” said Oberhelman. “Our global power systems business has grown significantly--in fact we supply approximately 400,000 diesel engines annually outside of the on-highway truck market. We intend to remain the world leader in clean diesel engines, and this collaboration is a key enabler.”
Caterpillar has long faced problems adapting its engines to the emission mandates being put in place for commercial trucks, you know. One reason it did not follow the exhaust gas recirculation (EGR) pathway every other truck engine maker did was because that technology didn‘t work in the construction, mining, and other engine markets Caterpillar served - forcing it to forge a different route to emission control.
It's also not surprising Caterpillar made this decision to get out of the on-highway market - especially as two of the largest users of its on-highway models, Peterbilt and Kenworth, are going to get their own proprietary engines starting in 2010.
In early 2007, Paccar announced it would build a $400-million engine plant in Missouri to manufacture 12.9-liter and 9.2-liter engines for its Peterbilt and Kenworth Class 8 trucks for the North American and global markets. These engines are based off what the company is building in Europe via its DAF and Leyland operations.
“The...facility...positions Paccar to capitalize on growing opportunities in North America, Europe and Asia,” said Mark Pigott, Paccar chairman & CEO. “It will provide the flexibility to supply products and components to Paccar facilities and customers on a global basis.”
This is the trend Caterpillar hopes to navigate with its Navistar partnership, for to comply with emission standards that differ by country as well as to keep production costs in check, many diesel engine manufacturers are tying their global network of factories together more tightly enabling them to use a single engine platform to meet worldwide needs. It's a topic I've written about many times, so I'll share some of that thinking gained from other engine makers over the last few months here.
“Engines are an international business nowadays,” said Lothar Lemmermeier, head of supplier management and assistant general manager for Daimler AG‘s engine plant and foundry in Mannheim, Germany.
(Detroit Diesel's new DD15 is built on a global engine platform used throughout the world by its parent company, Daimler AG.)
“There‘s fierce competition in the engine market, added to the demands of emissions compliance,” he noted. “As a result, we‘re trying to better optimize our global production flow - standardizing processes across all our plants, worldwide, while maximizing the benefits of scale.”
To accomplish that, Daimler is creating a “synchronous factory” design to manage its far-flung network of factories - coordinating production and support between the Mannheim plant and Detroit Diesel Corp.‘s facility in Redford, MI and Mitsubishi Fuso‘s engine plant in Kawasaki, Japan, along with Daimler‘s foundries in Capetown, South Africa and Rio de Janeiro, Brazil.
Daimler‘s new HDEP global engine platform is being built via this new “synchronous” approach, said Lemmermeier - allowing the company to build just a single engine product line that can be “tweaked” to meet specific market needs, from emission standards to power ratings.
Under this new program, components are built to be shared among all the factories, rather than have each plant build entire engines specific to the markets they serve, he noted. “For example, our Atlantis foundry in South Africa supplies 14.8 and 12.8 liter engine blocks to Redford, with Mannheim supplying camshafts and head liners for the 12. 8 unit,” Lemmermeier noted. “Redford builds the piston heads, liners, and camrods for the 14.8 liter engine - and supplies camrods to Mannheim for our 10.8 liter engine.”
Other engine makers are also engaging in similar global manufacturing strategies - especially Navistar, which partnered with MAN Nutzfahrzeuge AG, based in Munich, Germany to forge a “strategic agreement” back in 2004 to collaborate on the design, development, sourcing and manufacturing of components and systems for commercial trucks. That deal resulted in the new big bore line of MaxxForce engines for International highway trucks.
(Navistar is still going to equip its on-highway products with MaxxForce engines ... no Cat need apply.)
How that deal gets affected by the new one with Caterpillar we can‘t say right now - we‘ll learn more later. But it‘s safe to say that Cat-Navistar partnerhsip is going to create a large seismic shift in the truck engine market, meaning fleets and owner-operators alike will again see spec‘ing options they used to enjoy in the past disappear completely in the near future.
“This is an important step for Caterpillar and we look forward to working with Navistar for the continued benefit of our customers, ” said Jim Owens, Caterpillar‘s chairman and CEO.
“This relationship is a perfect example of Navistar‘s strategy of growth through leveraging our own assets and those that others have built,” added Daniel C. Ustian, Navistar‘s chairman, president and CEO. “In partnership with Caterpillar we intend to extend our leading-edge product focus that we have in North America into the rest of the world.”
Needless to say, this is a deal that‘s going to create some interesting reactions in the truck and engine market in the U.S., I can assure you of that.