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Number-crunching the Cat deal

June 13, 2008
Statistics may lie, but cold hard numbers don’t. A close reading of data compiled by Wardsauto.com on factory installations of Class 8 engines for the first four months of 2008 shed light on yesterday’s Caterpillar-Navistar deal,

Statistics may lie, but cold hard numbers don’t. A close reading of data compiled by Wardsauto.com on factory installations of Class 8 engines for the first four months of 2008 shed light on yesterday’s Caterpillar-Navistar deal, pointing to a heavy-duty diesel market supporting one independent engine maker, not two, as proprietary highway diesels gain market share.

Analysis of the data reveals that for the first four months of this year, Caterpillar holds the #4 slot (12.5% market share) for Class 8 engines in North America (U.S., Canadian and Mexican truck plants). Cummins has the top spot (40.6%) while the #2 (Detroit Diesel and MercedesBenz at 24.3% combined share) and #3 (Volvo and Mack at 13.2% combined) positions are held by suppliers of proprietary engines as is the #5 (Navistar at 9.3%) slot.

And of the total 8,321 Cat engines installed, 5,563—almost 67%-- were placed in Kenworth and Peterbilt trucks. Given that Paccar—the parent of those OEMs-- will roll out its own proprietary engine line in time for 2010, it’s safe to bet Cat’s share will decline further. This furthers the argument for Cat to pull out of the heavy-duty truck engine market in North America.

As for Cat’s role in the medium-duty engine arena, George Taylor, director of global on-highway for Caterpillar, told FleetOwner that “Caterpillar and Navistar plan to work together on the development of engine technologies to meet the future needs of the on-highway market. This will include focusing on mid-range engines for light duty diesel applications as well as highly technically advanced components to meet future emissions regulations.

“With this new strategic direction, Caterpillar has independently determined that it will not supply EPA 2010 compliant engines to truck and other on-highway OEMs,” Taylor added.

"The way trucks are built is changing,” consultant Darry W. Stuart, president of DWS Fleet Management, told FleetOwner. “We're seeing a strong return to vertical integration now. You pick a truck, and the engine comes with it. Mack had this philosophy decades ago -- you build a truck from front to rear and everything in between, the motor, the transmission, the works. We are seeing a return to this -- Paccar is bringing its own engines in, Volvo and Mack make their own, Freightliner has Detroit Diesel. Look at what's going on in terms of vertical integration, especially in terms of emission costs. It’s expensive to change truck specs to accommodate engines and emission requirements. Cat probably figured it wasn’t worth the extra cost as an independent [engine maker] to fit product to different trucks.

"The key word in this story is 'other,”' Stuart said. “Cat is going to sell truck engines in other places of the world and in other U.S. truck markets, just not the on-highway segment anymore. I am disappointed, obviously, that they are leaving the market -- my first choice of truck engines still remains Cat by and large -- but not really surprised. The big truck buyers today don't buy Cat engines because the buyers themselves are changing. Elders like me were partial to certain brands. The new crop of fleet managers -- the Millennials -- to them a truck is a truck and a motor is a motor. Doesn't matter if it is yellow, red, or black -- they care mostly about the price.

"Will it devastate the market, with Caterpillar leaving?” Stuart added. “Not really. They control a small segment, not fleets -- mostly independents and smaller operators. It’s harder to get product into trucks, with so many OEMs offering their own engines now."

In other news, Daimler Trucks North America (DTNA) today announced it will offer a full line of its own Detroit Diesel engines as well as Cummins medium- and heavy-duty engines, across its Freightliner, Sterling, Western Star and Thomas Built Buses vehicle lines.

The Detroit Diesel DD15 with a 14.8L displacement was launched in October 2007, the first in a complete line of new heavy-duty diesel engines. The company said it will offer additional variants, at 12.8L (DD13) and 15.6L (DD16) will be introduced in the coming months, supplanting current Detroit Diesel and Mercedes-Benz heavy-duty engine offerings, said DTNA.

According to DTNA, the Cummins 14.8L ISX heavy-duty diesel engine will round out the options in Freightliner, Sterling and Western Star Class 8 trucks in the post-EPA10 era.

"This decision will complement our current successful and proprietary product line of Detroit Diesel and Mercedes-Benz engines,” said Chris Patterson, president & CEO of DTNA. “It will expand and strengthen the range of choices for our customers, and establish Cummins as a full range vendor engine partner."

View Fleet Owner's full coverage of the Caterpillar, Navistar partnership.

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