PEORIA, Ill. (Nov. 27, 2000) — The tie-ups among engine makers and truck OEMs are getting tighter. Nearly two weeks after Volvo Trucks said it would make Cummins its sole external engine supplier in North America, Caterpillar and DaimlerChrysler announced a 50/50 joint venture to develop and produce midrange engines, fuel systems, and powertrain components. Caterpillar will also continue to supply heavy-duty engines.

Caterpillar and DaimlerChrysler, the parent of Freightliner LLC and Detroit Diesel Corp., say sales volumes from medium-duty engines will “grow significantly by mid-decade” from about $2 billion US combined this year.

Fuel system sales are expected to nearly triple during that period, from $600 million this year.
Volvo, meanwhile, says it will equip trucks sold in the United States, Canada, and Mexico with Cummins or Volvo engines only, effective with the 2002 model-year.

The decision will erase Detroit Diesel from the Volvo spec sheet.

The arrangement will see Volvo supply 7- to 12-litre engine models. Cummins will provide its ISM, N14, ISX, and Signature engines. Volvo also will expand the range of Cummins engines available in the Volvo VN Series, Volvo VHD, and Xpeditor models to include the Cummins ISL by October 2002.

Both deals come amid lean times for engine makers. They have been hurt by the current slowdown in truck sales. and have had to commit financially punishing R&D resources to meet more rigorous U.S. emissions standards in 2002 and 2007.

Volvo, which acquired two other engine producers, Renault V.I. and its Mack Trucks division earlier this year, says its alliance with Cummins is intended to make the transition to 2002-certified engines easier for customers in terms of reliability, performance, regulatory compliance, and residual value.

“Many of today’s popular trucks were developed in the 1990s to minimize capital cost for the first owner while being operated in high-mileage applications during the first three to four years,” says Volvo president and CEO Marc Gustafson. “This fact has been recognized by used-truck buyers, and values on these products have plummeted. As a result, customers in this new millennium are demanding products that provide absolute reliability when purchased new or second-hand.”

Cummins and Volvo are coordinating service, customer support, and parts distribution. Petro: Lube facilities, the travel centre chain in which Volvo has a stake, will offer maintenance and light repairs.