Caterpillar will produce with Navistar a Caterpillar-branded severe-service vocational truck, the companies announced June 10.
Also, Caterpillar will not produce an engine for North American on-highway truck makers that will meet stricter 2010 emissions standards, said George Taylor, company director for global on-highway products.
Those announcements are the first in a strategic partnership between the companies on vertically integrated global initiatives in diesel engine technology, Taylor and others said in a conference call with reporters.
“The writing’s on the wall for independent engine suppliers,” Taylor said, citing current on-highway engine market over-saturation amid tightening demand. “It will be increasingly difficult to participant in the North American market as an independent engine supplier.”
The new Cat-branded vocational truck will be designed for construction, logging and other severe-service applications, Taylor said. It will be introduced in the “2010 timeframe” and feature “a Caterpillar-branded engine produced by Navistar,” making use of Navistar’s manufacturing capabilities.
The partnership represents a “cooperation on developing technology,” said Mark Stasell, Navistar vice president and general manager for diversified operations.
Taylor characterized the company’s decision to enter into the memorandum of understanding with Navistar, maker of International brand trucks, as a “proactive” response to Caterpillar’s position as an engine supplier. Caterpillar will move forward with Navistar to “capitalize on the global market” in medium- and heavy-duty trucks, using its global distribution network for construction vehicles and Navistar’s sophisticated truck manufacturing capabilities to send both brands far into the global truck market, Taylor said.
North America represents only 22 percent of the global market, Taylor said. Caterpillar and Navistar, whose trucks are present only in the Americas, now will be able to pursue a bigger share of the “1.7 million trucks that are sold globally,” Taylor said.
Lack of an EPA 2010-compliant engine in the North American market for on-highway applications would be no hindrance to this strategy, the companies said. “The ability to build and distribute trucks globally with EPA 07 and earlier engines … can go on for quite some time” in countries not subject to U.S. and European emissions standards, said Greg Gauger, Caterpillar’s global on-highway product manager.
In the long term, however, both companies said they remain committed to moving past EPA 2010 using technologies other than selective catalytic reduction with the introduction of urea.
Caterpillar officials said dealerships will continue to service Cat on-highway engines, which in recent years have been based on proprietary ACERT emissions control technology, for the life of the equipment.
A new plant in Huntsville, Ala., completed in the past year, produces the on-highway big-bore variants of Navistar’s MaxxForce line of heavy- and medium-duty engines, but further plant expansion elsewhere could be expected for both companies in the coming years, representatives said.
Caterpillar’s on-highway business has not kept up with its expanding overall engine market.
“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 Douglas Oberhelman, Caterpillar Group president. “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.”
“With nearly 90 percent 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,” Oberhelman said.
The companies also intend to expand their existing remanufacturing relationship to include Navistar’s recently introduced MaxxForce on-highway engines. The companies expect to pursue additional remanufacturing opportunities as new vehicles and engines are developed
The June 12 announcement follows months of speculation within the trucking and construction industries regarding an upcoming alliance or possibly even an ownership arrangement between Caterpillar and Navistar. Until Thursday, officials of both companies had declined either to confirm or deny such talks.