Caterpillar, Navistar to jointly build, sell trucks

Caterpillar Incand Navistar International Corp NAVZ.PK are forming an alliance to build and sell a variety of trucks worldwide, the companies said on Thursday.

The deal quashes speculation that Caterpillar, a major manufacturer of diesel engines and the world's largest maker of construction and mining equipment, would exit the on-highway vehicle business altogether. It also provides an additional signal that the North American truck-making business is consolidating along the lines of the business in Europe.

Caterpillar said one of the trucks produced by the strategic alliance -- a heavy-duty truck for mining and highway construction customers -- would be on the road by 2010.

Caterpillar, based in Peoria, Illinois, also said it would stop supplying engines to other on-highway truckmakers, starting with the introduction of engines designed to comply with 2010 U.S. clean-air rules. It said it would begin developing engines in partnership with Navistar.

Uncertainty has surrounded Caterpillar's on-highway diesel engine business for more than a year, after problems associated with powerplants designed to meet tough 2007 U.S. clean-air rules allowed Caterpillar rival Cummins Inc to gain a big share of the North American market.

That threw a big question mark over Caterpillar's engine business at a time when the North American truck-making industry, which traditionally bought its engines from independent suppliers like Caterpillar and Cummins, was rapidly changing as more manufacturers, like Paccar Inc, moved engine-making in-house.

The Caterpillar-Navistar partnership comes at a time when the North American big-rig truck market is in a downturn, due in part soaring fuel prices, which have prompted sporadic protests by independent truckers.

Adding pressure is the slowdown in the U.S. economy. A surge in truck purchases in 2006, as long-haulers rushed to buy ahead of the implementation of the 2007 clean-air rules, also means there are now too many trucks chasing too little freight. As a result, the rebound that truckmakers were counting on in 2008 has not materialized, putting pressure on the industry.

Industry tracker A.C.T. Research estimates truckmakers will receive orders this year for 234,000 Class 8 trucks -- the biggest rigs -- up just 10 percent from last year's trough of 212,000.

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