The 90 days that changed the world

Diesel Progress North American Edition, Dec, 2003 by Mike Osenga

And the hits just keep on comin'.

In a stunning series of developments, largely unforeseen by many, the industrial engine and components world was swept by a stung of announcements in late summer/early fall, that even given our culture of hyperbole, literally has changed things for all rune.

Wow is pretty accurate.

The timeline was something like this.

DaimlerChrysler says it is going to use only its own engines and transmission and axles in its trucks and buses.

Italy's Same buys a major stake in Deutz.

JCB announces it will build its own diesels.

AGCO buys Valtra and with it the SisuDiesel program.

Rumors start that Terex is in pursuit of Daewoo's diesel engine program.

And the end result, (assuming Terex does something) is that Ingersoll-Rand becomes about the only major manufacturer of engine-powered equipment, on or off-highway, that does not own its own engine line or have an equity position in someone that does.

Some of the lift truck manufacturers come close to the 50,000 unit line and are unaffiliated, but the point is, the top of the volume equipment pyramid, with that one exception, are now all corporately tied in with someone for their engines. Not alliances, but real live equity.

On the other side of the coin, that also now leaves only one high volume diesel engine supplier, Cummins, that isn't owned, at least in part, by someone that builds equipment.

Certainly, there are still thousands of engine-powered equipment manufacturers around the world that do not have their own engines. And there are significant engine manufacturers without an equipment owner.

But the playing field has changed. It didn't all happen in 90 days, but the endgame certainly did.

Once again, emissions is the culprit. It's hard to swallow the development costs for Tier 2, Tier 3, Tier 4, without some sort of "guaranteed" base of sales, i.e., your own equipment, to spread those engine development costs over.

One thing that dies a quick death in all this is the grumbling about buying from a competitor.

Certainly, those not aligned with an equipment manufacturer will tout their independence long and hard, but the available universe of engines that are manufactured by someone without an equipment line, is suddenly a lot smaller.

The major cost items in almost all types of equipment are now, in some way, part of an equipment manufacturing company.

Certainly, the further away from the engine you move, the less this is true as a number of major transmission builders and virtually all the hydraulic manufacturers remain free of such ownership.

We thought, in the mid- to late- 1990s, with all those mergers, acquisitions and alliances, that that period define would define the structure of the engine and component world for a long time to come.

And it did. For all of 8 to 10 years.

Mike Osenga

mosenga@dieselpub.com