Caterpillar will not supply EPA 2010-compliant engine to truck OEMs, instead pursuing a strategic alliance with Navistar that will result in a Cat-branded severe service truck - an alliance that also will help Navistar build its severe-duty business.


Caterpillar and Navistar International have signed a memorandum of understanding to pursue global on-highway truck business opportunities and cooperate on a variety of engine platforms. The two companies intend to focus on global truck opportunities, including North American severe service construction trucks, as well as technology development for engines worldwide.

"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," said Dee Kapur, president, Navistar Truck Group.

Caterpillar plans to target a 2010 introduction of a North American Cat-branded heavy duty truck for severe service applications, such as road construction, large infrastructure projects and oil and petroleum development .It also says it will not supply EPA 2010 compliant engines to truck and other on-highway original equipment manufacturers.

"This new truck will incorporate the legendary quality of Caterpillar's construction and mining machines and provide construction customers a one-stop solution," said Douglas R. Oberhelman, Caterpillar group president. "In addition, 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."

Caterpillar officials emphasize that the company and its dealers will continue to provide product support and service beyond 2010 for all Caterpillar on-highway engines regardless of truck brand.

The companies intend to work together to develop, manufacture and distribute commercial trucks in select regions outside of North America. The product offering would include a full line of medium and heavy duty trucks in both conventional and cabover designs.

Caterpillar and Navistar plan to cooperate on engine development, incorporating "best in class" technologies from both companies. The two companies say they will work together on development of mid-range engines for diesel applications, such as school buses and utility trucks. This engine development would support each company's previously announced plans not to use urea-based Selective Catalytic Reduction (SCR) technology.

"There are many opportunities for technology sharing and development that would result in the ability to better meet the worldwide demand for diesel engines in both on and off-highway applications," said Jack Allen, President, Navistar Engine Group.

"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 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."

Through the alliance, 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.

Caterpillar and Navistar plan to explore opportunities to leverage their scale. Combining raw material and other commodity purchases is just one example of how the two companies can work together to reduce costs.