Ford Motor Co. will produce commercial trucks with Navistar International Corp. in a bid to expand its sales in the medium-duty segment.
Under a new 50-50 joint venture, the two companies will build Class 6 and 7 medium-duty commercial trucks based on a chassis recently developed by Navistar. The trucks will be marketed separately in the United States, Canada and Mexico under the Ford brand and Navistar's International brand.
Ford wants more volume in a sector it deems strategically vital. Ford's annual volume of about 12,000 Class 6 and 7 trucks is insufficient to justify the money and attention needed to expand the business.
'There is a danger that a 12,000- to 20,000-unit business will not get the TLC it deserves,' said Jim Donaldson, Ford group vice president of global business strategy. 'Our volume said exiting may have been an alternative.'
But there is value to Ford and its dealers in remaining in the segment, said Dave Tarrant, Ford commercial truck strategist.
Every medium-duty Ford truck owner controls a fleet that includes an average of 5.5 light-duty Ford trucks, he said.
'This is intimately tied to our light-truck business,' Tarrant said. 'It is not ancillary to it.'
The alliance expects to gain efficiencies of scale in product development and purchasing and use the savings to more rapidly develop new technologies and products. The companies would not disclose potential savings.
The as-yet-unnamed alliance may also develop smaller commercial vehicles and new diesel engines, the two companies said in announcing the venture last week. Chicago-based Navistar supplies Ford with Power Stroke diesel engines.
Financial details of the deal were not disclosed. Both companies will have equal representation on the venture's board of directors. Neither company will have an equity stake in the other's parent company.
Navistar will handle product design and engineering, vehicle assembly and expanded diesel engine programs.
Building in Mexico
The trucks will be built at Navistar's plant in Escobedo, Mexico. The companies would not comment on anticipated volume.
The Navistar plant has an annual production capacity of 60,000 units and eventually will be dedicated only to output from the joint venture, including newly developed niche vehicles, Tarrant said.
Volume allocation between the two brands will be based on market demand and not on a contractually established percentage, he said.
Ford will shift production from its assembly plant in Cuautitlan, Mexico. The capacity will be fully used, Tarrant said, declining to specify the products.
Cabs and interiors will remain distinct for the Ford and International products.
A new Navistar chassis will underpin the vehicles. Ford will introduce a 2003 model truck based on the common chassis in the fourth quarter of 2002, Tarrant said. Until that time, Navistar will use the chassis exclusively.
'We plan to use our pickup-based cab,' he said. 'The cab is distinctly Ford.'
Ford will continue to equip its medium-duty trucks with engines supplied by Navistar, Caterpillar and Cummins Engine Co.
'The engines presently in use will be adapted to the new chassis,' Tarrant said. The engines are supplied under annual contracts. Caterpillar supplies 55 percent of Ford's medium-duty engines; Cummins, 25 percent; and Navistar, 20 percent.
In 2000, Navistar sold more than 60,000 Class 6 and 7 International trucks. The segment generates a volume of about 150,000 units annually, excluding specialized vehicles such as buses and motor homes, Tarrant said.