Caterpillar, Navistar unite in joint buying to cut costs

Truck and engine projects targeted for initial effort

by Tom Stundza -- Purchasing, 7/2/2008 8:47:00 AM

In an attempt to cut raw material costs and stay relevant in global truck engine markets, Caterpillar and Navistar International have agreed to collaborate on truck and engine projects technology and to combine commodity buys. By combining raw materials purchasing, Peoria, Ill.-based Caterpillar and Warrenville, Ill.-based Navistar plan to save money, the firms said in a joint statement.

The deal will also see heavy equipment manufacturer Caterpillar stop making truck and on-highway vehicle engines that would be in compliance with 2010 U.S. Environment Protection Agency standards. The company supplies such engines to original equipment manufacturers and assembles them in plants in Mossville, Ill., and Greenville, S.C., but capacity for these on-highway engines is much higher than projected future demand. Anyway, almost 90% of Caterpillar's engines are made for numerous off-highway applications such as petroleum, marine, electric power generation; off-highway maschinery  and industrial products.

Navistar bills itself as the largest North American producer of mid-range diesel engines and Class 6-8 commercial trucks and buses. It also boasts of a leading position in the manufacturing of armored vehicles for the U.S. Armed Forces and their allies.

Caterpillar and Navistar also will work together to to develop diesel engines for school buses, utility trucks and other vehicles. They will also work together to design, manufacture and distribute trucks for use outside of North America.