PEORIA, Ill. – Caterpillar has announced it is pulling out of the North American on-highway engine market in 2010. However, at the same time, the company announced a strategic alliance with Navistar that will result in a Catbranded severe-service truck.

George Taylor, director, global on-highway with Caterpillar, said Cat chose not to produce EPA2010-compliant engines because the continuing shift towards vertical integration will eventually put independent engine suppliers at a major disadvantage.

“The writing’s on the wall for independent engine suppliers,” said Taylor. “When you look at an industry that year in, year out, runs 240,000-250,000 units, and capacity is up to 500,000 units, it’s going to be increasingly difficult to participate in the industry as an independent engine supplier. We wanted to proactively take action before getting backed into a corner.”

The company will continue to sell Cat engines right up until 2010 and will service and support those engines for their entire lifespans, Taylor said. There are currently about 1.6 million Cat onhighway truck engines in service.

“Nothing changes through 2009,” said Taylor. “Caterpillar engines can be purchased and operated in confidence.”

Meanwhile, Cat and Navistar will jointly build a Caterpillarbranded severe-service truck for logging, construction, oilfield, lowboy and other vocational applications. The first of these trucks is expected to be launched in 2010, and it will have Navistar power under the hood, according to officials. The Cat truck will be designed to compliment Caterpillar’s current line of construction equipment.

“While we’ll use some components off our existing product line, the Caterpillar product will be distinct in that it will be a Caterpillar product,” said Phil Christman, vice-president and general manager, severe-service vehicle center, Navistar.

Caterpillar and Navistar will also leverage their alliance towards extending their global reach.

“With this alliance, we’re now able to offer our customers the right vehicle for the right applications, potentially through more than 4,700 points of distribution around the world,” said Mark Stasell, vice-president and general manager, diversified operations with Navistar.

“It fits perfectly with our overall growth strategy to leverage our assets and those which others have built.”

Navistar will also tap into Caterpillar’s resources when it comes to developing future engine technologies, and the company maintains that it will not use Selective Catalytic Reduction (SCR) on either mid-range or heavy-duty engines.

“Caterpillar and ourselves are committed to a non-SCR path and will continue to develop those technologies,” said Eric Tech, vice-president and general manager, Navistar Engine Group.

The agreement between the two companies is at this point, a “nonbinding MoU”, however Taylor said “both parties are positive about the dynamics between us.”