Uh-oh. Cummins + NAVISTAR merge?! I hope not...

[HoleshotHolset]

Yahoo! / Reuters story link...



For the love of everything Holy - I hope this doesn't happen.



Matt

 

[john3976]

The link wont let me open page 2 or 3 but I hope Cummins does not change.

 

[HoleshotHolset]

... try the 'Next >' button/link...



Matt

 

[Grey Wolf]

Cummins engines are beginning to show up in Freightliners again, their customers have spoken and they listened.....

 

[john3976]

... try the 'Next >' button/link...



Matt

I did that along with clicking on the numbers all I get is page done loading with errors.

 

[TFucili]

There was an article in a recent issue of TDR that discussed this very issue. I guess those TDR boys know their stuff



If Cummins can't go it alone, I hope they find a better partner than Navijunk/ In-trash-national

 

[Grizzly]

I hope it doesn't come to pass.

 

[WDixon27]

I did that along with clicking on the numbers all I get is page done loading with errors.

By James B. Kelleher



CHICAGO, March 2 (Reuters) - Caterpillar Inc. (CAT. N: Quote, Profile, Research) and Cummins Inc. (CMI. N: Quote, Profile, Research), the two big U. S. diesel engine manufacturers, are at a crossroads, bankers say.



The dilemma: To keep their heavy-duty truck engine operations rolling, will they need to align themselves more closely with a single domestic truck maker?



In Europe, the top manufacturers of heavy-duty trucks -- Sweden's Volvo Group (VOLVb. ST: Quote, Profile, Research), and Germany's DaimlerChrysler (DCXGn. DE: Quote, Profile, Research) and MAN AG (MANG. DE: Quote, Profile, Research) -- are vertically integrated, producing both the chassis and engine.





But in North America the industry is divided.



The European players, Volvo and DaimlerChrysler's Freightliner unit, have tried in recent years to impose their vertical template on the marketplace, encouraging customers accustomed to being able to order their trucks with outsiders' engines in them to go with in-house drivetrains instead.



But the two other big manufacturers, Bellevue, Washington-based Paccar Inc. (PCAR. O: Quote, Profile, Research) and Warrenville, Illinois-based Navistar (NAV. N: Quote, Profile, Research) -- continue to outsource their so-called Class 8 heavy-duty engines, primarily to Peoria, Illinois-based Caterpillar and Columbus, Indiana-based Cummins.



But a big change -- the kind that drives deal-making -- is afoot. The wheels were set in motion in late 2004, when Navistar, Cummins' key customer, announced plans to develop a new big-bore engine with MAN.



When Navistar announced the deal, says one banker, "it sent shivers through the Cummins organization. "

TRUCK MAKERS IN DRIVERS SEAT



Paccar and Navistar have been happy to outsource the engine work because it was cheaper than trying to do it in house. As one banker characterized it, "Cummins and CAT (were) beating each others brains out for their business. "



The two truck makers also knew that if there was a downturn in the truck market, the vertically integrated foreigners would be more than happy to sell engines to them to absorb overhead and maintain the investment in technology.



With its deal with MAN, Navistar moves closer toward its European rivals -- but it insists it will continue to give its customers whatever engines they want.





"So I think the truck-makers are in a pretty good position," says one banker. "I think it's CAT and Cummins trying to figure out whether they need to own the customer. "



Which of the two is in the tougher spot? Cummins looks more vulnerable, according to some bankers. Engines are, after all, pretty much all the company does, while Caterpillar has a huge construction equipment business (which, ironically, is vertically integrated. )



"I don't think (Cummins is) necessarily forced to do anything in the short term," one banker says. "But over the long term, it's something they're going to have to look at. There isn't a compelling reason for them not to join forces with Navistar. "



A Cummins spokesman did not return a call seeking comment. One banker, however, dimisses the idea of a Navistar-Cummins linkup as "nutty. "



A more likely path if North America goes European: Cummins might simply redouble its overseas efforts, where it already derives a significant chunk of its revenue and where it is experiencing some real success in the fast-growing markets of India and China.

But not everyone is convinced that the North America truck market can ever mirror the European market.



Jim Parker, the vice president for power systems marketing at Caterpillar, argues that while vertical integration promises advantages on paper -- optimum component match, the potential for cost containment, and lucrative parts revenue -- significant hurdles immediately present themselves in practice.



The first hurdle would be the financial and technical investment companies need to make to make their engines comply with tough new government emission standards on the one hand, and customer demand for better performance in terms of fuel economy and engine life on the other.



"The amount of money, effort and expertise to support this kind of development is substantial," Parker says.





The second hurdle, Parker said, is consumer resistance.



"Customers want a choice," he said. "Volvo and Freightliner have both promoted their own engine product aggressively. But there's still a lot of customers out there that want a Cummins engine in a Volvo, for instance, or a CAT engine in a Freightliner. They may prefer the Volvo or Freightliner chassis, but don't necessarily prefer their engines. "

But not everyone is convinced that the North America truck market can ever mirror the European market.



