Article

Big Tuna, Lightly Fried

Navistar International becomes a very big fish indeed.

July 2008, TruckingInfo.com - Editorial

by Steve Sturgess, Executive Editor

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So the big Navistar/Caterpillar bombshell finally exploded. As I was researching the takeover rumors a few months ago, one deep insider said to me: "This lion must die. There's one bullet in the gun, and it has Caterpillar on it." 

How right was that?

So Big Tuna, as the deal around Navistar International was known, is done. Except more recently, with the various refinements to the final memorandum of understanding, it's been referred to at Caterpillar and International as Fish Fry. But it's done, nevertheless.

So what does it mean?

Well, for one, Caterpillar is out of the truck engine business in North America come January 1, 2010. The company, after 40 years, is out of the North American on-road business - truck, bus, motorhome, you name it.

At the same time the company made this blockbuster announcement, it also said it will be in the truck business, with its own Caterpillar-brand construction truck made for it by Navistar International. And most likely it's to be painted yellow. So Cat will compete with vocational truck makers such as Mack, Sterling, Volvo, Western Star, Kenworth and Peterbilt. And, of course, International.

Now that's a fine kettle of fish.

It won't happen until around 2010 that the big yellow Cat truck will roll out of Caterpillar equipment dealers. In the interim and going on from 2010, they'll service and support the 1.6 million-plus Cat engines on America's highways. But starting in 2010, those Cat dealers will have their own truck to support in the marketplace.

That truck will be designed and developed by International. It will likely be based on an International truck model and will compete with the WorkStars and PayStars that International dealers over the years have successfully sold and serviced, in large part keeping the parent company alive. You can bet the International dealers are more than a little miffed by this turn of events. True, as Navistar Vice President Mark Stasell points out, the company has at last delivered them the ProStar and the LoneStar, trucks the dealers can go out and - with heads held high - deliver best in class products after years of over-the-road product drought.

At the announcement of its withdrawal from the on-highway engine business, Cat's global on-highway engine VP, George Taylor, said that the company "could see the writing on the wall" that available market share would be shrinking post-2010. Funnily enough, the very same words were spoken by International Engine Marketing Director Tim Shick when we met just before Christmas last year to look at and drive the new MaxxForce 13-liter International engine. Shick said at the time - noting that International had been out of the big-bore engine business almost as long as Cat was in - that there would be no such thing as a low-cost, low-volume engine from the independent engine manufacturers. That was what propelled International into its 11- and 13-liter engines.

That decision hastened Cat's withdrawal from the on-highway business, because International has been a major Cat account; the MaxxForce big-bore engines will make a big hole in what would have been the Caterpillar offering. Of course, Cat's other big customers, Peterbilt and Kenworth, also get their own 13-liter engine, the Paccar MX, late next year. 

So yes, the writing was indeed on the wall.

This is looking at the situation with North American eyes, though. In the global scheme of things, both Cat and International will be big winners. Cat gets to sell its yellow, Navistar-made truck, potentially with Cat engines, since the rest of the world has less stringent emissions regs than EPA 2010. Navistar gets to sell its whole range of trucks, including cabovers it assembles in South Africa, through Cat's 4,700 dealers worldwide. Maybe school buses, too. (After all, they are yellow.) 

And Navistar also gets the legendary Cat parts logistics service to back up those sales.

That will make Navistar a very big fish indeed.


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