Cummins Inc. (NYSE:CMI) will build a medium-duty engine plant within a Daimler Trucks Mannheim complex in Germany to localize medium-duty engines that comply with the Euro VII emissions.
Daimler Truck AG and Cummins plan a global strategic partnership under which Cummins will make engines compliant with Euro VII emissions. Daimler decided against shouldering the expense of developing those engines itself.
For its undisclosed investment, Cummins eventually gets all of the global medium-duty engines systems business for Daimler Trucks and Buses.
It is the first major product announcement since Daimler AG said Feb. 3 that it would split off trucks and buses into a publicly traded stand-alone company.
Freeing up resources
The partnership is Cummins’ second this month. It announced Feb. 12 that it had agreed to supply medium-duty engines for Isuzu Commercial Truck of America, a subsidiary of Japan’s Isuzu Motors.
Cummins CEO Tom Linebarger hinted in recent earnings calls with analysts that some truck manufacturers were leaning toward outsourcing certain engine production rather than investing in expensive changes to meet tightening emissions regulations.
“We would have to invest considerable resources in the further development of our medium-duty engines,” said Martin Daum, chairman of the board of management at Daimler Truck AG. “We are now freeing up these funds to focus them on the technologies that are crucial to our long-term corporate success in the transformation of our industry.”
Daimler is focusing on developing zero-emission drive technologies, including hydrogen-powered fuel cells. It is also working on upgrading its own heavy-duty engine platform. It will continue to build heavy-duty engines in Detroit and Mannheim.
Leveraging supply chains
Cummins will use existing resources within the Mercedes-Benz Mannheim campus to build engines for Mercedes-Benz trucks. Details are pending, but the new plant will help current Daimler workers keep their jobs. Cummins will use its existing regional supply chains for other Daimler Trucks’ brands including Daimler Trucks North America.
“This is good for Mannheim,” Daum said. “Together with the works council, we will shape the changes in the coming years and develop joint solutions, always keeping the interests of our customers, employees and the company in mind.”
Daimler and Cummins may collaborate further, such as powertrain components and engine system components.
“Our partnership is a terrific opportunity for both companies to be more competitive, drive global innovation, expand offerings to customers and reduce emissions,” Linebarger said in a press release. “We are looking forward to working with Daimler on this and exploring other potential opportunities to grow our respective companies.”