Jim Parker, the vice president for power systems marketing at Caterpillar, argues that while vertical integration promises advantages on paper -- optimum component match, the potential for cost containment, and lucrative parts revenue -- significant hurdles immediately present themselves in practice.



The first hurdle would be the financial and technical investment companies need to make to make their engines comply with tough new government emission standards on the one hand, and customer demand for better performance in terms of fuel economy and engine life on the other.



"The amount of money, effort and expertise to support this kind of development is substantial," Parker says.

 

[john3976]

Thanks for posting this, I feel better now that I read more than the first page. I think Cummins is in fine shape.

 

[JHerr]

Correct me if I'm wrong, but doesn't Cummins currently have engine develpment ties with the Fiat-owned, Italian truck & engine maker, Iveco?



I think that this is a similar agreement to the Consolidated Diesel Corporation which gave us the beloved 5. 9 B-series in the late-80's. The Iveco/Cummins agreement translates into shared engine development for constuction, ag, and on-highway applications. A better diversified portfolio than the International / MAN agreement... in my opinion. But, I am just a casual observer... not an industry insider.

 

[Turbo1Ton]

:-laf :-laf I thought Ford owns Cummins. :-laf :-laf



C'mon now, you knew someone was gonna say it. I thought for once I'd be the first one!



Jeff

 

[Mundgyver]

What would be nice, would be if Cummins would develop a small turbo diesel for sedans and economey cars. If you want to grab a bigger chunk of the market, lest see them put together a small turbo diesel that gets 60 mpg without being a hybrid. Offer something like that to Chrysler, Chevy or Ford and I think their business would double.

 

[biggieou]

I did alot of research on Cummins in the fall for the paper that I wrote on Clessie Cummins and I still consider myself a casual observer. That being said, I think Cummins is very sound financially. If any of you have checked out The Big C's stock lately, it is doing very, very well. If you happen to look at Cummins(CMI) and Caterpillar(CAT) stocks, they are both doing very well and CAT is much more diversified, which I think speaks wonders to Cummins financial soundness. Cummins is doing well in the U. S. , but they are making a large part of their income overseas. For those of you that have some serious time on your hands, here is Cummins sustainability report(granted its a year or two old). I think Cummins will be A-OK! And of course if Cummins is making money, then Ford is as well, because we all know Ford owns Cummins.



http://www.cummins.com/cmi/attachme...t/SustainabilityReport2005FINALWEBVERSION.pdf

 

[HoleshotHolset]

My $0.04 worth...which isn't much in today's economy...

I saw Cummins' 1-yr stock price chart too...



Unfortunately for some (outsiders), fortunately for others (insiders)... stock prices don't reflect what is really going on inside a company. They are also in no way an indication of forward looking statements (Yes, I actually used a lame 'big business' term like that... ) which will be represented by the stock's future success/failure. It's all speculation and it is fueled by 'buzz' or somewhat educated guesses by outsiders as to where a company is going...



Matt

 

[Dieselnut59]

One thing for sure, the Cummins engine sells itself. It is an OPTION in just about everything it is offered in and without a doubt is the most common choice in any vehicle offering a choice. Just imagine: If pickups could have a choice of any engine they wanted, How many furd owners would actually get the 6 ohhhh??! Cummins is in great shape and has a heck of a good reputation and a loyal following.

 

[WDixon27]

i am not sure i got 100% of it as i was rushed at work to get off the computer

Thanks for posting this, I feel better now that I read more than the first page. I think Cummins is in fine shape.

 

[Dl5treez]

Old news..... Cummins and then 'Navistar' way back in 2001 were talking about a joint high-horsepower engine venture, and making Cummins the singular engine choice in International trucks. The whole idea never really panned out, but both companies have had interest in each other for quite some time.

 

[Grizzly]

I did alot of research on Cummins in the fall for the paper that I wrote on Clessie Cummins and I still consider myself a casual observer. That being said, I think Cummins is very sound financially. If any of you have checked out The Big C's stock lately, it is doing very, very well. If you happen to look at Cummins(CMI) and Caterpillar(CAT) stocks, they are both doing very well and CAT is much more diversified, which I think speaks wonders to Cummins financial soundness. Cummins is doing well in the U. S. , but they are making a large part of their income overseas. For those of you that have some serious time on your hands, here is Cummins sustainability report(granted its a year or two old). I think Cummins will be A-OK! And of course if Cummins is making money, then Ford is as well, because we all know Ford owns Cummins.



http://www.cummins.com/cmi/attachme...t/SustainabilityReport2005FINALWEBVERSION.pdf

I follow the stock market and your correct, Cummins is doing quite well. On the other hand, Ford, which does not own Cummins, is doing poorly. Also doing poorly is International, makers of the Powerjoke. GM is not doing good. Daimler Chrysler is doing well.