New Caterpillar-Navistar Engine's Start Date Uncertain
March 20 2009 - 5:56PM
Dow Jones News
Navistar International Corp. (NAV) said Caterpillar Inc. (CAT)
will supply major components for the heavy-duty truck maker's new
15-liter engine next year, but provided few specifics on when the
engine be available.
Navistar said Friday it will not be ready in time for the Jan.
1, 2010, start date for stricter U.S. emissions standards on diesel
engines. Navistar executives are counting on having a sufficient
supply of 15-liter engines built this year by Cummins Inc. (CMI),
Columbus, Ind., to accommodate Navistar truck buyers wanting
15-liter engines in early 2010.
Industry observers predict Navistar's new 15-liter engine won't
be ready until the second half of 2010. If inventories of Cummins
engines from 2009 are exhausted, Navistar won't be able to turn to
the engine maker's 2010 engines because they will not be compatible
with Navistar's pollution-reduction system.
"This is likely the biggest risk facing Navistar, particularly
since competitors such as Freightliner have targeted market share
gains from Navistar in 2010," said Ann Duignan, a JPMorgan equity
analyst, in a note to investors Friday.
About 20% of the 146,285 trucks Navistar built last year were
equipped with 15-liter engines.
Cummins' decision to meet the 2010 exhaust regulations with
technology different from Navistar's prompted the Warrenville,
Ill., company to pursue its own 15-liter engine. Navistar already
manufactures engines with smaller cylinder displacements.
Caterpillar, the world's largest builder of construction equipment,
opted to quit making engines for highway trucks in the United
States to avoid the additional cost of complying with the tougher
standards on diesel emissions.
But Caterpillar, Peoria, Ill., will supply Navistar with engine
blocks, cylinder heads, crank shafts and other components from its
long-established 15-liter engine model. Navistar will assemble the
engines in Alabama, adding its own fuel-injection system,
electronics and pollution-reduction components. The engines will be
sold under Navistar's MaxxForce brand.
Caterpillar and Navistar also continue to work on the details of
a truck-making venture announced last year. The two companies plan
to build Caterpillar-brand construction trucks for the U.S.
starting in 2010, as well as commercial trucks and engines for
overseas markets.
Caterpillar's stock closed Friday down 4.7% at $27.07 a share.
Navistar ended down 0.7% at $31.01, while Cummins closed down 3.2%
at $23.48.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com