Caterpillar, Navistar to team up

June 12, 2008
Caterpillar Inc. and Navistar International Corp. have signed a Memorandum of Understanding (MOU) to cooperate on a number of engine platforms and pursue global on-highway truck business opportunities, the companies announced this morning

Caterpillar Inc. and Navistar International Corp. have signed a Memorandum of Understanding (MOU) to cooperate on a number of engine platforms and pursue global on-highway truck business opportunities, the companies announced this morning.

Through the strategic alliance, Caterpillar said it plans on introducing a North American Cat branded heavy-duty truck in 2010 designed for severe service applications, such as road construction, large infrastructure projects and oil and petroleum development.

The two companies plan to cooperate on engine development of mid-range engines for diesel applications that support each company’s decision not to utilize urea-based Selective Catalytic Reduction (SCR) technology for such powerplants.

Caterpillar said it has determined independently that it will not supply EPA 2010-compliant engines to truck and other on-highway OEMs.

“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 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. In addition, with nearly 90% of our engine business being off-highway, we’ll continue to concentrate on our substantial and growing opportunities to supply engines in the petroleum, marine, electric power generation and industrial markets—as well as produce engines for our own construction and mining equipment.”

The two companies have commissioned teams to focus on truck and engine opportunities, and intend to develop, manufacture and distribute a full line of medium- and heavy-duty trucks in both conventional and cabover designs in select regions outside of North America. They added that the two companies should be able to reduce costs by combining raw material and other commodity purchases.

“The combination of Navistar’s truck design, development and manufacturing expertise and Caterpillar’s unparalleled worldwide distribution creates a significant advantage for global customers through the ability to offer the right vehicle for the right application through more than 4,700 points of distribution around the world,” said Dee Kapur, president, Navistar Truck Group. “The North American Caterpillar distribution system provides expanded reach for severe service trucks with big bore power, a segment where Navistar has traditionally not been as focused.”

“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 Caterpillar’s 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.”

The companies said the initiatives contemplated by the MOU are subject to completion of due diligence, execution of definitive agreements and regulatory approvals.

In a separate announcement, Caterpillar announced a $1 billion capacity expansion for its five Illinois factories over the next two years. The factories--in East Peoria, Joliet, Decatur, Aurora and Mossville--primarily manufacture machines for mining and large infrastructure applications, the company said.

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

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