7 May 2001

Navistar and Cummins have been reported to be negotiating terms of a $200.0 million joint venture to develop and produce medium-bore diesel engines by next year at a Cummins plant in Jamestown, NY. Navistar and Cummins tentatively plan to produce second-generation, medium-duty truck diesel engines that meet the US2004 emission standards. Under the Consent Decrees signed with US EPA, both companies are expected to produce 2004-compliant engines starting in October 2002.

The firms await approval of a $35.0 million loan guarantee from the state of Indiana and an assistance package from the state of New York before they will finalize a deal. “We are in serious negotiations (with Navistar) to design and manufacture this new engine platform, and we hope that these negotiations will be completed very soon. If we are able to do a deal with Navistar, the companies will together invest well in excess of $200.0 million in capital, equipment and assets into the venture, but this level of investment is not enough,” Cummins stated. Cummins said the venture with Navistar could not go forward without additional financing, as Cummins topped-out its debt capacity to a current 50% debt-to-capitalization ratio.

Washington-based commercial truck manufacturer PACCAR Inc. was also reported to take part in the negotiations, but it is not clear whether it will participate in the project with Cummins and Navistar.

Source: Stark’s Component Ledger