Caterpillar Inc. and DaimlerChrysler AG have delayed talks on a joint venture to make diesel engines and plan to focus on long-term agreements to supply DaimlerChrysler's Freightliner commercial-truck unit.
The talks will concentrate on Caterpillar supplying the truck unit with fuel injection systems and heavy-duty truck engines, the companies said in a statement Monday, July 23. They didn't say when negotiations on the medium-duty engine joint venture would resume.
Caterpillar, the biggest maker of diesel engines, and DaimlerChrysler, the largest maker of heavy trucks, in November announced an alliance to develop and make engines and fuel systems for commercial trucks. The companies in May said the alliance would be delayed at least two months because negotiations were taking longer than expected.
'It's a little disappointing that they're not moving forward today on the medium-duty joint venture, because there's an opportunity to take costs out there,' said Mark Koznarek, an analyst at Midwest Research Inc. 'It's a nice offset to pick up the supply agreements to work with Freightliner. Suppliers are aligning with their truckmaker customers, and over time that will help reduce costs for engine suppliers,' Koznarek said.
The joint-venture discussions were 'far more complex than we had originally anticipated,' said Caterpillar spokesman Jeff Hawkinson. The companies haven't set a deadline on completing the supply agreements, he said.
The alliance was intended to reduce costs by combining parts purchasing, manufacturing and research for diesel engines and fuel systems for buses, medium-duty trucks and power generation. The initial plan was for about half the engines to be sold to rivals with the rest going to DaimlerChrysler's Freightliner and Sterling trucks and Thomas Built buses, as well as Caterpillar off-road equipment.
The companies had estimated that their combined engine sales could rise to $3 billion in five years from $2 billion now, while fuel-system sales could triple to $1.8 billion.
DaimlerChrysler this fall plans to unveil a radical reorganization plan for Freightliner, which is based in Portland, Ore. The company replaced the unit's CEO in May and last month said it would fire 1,120 of Freightliner's North American workers.
DaimlerChrysler's commercial-vehicle division had a second-quarter operating profit of $110.3 million, down 69 percent as all of its major markets declined.
Operating profit at the unit will decline significantly because of the lower sales, the company said.
Caterpillar's profit has dropped in nine of the past 11 quarters because of slower spending worldwide. Second-quarter earnings fell a less-than-expected 14 percent from a year earlier as sales to the coal-mining and energy industries rose.