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Reporter: Cat’s Oberhelman: Navistar deal plays to our strengths

August 19, 2008 |

In a conference call with construction editors, Caterpillar’s Doug Oberhelman, group president, detailed the company’s recent memorandum of understanding with Navistar to produce a severe-service truck, and what led to its decision to exit the on-highway engine market:

The new severe-service truck: “The Cat truck will be powered by a Cat-branded engine produced by Navistar in an existing Navistar facility. They’re developing a 15-liter engine we’re very interested in for this truck, and of course, our product development people have a lot of expertise in 15-liters. With this truck, we’re aiming at the Kenworth and Mack heavy-duty premium vocational offerings. We intend to go after the Cat customer who knows us well and accepts our business model. We’ve had some concept drawings that look strikingly similar to a wheel loader. I don’t know if it will end up looking like that, but it will have the internal cab look and feel of Cat equipment.”

The why behind the deal: “Vertical integration is where the on-highway truck market is heading. Caterpillar is a perfect example of this vertical intergration: We don’t offer anyone else’s engine in our machines. Truck makers are headed toward the same thing. In five years you’ll see an over-the-road long-haul industry that looks a lot different than today. Our deal with Navistar puts us on a footing that plays to our strengths. Supplying third-party engines at cheap prices in a shrinking market does not play to our strengths.

“It’s our expectation that by getting out of the highly cyclical North American style of on-highway engine production we can divert a lot of resources into our off-highway engines. We’ll still be one of the largest diesel engine producers in the world. And with our Tier 4 off-highway product, we intend to have an engine that hits it out of the ballpark.”

Dealer reaction: “We’ve been talking with our dealers for more than a year about how the on-highway world was changing. The general response was fairly muted. On one hand, they’re delighted to be able to sell a premium vocational truck to a known customer base. But there was disappointment in that we won’t offer a 2010 on-highway engine.”

The Cat/Navistar alliance outside of North America: “We’re going to initially aim these mid-size and heavy-duty trucks at high growth opportunity countries. In these markets, we could offer both brands, or one or the other. Every truck that Navistar offers is within the scope of this offering. And we’ll supply our pre-2010 on-highway engines to those markets as well.”
Will the memorandum of understanding between the two companies become more formal? “There will be series of agreements between us that I anticipate will be wrapped up by the end of the year. This is not one big bang event, but rather a series of things that make sense.”
- Marcia Gruver

Work zone final rule to go into effect this year
Work zone fatalities have increased 45 percent over the last 10 years and more than 40,000 injuries occur each year due to accidents in work zones, according to Chung Eng, Office of Transportation Operations, Federal Highway Administration. To reduce these incidents, the FHWA will implement the Final Rule on Temporary Traffic Control Devices (23 CFR 630 Subpart K) on December 4, 2008.

Key parts of the new rule, which supplements Subpart J of the Work Zone Safety and Mobility Rule in effect since 2007, include: