Exiting the highway

| August 08, 2008

Caterpillar to depart on-highway market, build truck with Navistar.

Caterpillar will not produce an engine for North American on-highway truck makers that will meet stricter 2010 emissions standards, said George Taylor, company director for global on-highway products.

Caterpillar also announced June 12, with Navistar, that the companies will produce a Caterpillar-branded severe-service vocational truck.

Those moves are the leading edge of a strategic partnership between the companies on global initiatives in diesel engine technology, Taylor and others said in a conference call with the news media.

“The writing’s on the wall for independent engine suppliers,” Taylor said, citing current on-highway engine market over-saturation amid tightening demand. “It will be increasingly difficult to participate in the North American market as an independent engine supplier.”

The new Cat-branded truck will be designed for construction, logging and other applications, Taylor said. It will be introduced in the “2010 timeframe” and feature “a Caterpillar-branded engine produced by Navistar.”

The partnership, established through a non-binding “memorandum of understanding,” represents a “cooperation on developing technology,” said Mark Stasell, Navistar vice president and general manager for diversified operations.

Caterpillar will move forward with Navistar to “capitalize on the global market” in medium- and heavy-duty trucks, leveraging its global distribution network for construction vehicles and Navistar’s sophisticated truck manufacturing capabilities to send both brands far into the global truck market, Taylor said.

Lack of a Cat-branded on-highway engine compliant with the U.S. Environmental Protection Agency’s 2010 emissions standards would be no hindrance to this strategy, said Greg Gauger, Caterpillar’s global on-highway product manager. “The ability to build and distribute trucks globally with EPA ’07 and earlier engines

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