Caterpillar, Navistar Working On 15-Liter Engine Venture
January 16 2009 - 2:20PM
Dow Jones News
Caterpillar Inc. (CAT) plans to collaborate with Navistar
International Corp. (NAV) on a new 15-liter engine for the truck
maker's heavy-duty vehicles, according to sources familiar with the
discussions.
Navistar has been seeking a supplier for the large engines amid
moves by its existing suppliers - including Caterpillar - to leave
the sector or switch emissions technology.
Caterpillar plans to supply the 15-liter engine under Navistar's
MaxxForce brand by late 2010, according to the sources.
The heavy-equipment maker has said it plans to quit making
engines for the U.S. truck market in 2010 to avoid the cost of
complying with new domestic emissions standards. However,
Caterpillar, Peoria, Ill., could license its existing large engine
for Navistar to produce, or opt to continue making power trains
under the Navistar brand.
Both companies declined to comment.
The joint venture, part of a broader truck alliance announced in
mid-2008, would allow Navistar to build out its MaxxForce line of
medium and heavy-duty engines without the expense of developing a
15-liter unit from scratch.
The pending deal would reduce Navistar's reliance on Cummins
Inc. (CMI), which also supplies the truck maker with 15-liter
engines.
Caterpillar's plan to exit the U.S. engine business and Cummins'
decision to use a different emissions system from Navistar's sent
executives from Navistar, Warrenville, Ill., searching for
alternatives.
For Caterpillar, "This is a way to participate in the truck
engine industry, but not have the exposure of being a direct
supplier to it," said Eli Lustgarten, analyst with Ohio-based
Longbow Research.
Daniel Ustian, Navistar's chairman and chief executive, told
analysts Jan. 5 that a 15-liter engine solution will be unveiled in
March during a trade show in Kentucky. "We'll have our own
15-liter," he said.
About a fifth of the 146,285 trucks Navistar built in 2008 were
equipped with 15-liter engines, up from 16% in 2007, according to
Power Systems Research, a Minnesota-based equipment data
service.
Navistar has built more engines in-house in recent years to cut
costs.
Caterpillar and Navistar have been working on an alliance since
the summer to build Cat-branded construction trucks for the U.S.
market beginning in 2010, as well as commercial trucks and engines
for overseas markets.
Caterpillar's global dealer network and logistics operations
would provide Navistar with the overseas distribution presence it
now lacks.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
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