Navistar, Caterpillar Deepen Ties with Two New Truck Ventures

This story appears in the April 13 print edition of Transport Topics.

Navistar International Corp. and Caterpillar Inc. announced an expansion of their growing relationship last week, revealing plans for a joint venture to sell trucks outside North America by the end of this year and unveiling their formal agreement to produce Caterpillar-branded heavy-duty vocational trucks here beginning late next year.

Separately, Navistar also confirmed that it has handed out layoff notices to all employees at the company’s Chatham, Ontario, plant, its main facility for producing North American heavy-duty tractors. A company spokesman called the notices a legal precaution preceding contract negotiations, but union members told a local newspaper they are seriously concerned.

The definitive agreements an-nounced April 6 between Navistar and Caterpillar, both Illinois-based manufacturers, are the result of their June memorandum of understanding, wherein Caterpillar said it would close its North American on-highway truck engine business but would cooperate with Navistar on certain truck projects (6-16, click here for previous story).

The companies said the construction trucks will be made in Garland, Texas, by Navistar and will be powered by Navistar’s 11-, 13- and 15-liter MaxxForce engines. Thetrucks will be branded as Caterpillars and sold through Caterpillar’s dealership network. Full production is expected to begin in early 2011.

“Engineers are already well under way in designing this,” said George Taylor, general manager of Caterpillar’s global on-highway department, in a telephone press conference last week. He said the trucks would be marketed to Caterpillar customers in the mining, construction and logging industries to complement their use of Caterpillar machinery.

Garland is currently the home of Navistar’s TranStar tractor and other vocational vehicles.

Caterpillar’s withdrawal from the North American truck engine market this year means the company will not be building power plants that comply with the January 2010 federal emission regulations. However, parts of Caterpillar’s 2007-09 C15 engines will form the basis of Navistar’s 15-liter MaxxForce engine, the company said at last month’s Mid-America Trucking Show (3-23, click here for previous story).

International business for the construction trucks and other vehicles and equipment will be run through a joint venture called “NC2 Global,” owned evenly by Navistar and Caterpillar.

Phil Christman, Navistar’s president of global truck operations, said the initial target group of companies is Australia, Brazil, China, Russia, South Africa and Turkey, and that the joint venture will offer trucks with both cabover and conventional designs.

Christman said the two companies will analyze market preferences in the various countries and brand the vehicles Caterpillar or International, depending upon which company has the better name recognition in a given country.

Meanwhile, on the Canadian labor issues, Navistar spokesman Roy Wiley described the April 2 layoff notices at the Chatham plant as “procedural, precautionary and only a possibility.” He said Ontario law requires employees be given 12 weeks of notice if furloughs might occur.

Wiley said the timing was done to coincide with the expiration of Navistar’s three-year contract with Canadian Auto Workers Local No. 127.

The Chatham Daily News stated there are 345 production workers and office personnel currently employed at the plant. Wiley would not confirm the number, but also did not take issue with the newspaper’s figure.

Union officials did not return telephone calls to Transport Topics, but a representative did talk to the Chatham newspaper.

“The notice has taken us completely by surprise. Union officials and plant workers are extremely worried,” said Joe McCabe, national representative, in the Daily News.

Wiley said the company and the local will begin negotiations for a new contract during the first week in May, and the parties already have had three or four preliminary meetings. Because the contract covers only one local and one plant, Wiley said two months should be sufficient to negotiate a new agreement.

Navistar makes a majority of its Class 8 tractors at the Chatham plant, but the company also has a facility in Escobedo, Mexico. Wiley declined to apportion heavy-duty production levels at the two plants beyond saying Chatham was larger and currently cranks out 35 vehicles a day.

Speaking in the broadest of terms, Wiley said Navistar’s goals for the coming negotiations in Chatham were: “total flexibility” in terms of the type of vehicles to be produced at the plant, and “no artificial restrictions” in the assignment of tasks to workers. He said this would result in “a clean sheet” that would be “radically different” from previous contracts.

The Chatham newspaper said the union’s McCabe thinks the company has obligations to the workers and the region because of millions of Canadian dollars in concessions made by employees and large amounts given to Navistar by the provincial and federal governments.

The paper said the plant em-ployed 2,300 people in 2000.

Ontario also has been affected by the closing of the Sterling Trucks manufacturing plant in St. Thomas (click here for related story).