June 18, 2008
Caterpillar and Navistar to Pursue Strategic Alliance
WARRENVILLE, IL – Caterpillar Inc. and Navistar International Corporation have signed a Memorandum of Understanding (MOU) 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.
Through this alliance, 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. Concurrent with this new strategic direction, Caterpillar has determined independently that it will not supply EPA 2010 compliant engines to truck and other on-highway original equipment manufacturers (OEMs).
The companies have commissioned teams to focus on the truck and engine opportunities. The initiatives contemplated by the MOU are subject to completion of due diligence, execution of definitive agreements, and regulatory approvals.
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 cab over designs.
In addition to the United States and Canada, Navistar has a substantial distribution network in Mexico and Latin America. Caterpillar currently sells on-highway truck engines in Australia, New Zealand, Mexico, throughout Latin America, the United Kingdom, Belgium, Russia, China, and South Africa.
Under the alliance, Caterpillar and Navistar plan to cooperate on engine development, incorporating best-in-class technologies from both companies. Caterpillar and Navistar intend to 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 stated path not to utilize urea-based Selective Catalytic Reduction (SCR) technology.
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.