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Caterpillar, DaimlerChrysler Team

November 22, 2000

PEORIA, Ill. (AP) _ Construction machinery maker Caterpillar Inc. said Wednesday it is teaming up with automaker DaimlerChrysler to manufacture medium-sized truck engines.

The companies said they already produce a total of about 300,000 medium-size engines between each year. About two-thirds are used for vehicles such as delivery trucks and school buses _ a market DaimlerChrysler leads _ and a third are used in off-road vehicles such as construction or mining equipment, a market Caterpillar leads.

The engines will be used in the parent companies’ own products and will be sold to third-party customers.

Claude Elsen, a DaimlerChrysler senior vice president, said each company will continue to build its own engines under its own brands. Over the next few years, the companies will combine research and development efforts to design an engine both will produce. That base engine, Elsen said, will be adaptable for different uses.

``We are getting together in this business because we are convinced from a technical point of view we will be in a better position to design what the customer will want in the future,″ he said.

Both companies said they expect the deal to result in large savings in research and development costs as they design engines to comply with strengthening regulations on engine noise and emissions.

Alexander Blanton, an analyst with Ingalls & Snyder, said that seems to be the most attractive aspect of the alliance.

``Each company can benefit from what the other has already done,″ he said. ``They won’t have to reinvent the wheel.″

The alliance brings together companies that both distribute in 200 countries. Caterpillar employs about 67,500 people at 90 manufacturing facilities and had 1999 revenues of $19.7 billion. DaimlerChrysler’s Commercial Vehicle Division employees about 90,100 people at 53 facilities and had 1999 revenues of $26.9 billion.

Under the agreement, the companies will continue to compete against each other in manufacture and sale of heavy engines, but DaimlerChrysler’s Freightliner brand of heavy trucks enters a long-term agreement for Caterpillar to supply its engines.

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