UPDATE: Caterpillar, Navistar Finalize Truck-Building JV
07 April 2009 - 10:53AM
Dow Jones News
Caterpillar Inc. (CAT) and Navistar International Corp. (NAV)
have signed a definitive agreement to build Caterpillar-brand
construction trucks for North America and sell commercial trucks
and engines in several overseas markets.
The joint-venture has been in the works since last June and is
intended to leverage the two Illinois-based companies' strengths in
manufacturing, engineering and dealer distribution.
Navistar and Cateripillar will develop heavy-duty trucks for
vocational specialties, such as road construction, mining, logging
and waste hauling. The trucks will be manufactured in Navistar's
Garland, Texas, assembly plant and feature Caterpillar-badged
engines built by Navistar.
The trucks will be sold by Caterpillar's dealers, helping offset
the loss of sales from service and replacement parts on
Caterpillar-built truck engines.
Caterpillar, the world's largest builder of construction
equipment, plans to quit making engines for the U.S. truck market
at the end of 2009 to avoid the cost of complying with new domestic
emissions standards.
Frank Manfredi, president of Manfredi & Associates, an
Illinois-based market research firm for the off-road equipment
industry, predicted the vocational trucks will help Caterpillar
exectuves determine whether the company would be able to field a
broader line of heavy-duty commercial trucks to rival Volvo, which
already sells trucks under the Mack brand, as well as Volvo
construction equipment.
"I'm guessing this will lead to something more," said Manfredi.
"The Cat dealers don't really have a lot of experience selling new
trucks though."
The trucks will be unveiled in late 2010 and will go into full
production in early 2011.
For Navistar, the key benefit of the collaboration is expected
to be overseas. Navistar will build Caterpillar and
International-branded trucks that will be sold through
Caterpillar's overseas dealers.
Navistar, which is the largest maker of medium-duty commercial
trucks in the U.S., considers overseas trucks sales a growth
sector. But the company lacks an effective dealer network outside
of North America. Caterpillar's dealers are expected to remedy that
shortcoming.
The initial markets targeted by the venture are Australia,
Brazil, China, Russia, South Africa and Turkey. The first trucks
are expected to be available as soon as the third quarter.
The 50-50 joint-venture will have its own management team and a
board of directors made up of representatives from the two
companies.
Caterpillar's shares were at $31.35, up 0.1%, in after-hours
trading, while Navistar's rose 0.2% to $32.
-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com